Kelly Services Inc.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 6 August 2026: press release. Guidance figures: 5 new, 1 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Q2 revenue fell 5.8%: Second-quarter revenue was $1,038.2 million, down 5.8% year over year from $1,101.8 million. Source
• Underlying revenue decline near 0.6%: Excluding discrete items, underlying revenue declined about 0.6%, a 270 bps improvement versus the prior quarter's underlying decline. Source
• Adjusted EBITDA margin at 3.0%: Adjusted EBITDA was $31.1 million, down 15.9%. Margin was 3.0%, down 40 bps year over year but up 110 bps from the first quarter. Source
• SET revenue grew sequentially: SET revenue was $301.6 million, down 6.1% year over year. Management said SET revenue grew sequentially for the first time in over two years. Source
• Q3 revenue flat to down 2%: Third-quarter total revenue is expected flat to down 2%, with underlying growth of 1% to 2% and sequential declines from Education seasonality. Source
• Q4 revenue and margin step up: Fourth-quarter revenue is expected to grow mid-to-upper single digits, and adjusted EBITDA margin near 4%, about 200 bps higher year over year. Source
• Full-year revenue guidance raised: Full-year revenue is now expected to decline in the low-to-mid single digits, with adjusted EBITDA margin 10 to 20 bps higher, unchanged from the initial view. Source
• Free cash flow $21.2M year-to-date: Year-to-date free cash flow was $21.2 million, against $114.8 million a year earlier, on operating cash flow of $23.8 million and capital expenditures of $2.6 million. Source

“In the second quarter, we measurably exceeded our guidance for both revenue and adjusted EBITDA margin driven by growing momentum from our growth and efficiency initiatives as well as constructive demand trends in parts of our portfolio.”

Chris Layden, chief executive officer

Guidance

What changed from last quarter

• Guidance raised: Full-year 2026 revenue guidance was raised to a low-to-mid single digit decline. Source
• New guidance: Quarterly guidance for the third quarter of 2026 was given, covering revenue, underlying growth and margin. Source
• New: Fourth-quarter guidance includes an extra fiscal week, which is not in the prior release. Source
• Guidance kept: Full-year adjusted EBITDA margin guidance was kept at the initial view. Source
• Ended: Second-quarter 2026 guidance from the first-quarter release covered a period that is now reported.

Results and growth drivers

• Q2 revenue fell 5.8%: Second-quarter revenue was $1,038.2 million, down 5.8% year over year from $1,101.8 million. Source
• Underlying revenue decline near 0.6%: Excluding discrete items, underlying revenue declined about 0.6%, a 270 bps improvement versus the prior quarter's underlying decline. Source
• Operating earnings fell to $16.1M: Operating earnings were $16.1 million against $22.2 million a year earlier. Adjusted operating earnings were $19.3 million against $24.6 million. Diluted EPS was $0.31. Source
• Adjusted EBITDA margin at 3.0%: Adjusted EBITDA was $31.1 million, down 15.9%. Margin was 3.0%, down 40 bps year over year but up 110 bps from the first quarter. Source
• Six-month revenue fell 8.3%: Year-to-date revenue was $2.1 billion, down 8.3%, with an underlying decline of about 2.0% after discrete impacts. Year-to-date adjusted EBITDA was $46.9 million, down 34.8%. Source

Segment performance

• ETM revenue down 6.0%: Enterprise Talent Management revenue was $485.5 million, down 6.0%. Gross profit rate rose 0.5 points to 20.5%, and business unit profit rose 1.9% to $10.8 million. Source
• SET revenue grew sequentially: SET revenue was $301.6 million, down 6.1% year over year. Management said SET revenue grew sequentially for the first time in over two years. Source
• Education revenue down 4.4%: Education revenue was $253.5 million, down 4.4%. Management tied the decline to delayed prior-year contract decisions and lower enrollment, and Education business unit profit fell 21.3%. Source

“Notably, Kelly’s adjusted EBITDA margin returned to 3.0% in the quarter, demonstrating our ability to generate operating leverage in pursuit of growth.”

Chris Layden, chief executive officer

Service types and mix

• Permanent placement income declined 7.4%: Permanent placement income in revenue was $13.7 million, down from $14.8 million. Year-to-date it was $24.6 million, down 6.5%. Source
• ETM talent solutions revenue rose: Talent solutions revenue in ETM was $134.9 million, up from $126.9 million, while ETM staffing services were $239.3 million. Source
• SET outcome-based revenue increased: SET outcome-based services revenue was $118.7 million, up from $107.3 million a year earlier. Source
• Education and ETM staffing declined: Education staffing services were $251.5 million, down from $262.7 million, and ETM staffing services fell to $239.3 million from $265.8 million. Source

Costs, gross profit and margins

• Gross profit rate nearly unchanged: Gross profit rate was 20.4% versus 20.5% a year earlier, and gross profit fell 6.0% to $212.0 million. Source
• SG&A fell 5.5%: SG&A was $195.9 million, down 5.5%. Adjusted SG&A was $192.7 million against $200.9 million, reflecting expense management and acquisition integration benefits. Source
• Tax expense rose to $3.0M: Income tax expense was $3.0 million, compared with $0.9 million a year earlier. The effective tax rate was 21.2% against 4.2%. Source
• First-quarter impairment charge $2.2M: A $2.2 million asset impairment charge was recorded in the first quarter, tied to the lease portfolio realignment. Source

Demand and quarterly guidance

• Q3 revenue flat to down 2%: Third-quarter total revenue is expected flat to down 2%, with underlying growth of 1% to 2% and sequential declines from Education seasonality. Source
• Q3 margin in low 2% range: Third-quarter adjusted EBITDA margin is expected in the low 2% range, 40 to 50 bps above the prior year, with Education out of session for most of the quarter. Source
• Q4 revenue and margin step up: Fourth-quarter revenue is expected to grow mid-to-upper single digits, and adjusted EBITDA margin near 4%, about 200 bps higher year over year. Source
• Full-year revenue guidance raised: Full-year revenue is now expected to decline in the low-to-mid single digits, with adjusted EBITDA margin 10 to 20 bps higher, unchanged from the initial view. Source
• Demand trends improved in parts: Management cited growing momentum from growth and efficiency initiatives and demand trends improving in parts of the portfolio. Source

Cash, balance sheet and dividend

• Free cash flow $21.2M year-to-date: Year-to-date free cash flow was $21.2 million, against $114.8 million a year earlier, on operating cash flow of $23.8 million and capital expenditures of $2.6 million. Source
• Debt-to-capital fell to 7.4%: Debt-to-capital was 7.4%, down from 9.4% at December 28, 2025. Global days sales outstanding was 61 days. Source
• Quarterly dividend of $0.075 declared: The board declared a quarterly dividend of $0.075 per share on August 4, 2026. Source
• Receivables rose to $1,224.6M: Trade accounts receivable were $1,224.6 million at June 28, 2026, up from $1,188.7 million at December 28, 2025. Source

Strategy, leadership and one-time costs

• Sequential improvement in each business: Management said each business improved sequentially and that the company continued to capitalize on organic growth drivers. Source
• Executive transition costs tied to segment leaders: Executive transition costs were $0.3 million in the quarter and $1.8 million year to date, linked to segment leader changes in 2025 and 2026. Source
• Transaction costs tied to shareholder change: Transaction costs in 2026 were primarily tied to the controlling shareholder change in the first quarter of 2026. Source

Coming up, as management said on 6 August 2026

• Second-half improvement expected: Management expects further measurable year-over-year improvement as the second half of the year progresses. Source
• Dividend payable September 2: The $0.075 dividend is payable September 2, 2026, to holders of record at the close of business on August 19, 2026. Source
• Extra fiscal week in fourth quarter: The fourth quarter includes an extra fiscal week, which management said benefits revenue growth and reduces adjusted EBITDA. Source

Figures management reported

Risks management discussed

• Demand: Reduced federal contractor demand in SET and three large ETM commercial customers accounted for about 5.2% of revenue decline. Source
• Financial: Year-to-date margin pressure in ETM, Education and SET was attributed to lower gross margins and timing of revenue trends. Source
• External: Guidance assumes no material change in the macroeconomic environment in the coming quarters. Source
• Operational: Education school closures for most of the third quarter are expected to reduce sequential revenue and profitability. Source

Earlier plans management reported on

• Ahead: The first-quarter release set a second-quarter revenue decline of 7% to 9%; management said the quarter measurably exceeded revenue and margin guidance.
• Not stated: The first-quarter release targeted organic revenue growth and adjusted EBITDA margin expansion in the second half of 2026.
• On track: The first-quarter release said the technology modernization and go-to-market initiatives were on track.
• Not stated: Management affirmed its full-year expectation of modest year-over-year adjusted EBITDA margin growth. Source

Other quarters

• Q3 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.