Kelly Raises Outlook as Revenue Decline Narrows
Second-quarter revenue totaled $1.038 billion, exceeding Kelly’s prior forecast.
Kelly Services (KELYA), the workforce-solutions provider, narrowed its underlying revenue decline to 0.6% in the second quarter from 3.3% in the first, extending a sequential recovery across its businesses.
The improvement reflected easing pressure from discrete customer and federal-contractor losses, whose impact fell to 5.2% from 7.4%. Enterprise Talent Management and SET each improved their underlying year-over-year revenue performance by at least 300 basis points from the first quarter, while SET recorded its first sequential revenue growth in more than two years.
Revenue fell 5.8% year over year, compared with a 10.7% decline in the first quarter. Net earnings dropped 40.0% to $11.4 million, and diluted earnings declined to $0.31 a share from $0.52 a share. Adjusted diluted earnings fell to $0.37 a share from $0.54 a share.
Operating earnings rebounded to $16.1 million from a $5.1 million first-quarter loss, though they remained below $22.2 million a year earlier. Adjusted EBITDA nearly doubled sequentially to $31.1 million, lifting the margin to 3.0% from 1.5%. The margin remained 40 basis points below the prior year.
The service mix continued to shift away from staffing, where revenue declined 9.5% to $663.7 million. Outcome-based services were nearly flat at $228.3 million, while talent-solutions revenue rose 6.3% to $134.9 million. Within the operating segments, ETM expanded its gross-profit rate by 50 basis points despite a 6.0% revenue decline, while Education’s revenue fell 4.4% amid delayed contract decisions and lower student enrollment in key markets.
Kelly raised its full-year 2026 revenue outlook to a low-to-mid-single-digit decline and maintained its forecast for 10 to 20 basis points of adjusted EBITDA-margin expansion. For the third quarter, the company expects underlying revenue growth of 1% to 2%, total revenue ranging from flat to down 2%, and a low-2% adjusted EBITDA margin, representing 40 to 50 basis points of year-over-year expansion.
The company expects fourth-quarter revenue to grow at a mid-to-upper-single-digit rate and adjusted EBITDA margin to expand roughly 200 basis points to about 4%. An extra fiscal week accounts for approximately four percentage points of the projected revenue growth and is expected to weigh on adjusted EBITDA. The outlook followed a second quarter in which the revenue decline and 3.0% margin both cleared Kelly’s prior guidance.