Kelly Services Reports 11.5% Revenue Growth but 77.7% Drop in Net Earnings in Q1 2025

Kelly Services, Inc. reported its financial results for the first quarter of 2025, revealing a revenue increase of 11.5% to $1,164.9 million, compared to $1,045.1 million in the same period last year. The company's gross profit also rose by 15.0% to $236.5 million, driven primarily by the acquisition of Motion Recruitment Partners (MRP) in May 2024. However, net earnings fell significantly by 77.7% to $5.8 million, down from $25.8 million in the prior year, reflecting increased operational costs and integration expenses associated with the acquisition.

The financial performance indicates a notable shift in profitability, with earnings from operations declining by 59.8% to $10.8 million, compared to $26.8 million in the first quarter of 2024. The increase in selling, general, and administrative (SG&A) expenses was substantial, rising 18.5% to $225.7 million, largely due to integration and realignment costs totaling $10.7 million. The company also recorded a significant decrease in other income, which fell to a net expense of $3.2 million from a gain of $1.8 million in the previous year.

Strategically, Kelly Services has undergone significant organizational changes, including the integration of MRP's operations and the consolidation of its former Professional & Industrial and Outsourcing & Consulting Group segments into a new Enterprise Talent Management segment. This restructuring aims to enhance service delivery and align with evolving customer demands for integrated workforce solutions. The company also shifted certain customers from its Science, Engineering & Technology segment to the new Enterprise Talent Management segment to support this strategy.

Operationally, Kelly Services reported a decrease in its average shares outstanding, with 35.0 million shares in the first quarter of 2025 compared to 35.4 million in the previous year. The company’s cash and cash equivalents decreased to $28.2 million from $39.0 million at year-end 2024. Trade accounts receivable remained stable at approximately $1.25 billion, with a days sales outstanding (DSO) of 61 days, slightly up from 59 days at the end of 2024. The company’s working capital position was $528.1 million, reflecting a decrease from the previous quarter.

Looking ahead, Kelly Services expressed confidence in its ability to navigate market challenges and capitalize on growth opportunities. The company plans to continue focusing on integrating MRP's technology and services to enhance operational efficiency and profitability. Management remains optimistic about the resilience of its business model and the potential for future growth, despite the current economic uncertainties and shifts in customer demand.