Breaking Down Kelly Services, Inc. (KELYA) Financial Health: Key Insights for Investors

You're looking at Kelly Services, Inc. (KELYA) right now and seeing a mixed picture-a classic staffing industry story in a tight economy-but the headline numbers from the third quarter of 2025 defintely demand a closer look before you make your next move. The company reported Q3 revenue of $935.0 million, a clear 9.9% year-over-year decline, which shows the real pressure from reduced demand, especially among U.S. federal government contractors and large private sector clients. This market softness hit hard, resulting in a reported operating loss of $102.1 million, largely driven by a non-cash goodwill impairment charge of $102.0 million related to their Science, Engineering & Technology (SET) acquisitions, which is a significant red flag for investors. Still, the Education segment is showing resilience, and management is signaling confidence by planning Class A share repurchases in the fourth quarter, even with a projected Q4 revenue decline of 12% to 14%; so, the real question is whether their strategic cost-cutting and focus on specialty segments can overcome the near-term macroeconomic headwinds and get that adjusted EBITDA margin back on track from the Q3 low of 1.8%.

Revenue Analysis

You need to look past the headline numbers for Kelly Services, Inc. (KELYA) because the reported revenue growth is defintely not what it seems. While the trailing twelve months (TTM) revenue ending September 28, 2025, hit $4.39 billion, the underlying organic trends tell a story of a difficult labor market, especially in the second half of the year.

The primary revenue source for Kelly Services, Inc. is, naturally, its specialty talent solutions-staffing, consulting, and outsourcing services. The company has shifted its focus to three core segments, which is a key strategic move you need to understand. This is a deliberate pivot toward higher-margin work, but it hasn't insulated them from the broader economic slowdown.

Segment Contribution and Growth Dynamics

The year-over-year revenue growth rate has been highly volatile in 2025, driven almost entirely by the May 2024 acquisition of Motion Recruitment Partners (MRP). For example, Q1 2025 saw a reported revenue of $1.16 billion, marking an 11.5% increase year-over-year. Here's the quick math: strip out the acquisition, and the organic growth was a negligible 0.2%. By Q3 2025, the reported revenue of $935 million was actually a 9.9% decline compared to the prior year, showing the organic headwinds are now overpowering the acquisition boost.

The business segments show a clear divergence in performance, which is where the real risk and opportunity lie. The Education segment is a consistent bright spot, but the others are struggling with demand softness. This is why you must look at segment performance, not just the top line.

• Education: This segment is the most resilient, showing organic growth of 6.3% in Q1 and 5.3% in Q2 2025, largely due to K-12 staffing strength.
• Science, Engineering & Technology (SET): Reported Q2 growth was a strong 19.4% due to the MRP acquisition, but its organic revenue declined by a sharp 8.5%. This segment has the highest gross profit margin at 25.6%, so the organic decline hurts profitability.
• Enterprise Talent Management (ETM): This segment, which combines the former Outsourcing & Consulting Group (OCG) and Professional & Industrial (P&I) units, saw organic revenue decline by 5.1% in Q2.

Analysis of Significant Revenue Stream Changes

The most significant change in Kelly Services, Inc.'s revenue stream is the strategic realignment into the three specialty segments (SET, Education, ETM) and the integration of the MRP acquisition. This move is designed to capture higher-margin outcome-based solutions, like those in the semiconductor and renewables sectors.

But still, the company faces two major near-term risks. First, the reduced demand for U.S. federal government contractors contributed to a 1.4% organic revenue decline in Q2 2025. Second, a general slowdown in demand from certain large customers is impacting the Enterprise Talent Management segment. What this estimate hides is how quickly a recessionary environment could accelerate those organic declines, especially in the SET and ETM segments. You can read more about the company's long-term focus here: Mission Statement, Vision, & Core Values of Kelly Services, Inc. (KELYA).

The key takeaway is that the growth is inorganic, and the core business is contracting. You need to see organic growth return to SET and ETM to feel good about the stock. Until then, the Education segment is the only reliable engine.

Profitability Metrics

The financial health of Kelly Services, Inc. (KELYA) in the 2025 fiscal year shows a high gross margin typical of the staffing sector, but a clear struggle to translate that into bottom-line profit. The company's trailing twelve months (TTM) gross margin stands at 20.43%, but this shrinks dramatically to an operating margin of only 1.65%, culminating in a TTM net loss, or net margin, of -3.58%.

Looking closer at the first half of 2025, the Gross Profit Rate for the second quarter improved to 20.5%, up 30 basis points from the prior year, which suggests effective bill rate management. This is the core strength of any staffing firm: marking up labor costs. However, operational efficiency is a concern. The Science, Engineering & Technology (SET) segment shows a strong gross profit margin at 25.6%, but the Education segment, while a significant growth driver, has a lower gross profit margin at 14.4%. This mix of business, plus the high Selling, General, and Administrative (SG&A) costs, is what compresses the operating profit.

The real challenge is cost management. For the first half of 2025, Kelly Services, Inc. reported GAAP operating earnings of only $33.0 million on $2.3 billion in revenue, which is a thin 1.43% margin. The negative TTM Net Margin of -3.58% tells you the company is not profitable on a GAAP basis right now. This loss is a direct result of the high operating expenses and other non-operating costs, like increased interest expense following the May 2024 acquisition of Motion Recruitment Partners, LLC (MRP). That acquisition helps revenue, but it adds to the debt load, so the net income takes a hit.

Here's the quick math on profitability for a full-cycle view:

When you compare this to the industry, the picture gets starker. The average operating profit margin (often proxied by Adjusted EBITDA margin) for a staffing agency is typically around ~10%. Kelly Services, Inc.'s Adjusted EBITDA margin for the first half of 2025 was only 3.2%. That's defintely a significant underperformance, driven by margin pressure in the SET and ETM segments due to revenue trends and the timing of expense management actions. The company expects margin expansion in the latter half of the year, but they have a lot of ground to make up to reach even half the industry average.

The internal trends show a company navigating a tough macroeconomic environment by focusing on higher-margin solutions in technology and education, but still struggling with overhead. You need to look beyond the top-line revenue growth, which is largely acquisition-driven, and focus on the core efficiency of the existing business segments. You can see how this strategy plays out in the market by Exploring Kelly Services, Inc. (KELYA) Investor Profile: Who's Buying and Why?

• Monitor Q3 and Q4 2025 results for the promised margin expansion.
• Watch the SG&A-to-Revenue ratio for signs of improved cost control.
• Assess if the Education segment's growth can offset the cyclical weakness in other areas.

Debt vs. Equity Structure

You want to know how Kelly Services, Inc. (KELYA) funds its operations and growth, and the simple answer is: mostly with equity, keeping its debt load remarkably light. As of the most recent quarter (Q3 2025), the company's financial structure shows a clear preference for minimal leverage, a hallmark of stability in the staffing sector.

The core takeaway is that Kelly Services, Inc. operates with a very conservative debt-to-equity (D/E) ratio, which means lenders have minimal claim on the company's assets compared to shareholders. This is defintely a low-risk profile.

Kelly Services, Inc.'s total debt-to-equity ratio for the most recent quarter (MRQ) in 2025 stood at just 5.87% (or 0.0587). To put that into perspective, the average D/E ratio for the Human Resource & Employment Services industry is closer to 0.5184. Kelly Services, Inc. is running with roughly one-tenth of the leverage of its peers, signaling a very healthy balance sheet and a strong capacity to borrow if a major opportunity arises.

Here's the quick math on their financing structure:

• Total Debt (Q2 2025 Borrowings): Increased to approximately $301 million.
• Cash (Q2 2025): Decreased to $74 million.
• Total Debt-to-Equity (Q3 2025 MRQ): 5.87%.

The most significant recent change in the company's debt profile relates to its acquisition strategy. The jump in borrowings-from $46 million in Q2 2024 to $301 million in Q2 2025-was primarily to fund the May 2024 acquisition of Motion Recruitment Partners, LLC (MRP). This debt was incurred to fuel an inorganic growth strategy, but even with this increase, the overall leverage remains exceptionally low. This is a strategic use of debt, not a reliance on it for day-to-day operations.

On the equity side, the company is actively balancing its capital structure by returning value to shareholders. Management signaled its intent to be active with Class A share repurchases in Q4 2025, with a remaining authorization of $40 million. This commitment to buybacks, alongside the low debt profile, shows a management team confident in its valuation and focused on maximizing shareholder return through capital allocation, not just through operational earnings. This is a company that uses debt selectively for growth, but relies on its equity base for stability. For a deeper dive into how this stability plays out in the market, check out our full report: Breaking Down Kelly Services, Inc. (KELYA) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Kelly Services, Inc. (KELYA) can cover its short-term bills, especially with the economic uncertainty we're seeing. The direct takeaway is that KELYA maintains a healthy, albeit slightly contracting, liquidity position, largely backed by receivables and credit facility access, not massive cash on hand.

Their liquidity ratios are solid, which is the first thing I look at. The company's most recent Current Ratio (current assets divided by current liabilities) is approximately 1.52. This means KELYA has $1.52 in current assets for every dollar of current liabilities. What's interesting is the Quick Ratio (a stricter measure, excluding inventory) is also around 1.52. This tells you KELYA, as a service business, holds very little inventory, so its short-term assets are primarily cash and accounts receivable. That's defintely a good sign for immediate coverage.

Still, you need to watch the working capital (current assets minus current liabilities) trend. The company's Net Current Asset Value was reported at just $7.30 million on a Trailing Twelve Months (TTM) basis, a significant drop from the prior year. This trend suggests that while the ratio looks fine, the quality of the working capital is crucial. Honestly, their working capital is dominated by huge accounts receivable, not liquid cash reserves. This means they rely heavily on customers paying their bills on time to stay liquid. Mission Statement, Vision, & Core Values of Kelly Services, Inc. (KELYA).

Here's the quick math on their cash flow, which gives a clearer picture of their operational health:

• Operating Cash Flow (OCF): KELYA generated a strong $94 million in operating cash flow through the third quarter of 2025. This is a significant improvement and shows the core business is generating cash, which is what you want to see.
• Investing Cash Flow: The TTM figure shows a net cash inflow of $15.80 million. This positive number usually points to proceeds from asset sales, which is consistent with the final true-up from the sale of their EMEA staffing operations.
• Financing Cash Flow: The company made a net paydown of $130 million on its debt in Q2 2025, showing a focus on deleveraging after the Motion Recruitment Partners acquisition.

The biggest strength is their available liquidity. As of the end of Q3 2025, KELYA had total available liquidity of $269 million. This is composed of $30 million in cash and $239 million in available credit on their facilities. What this estimate hides is that they are leaning on their credit lines, but having that facility available is a strong safety net. The key risk is a prolonged economic downturn that slows down customer payments, which would strain those high accounts receivable.

Your action item here is simple: Monitor the Days Sales Outstanding (DSO) in their next earnings report. If onboarding takes 14+ days, churn risk rises. A rising DSO would signal trouble converting those high receivables into cash, which is the main potential liquidity concern.

Valuation Analysis

You are looking at Kelly Services, Inc. (KELYA) right now and the valuation picture is definitely a mixed bag. The core takeaway is this: the market is pricing KELYA like a deep-value stock, largely due to recent earnings misses, but its underlying asset value and forward earnings power suggest it is currently undervalued.

The stock's performance over the last 12 months tells a clear story of investor pessimism. The share price has been volatile, trading in a 52-week range of $7.98 to $15.71. As of November 2025, the stock is hovering near its low, around $8.08, having dropped approximately 41.97% over the year. This steep decline is a direct reaction to the challenging demand environment for staffing services and the Q3 2025 earnings miss [cite: 9 from first search].

Is Kelly Services, Inc. Overvalued or Undervalued?

The valuation ratios paint a compelling picture of undervaluation, especially when you look past the negative trailing earnings. Here's the quick math on why a realist sees opportunity here:

• Price-to-Book (P/B): KELYA trades at a P/B ratio of just 0.26. This is critical. It means the stock price is only 26 cents for every dollar of the company's net assets (what's left after liabilities). You rarely see a solid company trading this far below its book value.
• Forward Price-to-Earnings (P/E): While the trailing P/E is negative due to a recent net loss, the forward P/E-which looks at expected earnings-is a low 5.06. This is extremely cheap compared to the broader market and suggests investors expect a quick return to profitability.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio, which is better for comparing capital-intensive companies, is a low 3.47 (TTM). This signals that the company's total value (equity plus debt, minus cash) is only about three and a half times its annual operating cash flow proxy (EBITDA), which is a clear value signal.

The market is pricing in significant risk, but the valuation multiples suggest that risk is already baked in, and then some. The stock is defintely undervalued based on these metrics.

Dividend and Analyst Sentiment

The company continues to return capital, which is a sign of management confidence despite the operational headwinds. Kelly Services, Inc. pays an annual dividend of $0.30 per share, resulting in a solid dividend yield of 3.63%. Its forward payout ratio is a comfortable 10.9% of expected future earnings, meaning the dividend is well-covered and sustainable even with the recent dip in profitability [cite: 1 from first search].

Analyst consensus, while not a screaming Buy, still leans toward a positive outlook with an average rating of Hold and a consensus price target of $16.00 [cite: 13 from first search]. This target implies an upside of nearly 100% from the current price, which is a massive gap between the market's current valuation and professional expectations [cite: 12 from first search]. That spread is where the opportunity lies.

If you want to dig deeper into who is holding this stock through the volatility, you should read Exploring Kelly Services, Inc. (KELYA) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at Kelly Services, Inc. (KELYA) and wondering what could derail their strategy. The short answer is the current economic slowdown is hitting their core business, and a major internal charge confirms the pressure. The biggest near-term risk is the continued decline in demand from large customers, plus the fallout from recent acquisitions.

The company's third-quarter 2025 results, released on November 6, 2025, show a clear picture: revenue was $935.0 million, a 9.9% drop year-over-year. This wasn't just a broad market issue; it was concentrated. Excluding specific large customer and U.S. federal government contractor impacts, the underlying revenue decline was a more manageable 2.0%, but that discrete impact is still a huge operational risk.

Operational and Financial Headwinds

The most striking financial risk in Q3 2025 was the $102.0 million non-cash goodwill impairment charge. This is a red flag. Goodwill impairment means the value of past acquisitions on the balance sheet is now considered less than what they paid for it, specifically related to the integration of Motion Recruitment Partners, LLC and Softworld into the Science, Engineering & Technology (SET) segment. This suggests the expected returns from these strategic moves are not materializing as planned.

Here's the quick math on the impact: that charge pushed the reported operating result to a loss of $102.1 million for the quarter.

• Macroeconomic Sensitivity: Kelly Services, Inc. (KELYA) is highly susceptible to a sluggish labor market, which slows hiring and reduces demand for their staffing solutions.
• Customer Concentration: Discrete reduced demand from U.S. federal government contractors and three large private sector customers drove approximately 8% of the Q3 2025 year-over-year revenue decline. Losing or seeing reduced volume from a handful of major clients can crush the quarter.
• Technology Disruption: The rise of Artificial Intelligence (AI) talent solutions is a long-term strategic risk, potentially changing the demand for traditional staffing models.

Mitigation and Strategic Actions

To be fair, Kelly Services, Inc. (KELYA) is not just sitting on their hands. Management is focused on structural and demand-driven expense optimization, which is plain English for cutting costs and improving process efficiencies through things like technology modernization. They are also doubling down on what works.

The Education segment, for example, is a bright spot, showing continued growth while others decline. This segment achieved a remarkable 90% fill rate in Q3 2025. Also, they are signaling confidence by planning to engage in Class A share repurchases in the fourth quarter of 2025. That's a defintely concrete action to stabilize the stock price.

The core strategy is to drive profitable growth by focusing on high-margin segments and optimizing their customer wallet share. You can see their full strategic intent, which underpins these actions, by reviewing their Mission Statement, Vision, & Core Values of Kelly Services, Inc. (KELYA).

What this estimate hides is how quickly the broader economy could rebound, which would instantly alleviate the external pressures. Still, the current guidance anticipates a Q4 2025 revenue decline of 12% to 14%, so near-term pressure remains high.

Growth Opportunities

You are looking at Kelly Services, Inc. (KELYA) at a pivotal moment. The company is defintely executing a strategic pivot away from low-margin, high-volume staffing to a specialty-led model, and this shift is the primary driver for future value. While Q3 2025 revenue of $935 million missed analyst consensus, the underlying story is a deliberate focus on higher-margin segments like Education and Science, Engineering & Technology (SET) to stabilize and grow earnings.

The core of the growth strategy is a flight to specialization, plus a major acquisition. The future of staffing is specialty, not scale. Kelly Services, Inc. (KELYA) has been streamlining operations, notably by selling its European staffing business, to concentrate capital on these higher-growth specialties in North America.

Strategic Pivot and Acquisition Impact

The integration of Motion Recruitment Partners (MRP), acquired in 2024, is the single biggest near-term growth lever. This acquisition immediately strengthened Kelly Services, Inc. (KELYA)'s position in IT staffing and consulting. While the macroeconomic environment caused organic revenue to decline by 3.3% in Q2 2025, the MRP acquisition helped total reported Q2 revenue reach $1.1 billion, up 4.2% year-over-year.

What this estimate hides is the significant difference in profitability across segments. The specialty focus is designed to boost margins, not just revenue. For example, the SET segment, which includes the new IT focus, boasts a gross profit margin of 25.6% and an adjusted EBITDA margin of 6.2%. The Education segment is also performing exceptionally well, achieving a 90% fill rate in Q3 2025.

• Integrate MRP to be a top IT staffing provider.
• Expand higher-margin Education and SET segments.
• Use AI-enabled solutions for better talent matching.

2025 Financial Outlook and EPS Recovery

The full-year 2025 financial picture shows the company is still navigating a tough labor market, but a significant earnings recovery is expected. Analysts project full-year 2025 revenue to be around $4.61 billion. More importantly, the earnings per share (EPS) is forecast to hit $2.30 per share for the full year.

Here's the quick math on the earnings trajectory: the consensus EPS for the next year (2026) is expected to grow from a projected $2.45 per share to $2.88 per share, which is a substantial growth rate of 17.55%. This indicates that the margin-focused strategy is expected to pay off quickly as the integration costs of MRP subside and the specialty segments continue to scale.

Durable Competitive Advantages

Kelly Services, Inc. (KELYA)'s competitive edge isn't just about its 75+ years of experience; it's about the sophistication of its outsourced solutions. The KellyOCG + Sevenstep brand, which handles Recruitment Process Outsourcing (RPO), was ranked No. 3 overall in the HRO Today's 2025 RPO Baker's Dozen Rankings, and No. 1 in size of deal. This is a massive advantage because RPO is a stickier, higher-margin business than traditional temporary staffing.

The company is also leveraging technology, specifically mentioning the use of agile and AI-enabled solutions to adapt to changing workforce needs. This focus on proprietary technology and predictive analytics in their RPO business is what keeps them ahead of smaller, less-capitalized rivals. Plus, their balance sheet is relatively conservative, with a total liabilities to assets ratio that is nearly the lowest among its peers, giving them flexibility for future small, tuck-in acquisitions.

You can read more about the company's recent performance and valuation in Breaking Down Kelly Services, Inc. (KELYA) Financial Health: Key Insights for Investors.