Kelly's Q2 2025: Navigating Demand Shifts, Federal Challenges, and M&A Strategies Amid Economic Uncertainty

Revenue Trends and Market Dynamics:
- Kelly Services reported revenue of $1.1 billion for Q2 2025, an increase of 4.2% compared to Q2 2024. However, on an organic basis, revenue was down 3.3%.
- The decline was primarily due to reduced demand for federal contractors in the SET and ETM segments and decreased demand from large customers within ETM.

Segment Performance Variability:
- The Education segment grew 5.6% year-over-year in Q2 2025, while the SET segment showed a reported revenue increase of 19% primarily due to the acquisition of MRP. However, organic growth in SET was down 8.5% except for a 3.2% decline when excluding lower demand for federal contracts.
- The Education segment's growth was driven by stable fill rates and demand, while SET's decline in organic growth was influenced by lower staffing revenue and outcome-based solutions demand from certain verticals.

Outcome-Based Solutions and Margin Improvement:
- Outcome-based offerings, excluding contact center solutions, showed resilience with a 2% year-over-year increase, driven by ETM.
- Kelly improved its gross profit rate by 30 basis points compared to the prior year quarter, with SET contributing 70 basis points of improvement due to the MRP acquisition.

Challenges and Strategic Adjustments:
- Demand for staffing services in the ETM segment decreased by 7.7% year-over-year, with 6.2% decline in outcome-based revenues, reflecting reduced demand from a large customer within the contact center offering.
- Kelly addressed these challenges by aligning resources with demand, focusing on operational discipline, and integrating MRP's portfolio to improve efficiencies across segments.