Kelly's Underlying Revenue Turns Positive After Two Declines

The Tip Desk · November 5, 2026 · 3 min read

The specialty talent firm posted $927.2 million of third-quarter revenue, with underlying sales up 2.3% after a year-over-year decline that had narrowed for two straight quarters.

Kelly Services, Inc. (KELYA), a specialty talent solutions provider, reported third-quarter revenue of $927.2 million, a 0.8% year-over-year decline that improved 500 basis points from the second quarter. Underlying revenue, which excludes previously disclosed discrete impacts, grew 2.3% year-over-year.

That marked the third consecutive quarter in which the year-over-year revenue decline narrowed, after a 10.7% drop in the first quarter and a 5.8% drop in the second. Discrete impacts from reduced U.S. federal government contractor demand in Science, Engineering & Technology and from three large commercial customers in Enterprise Talent Management totaled about 3.1% in the third quarter, down from 5.2% in the second.

Chief executive Chris Layden said the company delivered results above the midpoint of its guidance, citing progress on growth and efficiency initiatives and increasingly constructive demand. He said ETM pivoted to positive year-over-year revenue growth and SET delivered another quarter of sequential revenue improvement.

Enterprise Talent Management revenue was $496.1 million, up 2.4% year-over-year. Underlying ETM revenue grew 7.7%, an improvement of 460 basis points versus the prior quarter. The company said underlying ETM growth included staffing and each of the talent solutions specialties. ETM adjusted EBITDA was $15.6 million, or a 3.1% margin, versus $8.7 million, or 1.8%, a year earlier.

Science, Engineering & Technology revenue was $302.1 million, down 2.0% year-over-year. Underlying SET revenue decreased 0.8%, improving 220 basis points versus the prior quarter. Within SET, Science and Engineering specialties grew year-over-year and the Technology specialty continued to strengthen sequentially. SET adjusted EBITDA was $19.9 million, or a 6.6% margin.

Education revenue was $134.2 million, down 6.4% year-over-year. The company said the segment continues to be impacted by declines in demand primarily driven by reduced student enrollment in key markets. Education adjusted EBITDA was a $5.8 million loss, or a negative 4.3% margin, which the company attributed to school-year seasonality.

GAAP operating earnings were $0.6 million, compared with a $102.1 million operating loss in the third quarter of 2025 that included a $102.0 million non-cash goodwill impairment. Adjusted operating earnings were $6.1 million. Adjusted EBITDA was $21.3 million, up 29.1% year-over-year, and adjusted EBITDA margin was 2.3%, expanding 50 basis points year-over-year. The company said the margin expansion reflected a 20 basis point higher gross margin and volume-related and structural expense management, including benefits from acquisition integration and technology modernization. Gross profit rate was 21.0%.

Net loss was $1.7 million, or $0.05 a share, versus a $150.1 million loss, or $4.26 a share, a year earlier. Adjusted earnings were $0.07 a share.

The company said fourth-quarter 2026 expectations for revenue growth and adjusted EBITDA margin have been adjusted relative to its prior view largely due to the delayed return to growth in Education and near-term incremental demand pressure from one discrete ETM customer. It expects fourth-quarter revenue to be flat to up 1% year-over-year and adjusted EBITDA margin expansion of 180 to 200 basis points year-over-year, resulting in a margin of 3.8% to 4.0%. The outlook includes an extra fiscal week that benefits revenue growth by about 3 points but negatively impacts adjusted EBITDA. For the full year, Kelly expects a mid-single digit total revenue decline and adjusted EBITDA margin of 2.6% to 2.7%.

On November 4, the board declared a $0.075 a share quarterly cash dividend and approved renewal and extension of a share repurchase program authorizing up to $50.0 million of Class A common stock.