• Organic Revenue Growth: Increased by more than 4% year-over-year in Q4 2024.
• Adjusted EBITDA Growth: Increased by 34% year-over-year in Q4 2024.
• Margin Expansion: 110 basis points improvement in Q4 2024.
• Education Segment Revenue Growth: Up 12% year-over-year in Q4 2024.
• SET Segment Revenue: Up 38% on a reported basis due to MRP acquisition; organic revenue down 4%.
• OCG Segment Revenue Growth: Increased by 9% year-over-year in Q4 2024.
• Professional Industrial Segment Revenue Growth: Improved by 4% year-over-year in Q4 2024.
• Gross Profit: $241.5 million with a gross profit rate of 20.3% in Q4 2024.
• SG&A Expenses: $217.4 million, down 6% year-over-year in Q4 2024.
• Adjusted Earnings Per Share: $0.82 in Q4 2024.
• Adjusted EBITDA Margin: Improved to 3.7% in Q4 2024.
• Full Year Revenue: $4.3 billion, down 10.4%; organic revenue grew 0.5% for 2024.
• Full Year Adjusted EBITDA: $143.5 million, up 31% for 2024.
• Available Liquidity: $154 million at the end of 2024.
• Total Borrowing: $239 million at the end of 2024.

• Warning! GuruFocus has detected 5 Warning Sign with KELYA.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Kelly Services Inc (NASDAQ:KELYA) delivered both top and bottom-line growth in the fourth quarter, with organic revenue increasing by more than 4% and adjusted EBITDA by 34%.
• The education segment achieved double-digit revenue growth, driven by improved fill rates, higher bill rates, and new customer wins.
• The acquisition of Children's Therapy Center expanded Kelly's higher margin therapy business, enhancing its education segment offerings.
• Kelly Services Inc (NASDAQ:KELYA) completed the sale of its European staffing business and Ayers Group, streamlining operations and focusing on higher growth specialties.
• The company successfully integrated Motion Recruitment Partners, strengthening its staffing, consulting, and RPO solutions, and positioning Kelly as a top provider in IT staffing and consulting.

Negative Points

• Kelly Services Inc (NASDAQ:KELYA) reported a decrease in total revenue by 3.3% in the fourth quarter compared to the previous year.
• The company faced a $72.8 million non-cash goodwill impairment charge related to the SoftWorld acquisition due to challenging market conditions.
• Despite revenue growth, the organic gross profit rate declined by 80 basis points due to business mix and lower perm fees.
• The education segment's growth was impacted by unexpected disruptions from two hurricanes, affecting performance in Q4.
• There is a disconnect between valuation expectations and performance in the M&A market, affecting potential acquisition opportunities.

Q & A Highlights

Q: The education segment showed strong revenue growth, but it was slightly down compared to the full year. Was this in line with expectations? A: Peter Quigley, CEO, explained that the education segment in Q4 was significantly impacted by two hurricanes, which created disruptions in school districts. Despite this, the segment still grew by over 12%, which was a positive outcome.

Q: Can you provide more details on the new customer wins and sales pipeline momentum mentioned in the press release? A: Peter Quigley highlighted that Kelly Services continues to gain market share in the education segment by competing on value rather than price. The company is recognized for delivering higher fill rates and better performance, which contributes to its ability to win more school district contracts.

Q: How is the M&A market currently, and are there more opportunities for acquisitions? A: Peter Quigley noted that the M&A market remains in a trough, with a disconnect between valuation expectations and performance. However, Kelly Services is actively monitoring deal flow and engaging in conversations with potential attractive additions to its portfolio.

Q: What drove the increase in staffing revenue in the fourth quarter? Was it demand or pricing? A: Troy Anderson, CFO, explained that the increase in staffing revenue, particularly in the Professional and Industrial (PNI) segment, was driven by strong demand and the success of their omnichannel strategy. The segment saw consistent performance throughout the quarter, with a seasonal uptick in the fourth quarter.

Q: What is the overall customer sentiment, and how does it impact your outlook for the first half of 2025? A: Peter Quigley mentioned that post-election, there was a shift towards more optimistic views from customers. However, with new executive orders and pending legislation, companies are taking a cautious approach. Kelly Services expects the first half of 2025 to continue the trends seen in previous quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.