Kelly Services, Inc. Class A Aktie

Hello, and welcome to the Annual Meeting of Shareholders of Kelly Services, Inc. Please note that today's meeting is being recorded. [Operator Instructions] Now it is my pleasure to turn today's meeting over to Chris Hunt, Chairman. The floor is yours.

Good morning, and welcome to Kelly Services 2026 Annual Meeting of Shareholders. I am Chris Hunt, Chairman of the Board. I'm pleased to have you join this webcast, and I will start by thanking Kelly's Board of Directors, all of whom are joining us today. Also thank you to Kelly's leadership team and other employees and guests who have joined us.

Holding our annual meeting virtually allows all shareholders regardless of location to participate safely and conveniently. Positive shareholder feedback supports continuing this format.

2025 was a year of transition for Kelly. We navigated a dynamic macroeconomic environment characterized by an evolving policy landscape and a mixed labor market. Against this backdrop, Kelly took decisive action to position the company for long-term growth. Critical to positioning Kelly for future growth was the appointment of Chris Layden as Chief Executive Officer in September 2025. Chris succeeded Peter Quigley, who retired following a distinguished 23-year career with the company. Chris is a dynamic leader with extensive industry experience, and his appointment reflects Kelly's commitment to driving growth and enhancing its operational capabilities and service delivery.

Kelly's Board of Directors also continues to evolve while remaining steadfast in its commitment to sound governance.

On January 30, 2026, Kelly entered into an agreement with Hunt Equity Opportunities LLC related to its purchase of the controlling stake of the company's Class B common stock previously held by the Terrence E. Adderley, Revocable Trust K. As part of the agreement, 4 new directors designated by Hunt joining the Board, including myself as Chairman; and James K. Hunt, your Services Lead Director; Angela Brock-Kyle; and Edward Escudero. Kelly's CEO, along with directors, Robert Cubbin; Amala Duggirala; and Leslie A. Murphy continued their service. Kelly's Board brings a strong combination of leadership, expertise and vision that will contribute to effective governance and support management in maximizing value for shareholders.

In connection with these changes, Terrence B. Larkin; Gerald S. Adolph; George S .Corona; InaMarie F. Johnson; and Peter W. Quigley resigned from the Board. We thank each of them for their contributions and dedication to Kelly.

Looking ahead, we remain focused on accelerating profitable growth and unlocking Kelly's full potential. We are confident that our path to revenue growth and margin expansion will help us deliver lasting value to you, our shareholders.

Following the business portion of the meeting, CEO, Chris Layden, will share an update on Kelly's strategic goals. Following Chris' remarks, we will address any questions submitted from Class B shareholders. Questions may be submitted in the Q&A text box on the web portal any time during this meeting. A playback of this meeting will be available on our virtual shareholder meeting site within 24 hours and will remain there until the 2027 shareholders' meeting.

The agenda and meeting guidelines are also posted on this meeting website.

I'll now call the meeting to order. Vanessa Williams, General Counsel and Corporate Secretary of Kelly and Secretary for this meeting, certify that on April 13, proper notice of this meeting, including the date, time, meeting purpose and the web address was provided to all shareholders of record as of March 19, 2026. The proxy holders appointed by the Board to vote on behalf of the shareholders are Vanessa Williams and Troy Anderson. I appoint Cynthia Mull from the Office of the Corporate Secretary as the Inspector of Election.

We have a sufficient number of voting shares of the company present by proxy to constitute a quorum. Class B shareholders who have not voted may do so now by clicking the Vote button on your screen.

The first item of business is the election of directors. The 11 director nominees as identified in the 2026 proxy statement are Angela Brock-Kyle; Robert Cubbin; Amala Duggirala; Edward Escudero; James K. Hunt; Christopher Layden; Ryan McCrory; Leslie Murphy; Michael Wartell; George Young; and myself. I will now entertain your motion for their election.

Mr. Chairman, I am Vanessa Williams, a Class B shareholder. I move the election of directors for a term expiring at the Annual Meeting of Shareholders in the year 2027 or until the election and qualification of their successors.

Thank you, Vanessa. Is there a second to the motion?

Yes, Mr. Chairman, I am Troy Anderson, a Class B shareholder. I second the motion.

Thank you, Troy. The second business item is to consider proposal to approve, by advisory vote, the company's executive compensation. Is there a motion to approve this proposal?

I move the adoption of the compensation of the named executive officers, commonly known as say on pay, as disclosed in the company's 2026 proxy statement.

Thank you. Is there a second to the motion?

I second the motion?

Thank you. The third item of business is to consider the proposal to approve the amendment of the company's restated certificate of incorporation to permit stockholder action by written consent, allow the chairperson and majority Class B holders to call special meetings and allow stockholders to fill Board vacancies and new directorships. Is there a motion to approve this proposal?

I move the adoption of the amendment of the company's restated Certificate of Incorporation to permit stockholder action by written consent, allow the Chairperson and majority Class B holders to call special meetings and allow stockholders to fill Board vacancies and new directorship as disclosed in the company's 2026 proxy statement be approved.

Thank you. Is there a second to the motion?

I second the motion.

The fourth and final item of business is to consider the proposal to ratify the appointment of PricewaterhouseCoopers as Kelly Services' independent registered public accounting firm for 2026. Is there a motion to approve this proposal?

I move the proposal to ratify the appointment of PricewaterhouseCoopers as the independent registered public accounting firm for the year 2026 be approved.

Thank you. Is there a second to the motion?

I second the motion.

Cynthia, what are the results of the election on the 4 proposals?

While a final tabulation will be made following today's meeting, all 4 proposals are approved having received the necessary vote of the Class B shares outstanding and entitled to vote at this meeting.

Thank you, Cynthia. This concludes the business portion of the meeting. And without objection, I declare the 2026 Annual Meeting adjourned.

I now invite Kelly's CEO, Christopher Layden, to provide an update on the state of the company. Chris?

Thank you, Chris, and hello, everyone. It's great to be with you today. Before I begin, I'll refer you to the safe harbor statement included as part of the rules of conduct in agenda slides found on both the annual meeting website and on kellyservices.com. This applies to any forward-looking statements that I may make as part of my comments during today's webcast.

As Chris noted, 2025 was a year of transition for Kelly. At each step, our team demonstrated the resilience and agility that had defined this company for nearly 80 years. Throughout the year, we concentrated on driving growth in more resilient markets and capitalize on positive trends in each of our business segments. Kelly Education, once again, delivered year-over-year revenue growth, driven by continued fill rate improvement and solid demand for our market-leading K-12 staffing and pediatric therapy specialties.

In the third quarter, Education achieved a portfolio-wide 90% fill rate for the first time, a testament to the operational excellence and deep customer relationships that have made this business one of the best organic growth stories in our industry.

We stabilized the underlying performance of our SET and ETM businesses even as we navigated discrete demand reductions from the federal government and 3 large customers. Within SET, both our telecom and engineering specialties grew over the prior full year period, with telecom achieving double-digit growth on robust demand from large carriers. Within ETM, outcome-based solutions, excluding contact center, and payroll process outsourcing grew on a full year basis, while our MSP specialty gained momentum through new customer wins. Across both segments, we continue to align resources with demand and drive structural efficiencies in our operating model.

Kelly's scale and capabilities continue to earn industry recognition. Everest Group named Kelly a Leader and Star Performer in each of its contingent talent and strategic solutions PEAK Matrix, marking the first time any company has achieved that distinction. HRO Today named Kelly the #1 global provider of Total Workforce Solutions. These accolades reflect the breadth and depth of our differentiated offerings and the trust that the world's leading employers place in Kelly.

We also reached a significant milestone in our technology modernization initiative, completing the cutover of our SET acquisitions to the unified technology platform we acquired through Motion Recruitment Partners. This is the first milestone of a multiphase strategy to replace legacy systems with a modern integrated platform. Our SET business is already benefiting from deeper data insights, AI and automation at scale and enhanced productivity, benefits that will extend across the enterprise as we continue to execute.

We accelerated the integration of human-centric AI as well. In the fourth quarter, we launched Grace Boost, a proprietary AI platform deployed to every Kelly employee, integrating generative AI into everyday workflows. We also deployed a scalable AI recruiting solution that combines the power of people and technology to deliver faster, more cost-effective results for large employers. These practical applications reflect Kelly's commitment to putting AI directly into the hands of our employees and customers to solve real business challenges.

Turning to 2026. We are taking deliberate steps to position Kelly to capitalize on the growth opportunities in front of us. We have continued to evolve our leadership team through key appointments. In February, at Pat McCall joined Kelly as Chief Growth Officer, bringing 30 years of sales and operations experience and a proven track record, accelerating profitable growth. In March, Joel Leege was appointed President of SET, bringing nearly 3 decades of specialty staffing experience and a track record of driving above-market growth.

Our fresh management team is aligned and energized to accelerate progress on our strategy.

Looking ahead, we have clear organic growth drivers and a pathway to top line growth and margin expansion in the second half of 2026.

In Education, our pipeline of net new K-12 opportunities remain strong. In SET, we are focusing on high-growth areas, including data centers, AI and cybersecurity. And in ETM, significant new MSP and enterprise staffing wins are coming online. Our strategic initiatives, focused on going to market as one Kelly enterprise, modernizing our technology and recentering our culture around customer centricity, visibility and accountability, are designed to ensure we capitalize on these opportunities.

Later this year, we will celebrate 80 years of Kelly's leadership in workforce strategy and solutions, a testament to the endurance of our mission to connect people to work in ways that enrich their lives.

We move forward with confidence in our strategy, underpinned by a strong balance sheet, healthy cash generation and a balanced approach to capital allocation. The investments we're making in our people, portfolio and technology are positioning Kelly to drive profitable growth and realize the company's full potential.

In closing, I'd like to thank our employees for their dedication to serving Kelly, our clients and our talent. I'd also like to thank our Chairman and each of our Board members for their support and commitment to Kelly. And to you, our valued shareholders, we are grateful for your continued trust. I am confident that 2026 will mark an inflection point in our journey to accelerate profitable growth and value creation, and I look forward to delivering on that commitment.

Thank you, Chris. We will now address questions received from shareholders.

Thank you, Mr. Chairman. Looking at the portal, there are no questions for us today.

There being no questions, we can thank everyone for joining. And if there are additional questions, you can reach out at Investor Relations (248) 251-7264.

Thank you so much for joining us.

This concludes the meeting. You may now disconnect.

Good morning, and welcome to Kelly Services First Quarter Earnings Conference Call. [Operator Instructions]

Today's call is being recorded at the request of Kelly Services.

If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's Head of Investor Relations. Please go ahead.

Good morning, and welcome to Kelly's first quarter conference call. With me today are Kelly's Chief Executive Officer; Chris Layden; and our Chief Financial Officer, Troy Anderson. Before we begin, I'll remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance.

Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, we'll discuss certain data on a reported and on an adjusted basis.

Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations. For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation and once filed, Form 10-Q. All of which can be accessed through our Investor Relations website at ir.kellyservices.com.

With that, I'll turn the call over to Chris.

Thank you, Scott. Good morning, everyone. I'll begin with highlights from the first quarter. The macroeconomic environment remained dynamic over the first 3 months of 2026. Against this familiar backdrop, employers continue to take a cautious approach to hiring, contributing to a mixed labor market. That said, conditions through the quarter were stable, consistent with our expectations.

This stability was reflected in our results as we executed on our strategic priorities. Total company revenue exceeded our expectations and adjusted EBITDA margin was in line with our expectations. In ETM, staffing and overall revenue trends improved sequentially from the fourth quarter, including growth in talent solutions across our technology-enabled and AI-powered MSP, RPO and PPO offerings.

In SET, we delivered another quarter of year-over-year growth, our Telecom specialty and life sciences and engineering performance improved sequentially. In Education, we continue to experience pressure from delayed contract decisions and enrollment declines and to a lesser extent, weather-related closings.

Across all 3 segments, we continue to align resources with demand and maintain a disciplined approach to expense management as part of our ongoing focus on efficiency. Contributing to stabilizing trends in our results, for new customer wins that were implemented and came online during the quarter. Among them is a significant MSP program with a leading global oil and gas company across its North American operations.

Kelly was selected based on the differentiated value of our technology-enabled capabilities. This includes our Helix analytics platform and AI-enabled rate intelligence which provides the visibility benchmarking and cost optimization, large enterprise customers require of a contingent talent management program.

With the initial implementation of this new MSP program complete, we have clear line of sight to additional expansion opportunities. This win underscores where our 1 Kelly go-to-market approach is capable of delivering. Leveraging technology in our experience, serving global customers to win in the market and grow.

With momentum building across the enterprise, we remain focused on returning to organic growth and margin expansion. Paving the way towards this next horizon is our newly formed growth office. Since it was established in February, the growth office has been collaborating across the enterprise to lay the foundation for an integrated commercial operating framework.

This framework will serve as the foundation of a unified 1 Kelly enterprise strategy that brings the full breadth of our portfolio to Kelly's current customers and prospects. Central to this effort is the migration of all commercial teams onto a new unified CRM system, a key component of our modernized tech stack, the CRM will provide enterprise-wide pipeline visibility, enable high conviction forecasting and support cross-selling across business units.

We expect the migration to be complete by mid-year as part of our ongoing technology modernization initiatives. Reflecting more broadly on our technology modernization journey, we remain on track with our multi-phase approach.

In the first quarter, our team was successful in ensuring a smooth transition following the cutover of our acquisitions in SET from their legacy technology stack to the modernized platform, Kelly acquired through our acquisition of MRP.

Armed with the key learnings we gathered from the initial cutover, we're well positioned to execute on subsequent phases and realize the benefits of deeper data and insights, AI and automation and scale and enhanced productivity. As we executed on our strategic priorities through the quarter, we continue to evolve our leadership team.

In March, we welcomed Joel Leege as President of SET. Joel is a proven industry leader with broad-based sector experience, having spent nearly 3 decades in staffing, talent solutions and managed services across technology, engineering and life sciences. He brings extensive experience leading complex transformations and integrations, enabling exceptional service delivery for customers and driving above-market growth.

This experience is uniquely suited to further enhance SET's competitive positioning and take the business to the next level. I'm pleased to have him as part of Kelly, and I look forward to Joel leading the SET business to new heights of growth and profitability.

I'm also reevaluating the leadership structure within the ETM business. This business is core to our strategy. And with this in mind, I'm taking time to assess what we need longer term to ensure we deliver on our growth objectives.

In the interim, I will be closely involved in the management of ETM. I have great confidence in the team who have consistently demonstrated their commitment to customer centricity, visibility and accountability. These cultural pillars remain fundamental to how we'll achieve our ambitions and win in the market, both in ETM and across the enterprise.

I was pleased to have the opportunity to see the strength of our culture on full display at our recent Impact 2026 Leadership Summit in March. This immersive experience brought together 200 of our leaders for 2 days of dialogue and collaboration focused on transforming Kelly into a more customer-centric, visible and accountable enterprise.

Impact reflects our commitment to building on the strength of Kelly's culture from the leadership level down, positioning the company to execute more consistently as we target a return to revenue growth and margin expansion in the second half of the year.

In a moment, I'll share more about our pathway toward a return to growth. First, I'll turn it over to Troy to provide more details on the results in the quarter. Troy?

Thank you, Chris, and good morning, everybody. I'm pleased to report that we started the year with solid execution and results on a number of fronts. For the first quarter of 2026, revenue totaled $1 billion, which was down 10.7% overall versus Q1 of last year, is favorable to our guidance.

Excluding the previously disclosed discrete impacts, driven by reduced demand from the federal government and 3 top ETM customers, revenue was down 3.3% on an underlying basis, which was improved 60 basis points versus last quarter.

As a reminder, a brief update regarding these impacts. Federal government demand largely stabilized in Q3 of last year with a slight sequential increase this quarter mainly from the government shutdown and seasonal impacts in Q4. For the 3 top ETM customers, 1 stabilized at the current reduced demand levels beginning in Q3, 1 fully ran off in Q3, and the largest 1 remains one of our top customers and has stabilized across Q4 and Q1.

At the segment level, underlying ETM declined 0.4% versus the prior year quarter, which is measurably improved versus last quarter and exceeded our expectations. Each Talent Solutions specialty grew versus the prior year quarter.

In staffing, we saw a net underlying decline of just 1.2% in the quarter and year-over-year growth across February and March. Overall underlying ETM revenue has been relatively stable across the last 5 quarters.

Education decreased 4.8% year-over-year in the quarter, reflecting the prior year delayed new contract decisions, elevated weather-related school closures, and overall reduced demand in key markets due to enrollment declines.

We expect education to deliver sequential year-over-year improvement throughout the remainder of 2026 and a return to growth in the second half of the year as a result of new business wins, successfully defending several key renewals and continued penetration of our therapy offering into new and existing clients.

SET's underlying revenue declined 6% in the quarter led primarily by near-term demand pressure within the technology specialty. Consistent with ETM and education, we are confident we will see sequential year-over-year improvement each quarter in 2026 with science, engineering and technology contributing most strongly in Q2.

Reported gross profit was $196.4 million, down 17% versus the prior year quarter reflecting the lower revenue volume, along with employee-related costs and business mix changes. The gross profit rate was 18.9%, a decrease of 140 basis points compared to the prior year quarter. Approximately 50 basis points of the decline is timing related, which we expect to normalize over the course of the year.

Our overall gross profit rate improved 10 basis points relative to Q4 and the year-over-year decline improved similarly. Versus Q4, both ETM and SET saw improvement in their gross profit rates and year-over-year declines. While Education saw rate pressure in light of the revenue decline, cost timing and mix. We expect to see gross profit rate improvement overall and in each BU in Q2 and over the remainder of the year.

We continue to make significant progress improving our SG&A expense profile with reported SG&A expenses of $199.3 million, a decrease of 11.7%. On an adjusted basis, SG&A expenses decreased 10.3% year-over-year, reflecting the continued momentum with our structural and volume-related cost optimization efforts.

Over the last 3 quarters, the year-over-year decline has averaged over 10%. Additionally, core adjusted SG&A expenses, which exclude depreciation and amortization and incentives, have declined sequentially each quarter since Q1 of 2025.

In the quarter, adjusted SG&A expenses decreased across all the segments as we continue to drive durable and sustainable efficiencies in our operating model, through technology enhancements and process efficiencies, including leveraging AI. We also continue seeing benefits from realignments within the ETM segment and integration of MRP and other acquisitions within SET. All of which are progressing well.

For the year, we're projecting a net year-over-year decline of approximately $25 million in core SG&A expenses despite investments being made in technology to growth office in other areas. The structural and durable changes we are making will allow us to scale more efficiently as we pivot to growth, thus supporting our expected return to margin expansion in the second half of the year and beyond.

Our reported loss per share was $0.17 for the quarter. On an adjusted basis, we delivered earnings per share of $0.03 compared to $0.39 in the prior year. For our adjusted results, in connection with our various efforts. We recognized $9.2 million of charges in the quarter.

Integration, technology modernization, organizational realignment and restructuring drove $5.2 million of the charges. The balance is related to costs associated with our controlling shareholder change, executive transitions and initial steps we have taken in our real estate rationalization efforts.

We expect to continue incurring various charges throughout 2026 and as we progress on our technology modernization journey, reduce our fixed cost structure, including real estate costs and expand upon our various optimization efforts.

Adjusted EBITDA was $15.8 million, with an adjusted EBITDA margin of 1.5%, which was down 150 basis points versus the prior year quarter and in line with our expectations. The year-over-year decline improved 20 basis points relative to Q4. The revenue and gross profit declines drove the decrease versus the prior year with the significant SG&A reductions partially offsetting.

At a segment level, similar to the gross profit rate, both ETM and SET improved their margins and year-over-year performance versus Q4, while Education saw pressure in light of the revenue and gross profit declines. We expect each BU to show sequential improvement in their adjusted SG&A margins in Q2 and on a year-over-year basis as we progress through the year.

Moving to the balance sheet and cash flow. We utilized $25.4 million of cash from operations this quarter due to the timing of working capital requirements. Total available liquidity as of the end of the quarter was $252 million, comprising $26 million in cash and $226 million available on our credit facilities, providing us with ample capital allocation flexibility.

Total borrowings of $130.5 million increased versus the prior year-end, reflecting the working capital needs during the quarter. Our debt-to-EBITDA leverage remained near 1 at the end of the fiscal quarter.

During Q1, we maintained our quarterly dividend of $0.075 per share. We remain confident in Kelly's strategy and cash flow generation capabilities and are committed to opportunistically deploying capital in pursuit of attractive returns for shareholders.

As we turn to the outlook for the remainder of 2026, our expectations are unchanged relative to the initial view we established in February. Our expectations assume no material change in the macroeconomic or industry dynamics in the coming quarters.

For Q2, we expect to show year-over-year improvement relative to Q1 with an overall revenue decline of 7% to 9%, which includes at least 100 basis points of improvement in the underlying decline. For adjusted EBITDA margin, we expect at least 2.5% representing at least 100 basis points improvement relative to Q1 and a significant reduction in the year-over-year decline relative to the past 2 quarters.

As we progress through the balance of the year, assuming no new material impacts, we expect to see relative improvement in our year-over-year performance, each successive quarter for both revenue and adjusted EBITDA margin. That should translate to modest revenue growth in the second half of the year in a roughly mid-single-digit decline on a full year basis.

For adjusted EBITDA margin, we expect to see measurable year-over-year margin expansion in the second half of the year and a modest increase on a full year basis. We are excited about the momentum we are building and the opportunities that lie ahead in 2026. I'm grateful to all the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhance profitability over the long-term.

I'll now turn the call back to Chris for his closing remarks.

Thank you, Troy. As we look ahead, we remain firmly committed to executing on the priorities we outlined in February. Rooted in the strategic pillars I shared shortly after joining Kelly, these priorities will continue to guide our actions and progress on the pathway toward an inflection point in our results.

Growth remains our top priority. The growth office is taking shape and beginning to enhance how we go to market as 1 Kelly enterprise. With the leadership transition in SET complete and organic growth drivers gaining traction in each of our businesses. We have a clear path to improve top line performance as we move through the year.

The strength of our pipeline and the steady stream of new wins coming online reinforce our confidence that our go-to-market approach is working, that our ability to convert opportunities is accelerating.

On efficiency, we'll continue to align resources with demand while reengineering our cost base to drive structural efficiencies and enhance profitability. Our technology modernization initiative remains on track and our enterprise AI strategy continues to unlock productivity across the business.

In our culture, the energy and alignment our team demonstrated at our recent Impact Leadership Summit reinforce what I've known since I joined Kelly. Our people are deeply committed to the success of our company, our clients and the talent we place. We'll continue to build on the momentum with an emphasis on customer centricity, visibility and accountability across everything that we do.

We remain on track to deliver our commitments and achieve revenue growth and margin expansion in the second half of the year. There's much work ahead, but I'm confident in our plan, our team and our ability to execute. We look forward to capitalizing on the positive momentum we're building together and unlocking Kelly's full potential for the benefit of all of our stakeholders.

Operator, you can now open the call to questions.

[Operator Instructions] Our first question is going to come from the line of Marc Riddick with Sidoti.

So I wanted to start with some of the cost improvements that you've been working on? And maybe you could talk a little bit about the -- the -- I believe it was $25 million in core SG&A reduction is expected. Maybe you could sort of touch a little bit about some of those efforts and maybe the timing that we might expect there?

Yes. Thanks, Marc. Look, I'm really pleased with the progress that you're seeing as we really look at driving expense reductions across the enterprise. This is one of the priorities that I outlined right as I joined Kelly, our focus on reengineering our cost base, matching resources with demand.

And you're seeing us come through and really delivering on that commitment in the first quarter through that disciplined execution. We saw that in the 1.5% margin -- EBITDA margin as well, which was in line with our expectations. It improved 20 basis points year-over-year in comparison to our Q4 trajectory.

And as you've heard us talk about and Troy reemphasize, we're going to continue to see that sequential incremental improvement on the EBITDA margin side as we go throughout the rest of the year. Maybe ask Troy, if you want to comment any further on the specific $25 million impact for the rest of the year.

Yes, sure. Thanks for the question, Marc. We began taking actions, as Chris noted, throughout last year and really accelerated in the latter part of the year in response to some of the elevated revenue pressure but also just with the integration efforts that really with the acquisitions, the cutover to the new technology platform, where we consolidated all the acquisitions in December.

So it's really the manifestation of some of the realignments that we did last year and then the integration efforts as we progress into this year and just continue looking at both durable structural changes as well as volume-related changes so that as we pivot to growth, we can scale much more efficiently and really drive that EBITDA margin expansion.

Great. And then actually, I guess, maybe picking up on that part of the commentary there. Can you talk a little bit about the -- I guess, the timing and milestones that you're looking for, for the remainder of the year on the technology activity as well as, I guess, maybe timing of ERP that we might see going forward?

Yes. We have another phase expected in the beginning of the fourth quarter of this year, where we'll migrate the platform now to sort of a broader enterprise platform. Right now, again, we have the acquisitions, MRP and the prior SET acquisitions all consolidated on the platform. But that was designed really for those smaller entities. And so we've made some foundational changes in the platform that, then we'll migrate all of those onto that, that now, we'll call it the enterprise platform.

We're migrating our enterprise human capital management. So all of our FTEs will now be on the platform and we have some other smaller changes, migrating some customers on a prototype sample basis, just to go through some of the Kelly platform migrations and then -- and we're going to continue working on some of our solutions billing capabilities.

So that's some of the more complex, right, non-staffing related capabilities and then work that we're going to be doing to bring the majority of the SET business onto the platform early in '27.

Yes. And Marc, just maybe 1 thing to add on our CRM. The most important near-term milestone in the second quarter which is on track, is the deployment of our HubSpot CRM. It's the consolidation of our CRMs across the business units. We're going to migrate all of our commercial sellers onto the CRM by mid-year.

And now having the growth office and Pat's leadership to be able to go and drive that, it gives us the enterprise-wide pipeline visibility and allows us to go and do some of the go-to-market and growth objectives we've been outlining since we started.

That's very helpful. And then last one for me, just maybe touch a little bit on the demand drivers that you're seeing from customers, particularly the technology demands. Maybe you could talk a little bit about sort of how that sort of pace through the quarter and maybe just what you're seeing overall as far as whether the data center impacts, AI impacts, things like that, what you're seeing now versus maybe the beginning of the year and sort of how that's been progressing?

Yes, sure. I mean, first, some of the near-term pressures you're seeing do reflect some difficulty in our year-over-year comps particularly within SET, as we look at 2025, which is why, as we've talked about across the business, we continue to make sure we've got resources aligned with demand and now under Joel's leadership, we'll be very focused on getting back to market growth.

Now that being said, we're actually seeing some encouraging signals, including a net positive consultant count improvement in March. As we exited the quarter, we also are seeing that April is tracking quite similarly. So some positive momentum there.

And we also saw some sequential improvement in some of the businesses that we mentioned in our prepared remarks, we're really pleased with the progress we're making in the telecom space. That is being driven by outsized demand in the data center space that we have differentiated capability and we are going to continue to see that demand play out in the market where we have customers across the supply chain who need total talent management solution and the technical solution to support the investment that's happening in the United States and around the world.

Yes. Marc, this is Troy. I would just add, across the business, we saw improvement as we progressed through the quarter. Again, in Education, we had some weather-related impact that was largely concentrated in January. That was maybe half the decline in the quarter specific to that. And in an ETM, I commented in the prepared remarks about pivoting to growth in the underlying staffing business as we exited the quarter.

So we feel good about the trends heading into Q2, which is reflected in the expectation there where we'll see our call for down 7% to 9% overall and at least 100 basis points improvement in the underlying decline.

[Operator Instructions]. Our next question will come from the line of Kartik Mehta with Northcoast Research.

Maybe taking a bigger picture look at Kelly today versus prior downturns. Can you just discuss maybe how you think structurally, the company is different today than it was before? Maybe in terms of customer mix, customer relationships? And obviously, in terms of how the company has changed in terms of business mix as you've gone more into SET and higher-margin businesses?

Yes. Sure, Kartik. Good to have you with us. I guess, as I step back and think a little bit about what differentiates Kelly in the market and maybe how that's evolved, all of the steps we took over the last few years to get scale and to get capability in higher specialized areas were all the right steps to take.

We have the scale and the breadth of capability to go and compete now in all of the end segments that we're in. We didn't have that a few years ago in areas like technology, as an example, in that we do. We also have a much more robust RPO offering through the -- through some of the inorganic activity with our acquisition of Sevenstep.

And we have a leading total talent management solution with the combination of the strength of our MSP offering and RPO offering together. As I think though about what needs to differentiate, Kelly, going forward, it really is, it has to be our focus on our customer and making sure that we're bringing all of that capability to our customer.

And we're doing that in large part through better execution, the operating framework that we outlined right away focusing on not only our go-to-market, but also the way that we show up more holistically as an enterprise, Kelly enterprise to all of our customers.

The establishment in the first quarter of the growth office was the next step in that journey, driving the operating framework within account management, within how we sell and within how we deliver across these large customers is really important. That is an area of focus that we're going to continue to come back. And we're seeing the roots of that already playing out with some large customer wins, and that focus is going to continue to be what will differentiate Kelly, for many years to come.

Maybe Troy, just on that point, you've done a good job of taking cost out. The company seems more efficient. And I'm wondering how you think about the incremental earnings power when we get back to kind of -- to a growth in this industry?

Yes. It's a good question. And that cost reduction from the earlier question, and I noted this in the prepared remarks, was net even of some investments that we're making in the growth office and some other areas. So you'll see some of that cost moderate -- declines moderate as we go through the year and pivot to growth, but we'll be able to scale more efficiently.

Look, we're expecting to achieve our expectations for the year. Margins would be back above 3% in the back half of the year, which is where we were in the last half of '24 and the first half '25. And then, of course, as we continue to grow more, we would expect to expand further from there in a very efficient and effective way.

[Operator Instructions] Our next question comes from the line of Kevin Steinke with Barrington Research Associates.

Great. I wanted to just follow up on the discussion about the core SG&A expenses to make sure I'm understanding correctly, I guess with core SG&A, I believe you're equating that with the adjusted SG&A. And if it's down $25 million year-over-year in 2026, if I'm doing my math correctly, it appears that the adjusted SG&A expense on a quarterly basis will kind of flatten out for the rest of the year at about that $192 million level that you saw in the first quarter. Is that -- am I thinking about that correctly?

Yes. So that's right, that's total -- yes, so $192 million, yes, roughly flatten out. And the reason why I went to this core, which is not something that we've talked about really previously was just, we had a lot of movement with incentives last year with the challenging environment we were operating in. Of course, there was a reduction to performance incentives throughout the year.

And of course, this year, we're expecting to perform measurably better and we would expect to return to some of those incentives. So if you strip that out and really just focus on that underlying wages and facilities and some of those things that are more stable and some of those things that we're focused on from the durable and structural reduction perspective, that should flatten out as we progress through the year and we get the year-over-year benefit of the actions taken both last year and this year. And again, that's net of investments that we'll be making as we pivot to growth.

Okay. Right. How material is the change in incentive comp that you're expecting in 2026 versus 2025?

It's probably $20 million to $25 million swing in total SG&A between the years, something in that ballpark. Again, it will be subject to ultimate performance. And of course, each business unit has different -- has incentives tied to their specific performance so you can get some variability in that just based on how individual business units perform.

Right. Okay. That makes sense. Yes. So just following up on that, then I think you commented that you expect gross margin improvement throughout the year, I believe. And what would be driving that? And it sounds like a lot of the adjusted EBITDA margin improvement that you're expecting would kind of hinge on the improved gross margins. Is that correct?

Yes, that's generally correct. I mean, again, we'll continue driving -- I mean, with the -- as we pivot to growth, we'll get some lift there on a relatively, again, flattish expense base on a run rate basis and then with the gross margin improvement.

A little bit of timing, I commented on that, just how some of the expenses we're seeing, how they'll play out this year versus how they played out last year particularly in the employee-related expenses, which we saw some pressure on exiting last year.

And then we were again up 10 basis points quarter-over-quarter on gross margin despite some of that timing pressure. And then as we benefit from mix, again, as we grow, pivot to growth and some of the areas that we're expecting growth are the higher-margin areas that will benefit us as we get into the back half of the year.

We are also, by the way, again, back to an earlier comment about just growth and where we're seeing opportunities. We are seeing a little bit of movement on perm fees. I mean it's still 1% of revenue, but we did see a little bit of benefit from that and particularly in SET in the first quarter. And of course, that helps gross margins and ultimately EBITDA as well.

Okay. Yes, that's helpful. Just a couple more. You called out lower student enrollment in the Education segment. Just wondering how meaningful that is or how broad based that is as you look across your various school district clients?

Yes. Thanks. Well, we -- first, I mean we remain really confident in this Education business. It has really significant differentiation. We're #1 in the market. And we continue to see really historic fill rates across the U.S. where we're serving 9,000 schools.

Some of the impact, the convergence of factors that really came together are temporary in nature. And so we don't see these as structural as we mentioned in the prepared remarks, there were some weather-related closures. We also saw some budget constraints stemming from enrollment declines.

And where that had the biggest impact for us was in Florida, we serve some of the largest school districts in the United States, some larger school districts in Florida. And that concentration was a onetime hit and that demand has now stabilized.

And so where we're focused is the 70% of the market that is still not benefiting from an outsourced K-12 substitute management relationship with Kelly. And we are selling around the country. We're very -- as we hinted that, we feel very good about some of the large renewals that have been opened this year, and we're going to continue to sell more districts around the United States.

And we're also going to continue focus on bringing in more therapy, more therapy services across that K-12 footprint, not only in Florida but around the United States. So we feel really good about where that business -- what the opportunity is in the Education business and where that business is going to be as we go throughout the rest of the year.

Okay. That's helpful commentary. And just lastly, I want to ask about the organic growth drivers. You mentioned organic growth drivers gaining traction. If you could provide a little more color on that? And then related to that. You mentioned the strength of the pipeline. And can you maybe talk about how broad-based that strength is across your various businesses?

Yes, sure. So first, the growth office has been moving quickly. And it's a foundational quarter for us as we begin to put in this integrated commercial operating framework. There is some work we've been doing aligning incentives, obviously, the commercial team, some of the account management teams, putting more rigor around our pipeline management and account planning is all in motion.

We will move, as I mentioned earlier, all of our commercial teams to this new CRM platform. And that will give us the visibility that we need to continue to drive the business forward and make sure we've got resources in the right places, not only to go close deals, but also to go and make sure that we're delivering and providing excellent service.

The strength in the pipeline continues -- we continue to see a lot of demand for customers looking for total talent management solutions, the robustness of our MSP pipeline is very strong right now. You saw that in the big oil and gas win we had in the quarter.

And interestingly, that was not a price-based win. This was a differentiation around our tech stack, our reach and the differentiation of our core -- of our core offering. And we continue to see more and more large global customers coming to Kelly for those total talent management solutions.

We hinted earlier our telecom and engineering pipelines continue to be very strong in SET, and we're going to likely continue to see that. We have an opportunity to continue to drive more pipe in our technology business.

In our K-12 staffing pipeline continues to be very strong for net new -- net new school districts, and we've seen a nice jump in the amount of therapy opportunities that we're seeing tied to some of our larger school districts. So at a high level, that's how I'd characterize some of the momentum that we're seeing, and Pat in the growth office are going to continue to drive as we go through the remainder of the year.

Okay. That's good to hear. Thank you for the comments.

Thanks Kevin.

[Operator Instructions] Our next question is going to come from the line of Joe Gomes with NOBLE Capital.

This is George [ Pres. ] I'm filling in for Joe Gomes this morning. So first question I have for you. What have the Hunt companies brought to the table so far?

Yes. Great. Well, as you would have seen a few weeks ago in our filing, we -- later today, we'll be in our annual meeting. The Board has nominated 11 individuals for election to the Board, 3 new members will be joining. Really excited about the extensive experience that the Board brings. Some of our new Board members are bringing to really help with our strategic execution, our long-term value creation, and I'm personally really excited to work with the new Board.

As the Hunt's have shared, they continue to express their support of our management team, the strategic direction that we've outlined. And there's been no change, right, to our business strategy, our client relationships, our operational approach, and we're all focused on driving shareholder value. And that's -- and we're excited to bring in this new slate of directors later today.

All right. Great. And the early days of your new Chief Growth Officer, Pat McCall, how have they been?

You know really well. And we talked a little bit about this in terms of setting some of the foundation for the commercial operating framework. There's a lot of opportunity for Kelly to show up as one global enterprise. 1 Kelly enterprise to all of our large customers.

And so we're putting in the foundation right now, stronger account planning, more rigorous pipeline management, all of the things that will contribute to our growth, and we're really excited about what this will mean to our future.

Thank you. And I'm showing no further questions. And I would like to hand the conference back over to Chris Layden for closing remarks.

Great. Thank you all. We'll see you next quarter.

This concludes today's teleconference. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good morning, and welcome to the Kelly Services Fourth Quarter and Full Year Conference Call. [Operator Instructions] Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's Head of Investor Relations. Please go ahead.

Good morning, and welcome to Kelly's Fourth Quarter and Full Year Conference Call. With me today are Kelly's Chief Executive Officer; Chris Layden; and our Chief Financial Officer, Troy Anderson. Before we begin, I'll remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

In addition, we'll discuss certain data on a reported and on an adjusted basis. Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations. More information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation and once filed Form 10-K all of which can be accessed through our Investor Relations website at ir.kellyservices.com. With that, I'll turn the call over to Chris.

Thank you, Scott, and good morning, everyone. Before I discuss Kelly's performance in the fourth quarter, I'd like to reflect on the recent developments that marked an important moment in the company's journey. On January 30, we announced that Kelly had entered an agreement with Hunt companies related to its purchase of the controlling stake of our Class B common stock. In conversations with Hunt, it's clear they see many of the same opportunities I saw as I consider joining the company as CEO, an iconic brand to build upon, a strong balance sheet with consistent free cash flow, a clear pathway to accelerate growth and significant value to be unlocked.

I welcome their support as we pursue these opportunities and realize Kelly's full potential. As part of the agreement, our Board has been reconstituted and 4 new board members have been appointed. Our new directors bring extensive experience, which positions them to be strong contributors to the Board as we drive progress on Kelly's strategic journey. I look forward to engaging with them and continuing to work with the entire Board to create lasting value for all of our stakeholders.

Now let's review the highlights from our performance in the fourth quarter. Starting first with the broader macroeconomic environment. The dynamics that shaped our results through the third quarter persisted in the fourth quarter. Employers continue to take a cautious approach to hiring amid a mixed labor market. At the same time, we capitalized on positive trends in each segment, which were reflected in our performance in the quarter. Kelly delivered revenue at the top end of our expectations as we doubled down on our commitment to stabilize the company's performance and enhance how we're going to market as one Kelly enterprise.

We achieved continued year-over-year growth in education, driven by solid demand for K-12 and therapy specialties. In set, we delivered top line growth on a year-over-year basis in our telecom specialty and sequential revenue stability in Life Sciences. In an ETM, we achieved stable sequential revenue performance in our staffing, MSP and BPO specialties, excluding contact center solutions. Across the enterprise, we continue to align resources with demand and maintained a disciplined approach to expense management. These results also reflect our deliberate shift towards customer centricity. My time in the field with our customers and talent has reinforced how this approach unlocks value for employers and for Kelly.

Recently, I visited with the CEO of a consumer technology company that is designing and building some of the world's most advanced audio solutions. I had the opportunity to see firsthand how Kelly has helped evolve their workforce as they've scaled advanced manufacturing capacity in the U.S. to meet growing demand. When our relationship began 8 years ago, they produced 10,000 units a year. Today, that number has grown to $4 million with our team supporting key work streams from R&D to final production and distribution.

As they have invested in advanced robotics and capital equipment, our workforce has evolved alongside them, learning new skills, adapting to new processes and helping them scale production in the U.S. As more manufacturers ramp up domestic capital investments and reshore operations, Kelly is well positioned to capitalize, leveraging our differentiated solutions, a customer-centric delivery model and market leadership in North America. Parallel to these efforts, we reached a significant milestone in our technology modernization initiative that will power our growth well into the future. .

In December, our acquisitions in SET successfully completed the cutover from their legacy technology stack to the modernized platform Kelly acquired through our acquisition of MRP. This marks the first of a multiphase strategy to move our enterprise from a fragmented and outdated mix of front, middle and back-office technologies to a unified best-in-class platform. With our SET acquisitions fully operational within the platform, the business is now benefiting from deeper data and insights, AI and automation at scale and enhance productivity. These benefits will extend across set in the enterprise as we execute on our phased approach with the majority of Kelly's businesses and functions slated to be operational within the platform in 2027.

With our technology modernization initiative gaining momentum, we also accelerated the integration of AI across the enterprise. In the fourth quarter, we launched a proprietary internal AI platform, Grace Boost, to every employee at Kelly. This is the latest iteration of Grace, a stand-alone J&I tool, which we initially deployed nearly 2 years ago to simplify sales and recruiting workflows. With Boost, we've taken its capabilities a step further including directly integrating AI into the applications our people use every day.

This integration eliminates civil chair processes a limited option while improving its ability to learn users' workflows, provide contextual assistance and ultimately enhance productivity. As we continue to double down on customer centricity, we're also leveraging AI to enhance the customer and talent experience directly. During the quarter, we deployed a tailored AI recruiting solution with a large multinational manufacturing customer, enabling them to rapidly staff a key assembly line. The AI agent calls, screens and answers questions from applicants helping our recruiters hone in on top candidates and accelerate the hiring process, and the results have exceeded our expectations.

Talent feedback has been overwhelmingly positive. Customer satisfaction has improved meaningfully, and we're meeting their needs faster and at a lower cost. The solution is highly configurable and scalable and we're pursuing opportunities to deploy it to additional customers. These examples reflect Kelly's focus on practical applications that put AI directly in the hands of our employees and our customers to solve real business challenges leveraging the combined power of people and technology to deliver results with clear alignment to our strategy.

We're also aligning our leadership team to accelerate growth. Yesterday, we announced the appointment of Pat McCall as Kelly's Chief Growth Officer. Pat brings 30 years of sales and operations experience and a proven track record, accelerating profitable growth and leading global staffing and IT services firms. In this newly created role, he will help bring to bear the full strength of Kelly's portfolio, working across the enterprise to strength in large enterprise account management and expand new customer acquisition. We're pleased to welcome him to the team, and we look forward to his contributions towards Kelly's growth strategy.

Additionally, we announced in the fourth quarter the initiation of a comprehensive search for the next President of SET. Kelly has engaged a nationally recognized firm to conduct a search for a proven leader with significant experience in enhancing go-to-market strategies capitalizing on opportunities created by AI in driving profitable growth. I'm excited about the caliber of candidates we're speaking to, and I look forward to sharing an update soon when our process concludes. The positive momentum we generated in the fourth quarter has set Kelly on the right path entering 2026. As we carry forward this momentum, we remain confident in our strategy, underpinned by a strong balance sheet, healthy cash generation and a balanced approach to capital allocation. In a moment, I'll share more on our priorities for the year. First, I'll turn it over to Troy to provide more details on the results in the quarter and for the full year.

Thank you, Chris, and good morning, everybody. For the fiscal year, revenue totaled $4.25 billion which was down 1.9% overall and roughly flat, excluding acquisitions and discrete impacts from reduced demand from the federal government and 3 top customers, which we have discussed in prior quarters. For the fourth quarter of 2025, revenue totaled $1.1 billion, a decrease of 11.9% versus Q4 of last year or down 3.9% on an underlying basis, excluding the discrete impacts. .

As a reminder and brief update regarding these impacts, federal government demand largely stabilized in Q3 with a modest sequential decline in Q4, mainly due to seasonality. For the 3 top customers, one stabilized at the current reduced demand levels beginning in Q3, one fully ran off in August and the largest one remains one of our top customers and saw continued demand reductions throughout Q4, we could see some further reduction in 2026. At the segment level, Education grew 1.3% and reflecting continued fill rate improvement. SET's underlying revenue declined 5.4% in the quarter, which was modestly better than our expectations and reflects demand pressure within information technology and other key specialties partially offset by growth in telecom.

Underlying ETM also declined 5.4% and was modestly better than our expectations with varying levels of declines across the primary specialty areas. On an absolute basis, underlying ETM revenue has been relatively consistent across the quarters throughout 2025. For Q4 revenue by service type, Staffing Services reflects modest growth in our education business and pressure from government, large customer and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding contact center solutions, were down year-over-year, reflecting timing of project demand and new business within SET and ETM.

Talent Solutions was down year-over-year, reflecting a mix of performance across the individual specialties. Term fees represented approximately 1% of revenue, which was consistent with the prior year. Reported gross profit was $197 million, down 18.4% versus the prior year quarter reflecting the lower revenue performance, along with increased employee-related costs and business mix changes in the quarter. The employee-related costs were driven primarily by health care and workers' compensation claims expense as well as certain impacts related to the large customer runoffs. The gross profit rate was 18.8%, a decrease of 150 basis points compared to the prior year quarter.

Education's GP rate held flat at 14.2%, while SET at 24.2% declined 130 basis points and ETM at 18.1% declined 220 basis points. We made significant progress improving our SG&A expense profile in the quarter with reported SG&A expenses of $198.5 million, a decrease of 8.7%. On an adjusted basis, SG&A expenses decreased 11.1% year-over-year, reflecting the momentum we are gaining on structural and volume-related cost optimization efforts. Expenses decreased across all the segments as we continue to drive durable and sustainable efficiencies in our operating model through technology enhancements and process efficiencies, including leveraging AI.

Reduced incentive compensation expenses also contributed to the decline in the quarter. Existing initiatives like the continued realignment within the ETM segment and integration of MRP and other acquisitions within SET are progressing well and will drive increased go-to-market and cost efficiencies going forward. In connection with our various efforts, we recognized $9.8 million of charges in the quarter. These included costs associated with improving technology and processes across the enterprise as well as severance expenses and executive transition costs. We expect to incur certain of these expenses through 2026 as we make continued progress and expand upon our various optimization efforts, including our technology modernization initiative.

As a result of the overall business performance and a $127.9 million increase to the tax valuation allowance, our reported loss per share was $3.69 for the quarter. On an adjusted basis, we delivered earnings per share of $0.16 compared to $0.79 in the prior year with the decline over the prior year primarily due to lower profitability and discrete tax items. For the full year, the reported loss per share was $7.24 including $7.61 of noncash negative impacts from goodwill impairments and tax valuation allowances. Full year adjusted earnings per share was $1.26. Adjusted EBITDA was $21 million, with an adjusted EBITDA margin of 2%, which was down 170 basis points versus the prior year quarter and below our expectations.

The revenue and gross profit declines I previously noted, drove the decrease versus the prior year, while incremental GP rate pressure drove the shortfall versus expectations. Education margin expanded by 30 basis points year-over-year driven by the revenue growth and expense optimization efforts. ETM and SET saw margin pressure due to the elevated revenue gross profit declines despite substantial SG&A reductions. Moving to the balance sheet and cash flow. We generated strong operating cash flow this year with $122.6 million through the fourth quarter, up significantly versus the prior year. Total available liquidity as of the end of the quarter was $288 million, comprising $33 million in cash and $255 million on our credit facilities, leaving us ample capital allocation flexibility.

Total borrowings of $102 million decreased $16 million versus the prior quarter and $137 million versus the prior year-end. Our debt-to-EBITDA leverage ratio was less than 1 at the end of the fiscal year. In addition to the debt repayment during the quarter, we completed $10 million of Class A share repurchases, leaving us with $30 million remaining on the current Class A share repurchase authorization. We also maintained our quarterly dividend of $0.075 per share. Total capital deployed across these 3 areas was approximately $30 million in the quarter and $158 million for the fiscal year. These actions reflect our confidence in Kelly's strategy and cash flow generation and our commitment to opportunistically deploying capital in pursuit of attractive returns for shareholders.

As we look ahead to 2026, we are assuming no material change in the macroeconomic or industry dynamics. Consistent with what we discussed last quarter, during the first half of 2026, we will still be experiencing the larger year-over-year effects of the discrete impacts from the federal government and the 3 large ETM customers with some residual impact into the third and fourth quarters. Given that, we expect Q1 to look very similar to Q4 with revenue declining between 11% and 13% year-over-year or an underlying decline of 3% to 5%, excluding discrete impacts and adjusted EBITDA margin of approximately 1.5% which steps down from Q4, primarily due to payroll tax resets.

As we progress through the year, assuming no new material impacts, we expect to see relative improvement in our year-over-year performance, each successive quarter for both revenue and adjusted EBITDA margin. That should translate to modest revenue growth in the second half of the year and a roughly mid-single-digit decline on a full year basis. For adjusted EBITDA margin, we expect to see measurable year-over-year margin expansion in the second half of the year and a modest increase on a full year basis. We are excited about the momentum we are building and the many opportunities that lie ahead in 2026. I'm grateful to all of the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhanced profitability over the long term. I'll now turn the call back to Chris for his closing remarks.

Thank you, Troy. The path to improve year-over-year performance becomes clear as we move through 2026 and the discrete impacts we've discussed begin to anniversary. The actions we're taking today are designed to ensure we capitalize on that inflection. Let me share more about our priorities for 2026, which build on the strategic pillars we discussed last quarter. First and foremost is growth. Our focus on growth is reflected in the formation of a growth office, which under Pat's experienced leadership will work across our businesses to enhance how we go to market as one Kelly enterprise. And having identified organic growth drivers in each business, we have a clear path to improve top line performance as we progress through the year.

In Education, our pipeline of net new K-12 staffing opportunities remain strong. We're well positioned to continue to gain share in this growing market as more schools seek to improve fill rates through our industry-leading offering. In districts where we already have strong relationships, we're driving penetration of our higher-margin pediatric therapy services to meet growing demand. In SET, we're sharpening our focus on high-growth areas, including data centers, AI and cybersecurity, where our scale and expertise are uniquely suited to meet customers' evolving needs. We're also continuing to capitalize on the shift towards higher-margin statement of work and consulting engagements.

As an example, in Life Sciences, where Kelly is already the second largest staffing provider in the U.S. We're capturing growth in the clinical trials market through our differentiated functional service provider solution or FSP. Our outsourcing model provides sponsors with specialized scalable expertise to more efficiently manage specific functions in clinical trials from data management and biostatistics to pharmacovigilance. With new deals coming online, including a multiyear contract with a global pharmaceutical company, we expect FSP will continue to be an important contributor to Kelly's top and bottom line going forward.

In an ETM, we have several MSP and enterprise staffing wins slated to go live in the first quarter. This includes a new MSP program with a global financial services firm, one of the largest MSP deals Kelly has ever won. Our scale and capabilities which contributed to this win are reflected in our recent recognition by HRO Today as the #1 global provider of total workforce solutions, encompassing MSP, RPO and staffing. As we build on this momentum and enhance how we go to market as an enterprise, I expect our new business pipeline to continue to grow and our conversion of these opportunities to accelerate.

Let me talk next about our second strategic priority, efficiency. We'll continue to align resources with demand while reengineering our cost base to drive further structural efficiencies and enhance profitability. Our SG&A trajectory reflects the momentum we're building and our technology modernization initiative is central to this effort. And our enterprise AI strategy reflects a targeted approach to unlocking productivity and growth across the business. And finally, culture. Culture remains fundamental to how we'll achieve our growth and efficiency ambitions with an emphasis on customer centricity, visibility and accountability.

We'll continue making it easier to do business with Kelly spending time in the field to better understand the needs of our customers and talent and holding ourselves to the highest standard of execution across every part of the business. As we enter 2026, the investments we've made in our portfolio, our technology and our people have positioned us to emerge stronger on the other side. There is much work to be done but I am confident in our plan, our team and our ability to execute. I want to thank our shareholders for their support and trust at this important moment on Kelly's journey. I also want to express my gratitude to the Kelly team for their perseverance and resilience as we closed last year.

The fourth quarter was a sprint, and we ran through the tape. Now it's time to carry our momentum forward and deliver on the promise of 2026. I look forward to working alongside our team to realize our collective ambitions and create long-term value for our stakeholders. Operator, you can now open the call to questions.

[Operator Instructions] Our first question will be coming from Joe Gomes of Noble Capital.

So Chris, I appreciate your comments on Hunt and just kind of dig a little deeper here and see maybe you provide a little more insight. We've gone from a passive owner of control of Kelly to an active shareholder here. And trying to get a better handle on what Hunt is bringing to the table. Do they have expertise in the staffing business. Maybe you can talk some more about that. And then what does this mean for the A shareholders. If we look here, the B shares are -- have risen in price or they've now diverged fairly significantly from A. And historically, they've pretty much traded in tandem. I mean, obviously, there's been periods where they have diverged, but it's just trying to get a better handle of what all this can mean here for the A shareholders and what they could see here going forward.

Yes, Joe, great question, and thank you for it. We're really excited to welcome the Hunt team. And as you heard in my prepared remarks and what we shared even last week, Hunt companies continue to express their support of our team and the focus that we have in accelerating growth. They saw a lot of the same opportunities that I've highlighted over my first 5 months. and the opportunity to unlock a lot more value here at Kelly. Now we continue to maintain a market-leading position across this diversified portfolio, the deep client relationships that continue to allow us to support global employers as their needs evolve. And we know that the Hunt team is committed to that. We are not expecting any -- or anticipating any changes to our business operation, our client relationships, our strategic initiatives, and we remain committed to continue to create lasting value for our shareholders, and we look forward to working with our new directors on that.

There really is an opportunity for value for all shareholders and interests are aligned in that regard. Now specifically, maybe to the second half of your question on just some of the protections that were secured. The agreement that we have with the Hunt companies does include some governance protections and those governance protections, we think, really align to all shareholders and give us a benefit for our Class A and our Class B going forward, where we know there's a tremendous opportunity to unlock value.

Great for that. I appreciate it. And on the SET business, the underlying revenue trends have worsened the last 3 quarters. And maybe you could speak a little bit more to that? And what do we see here in that business that could change those trends here?

Yes. No, as you indicated, and I'll let Troy weigh in a little bit as well, right, underlying debt declined 5.4% in the quarter, but this was modestly better than our expectations. The decline reflects some continued demand pressure in the technology space, but we also saw that offset with really nice growth out of our telecom segment. As we indicated, the life sciences, our science segment where we're #2 continues to show a lot of positive momentum, large pharma companies leveraging our functional service provider offering, which leads the market, and we expect to continue to see demand for customers needing a more flexible, outcome-based solution in the science space.

And in IT, right, that's our largest segment. We continue to see some headwinds from AI-driven productivity increases, reducing some demand for rules like programmers or areas like quality assurance. But we're also seeing an increase in an uptick in roles directly related to the development and deployment of AI solutions. We expect that pipeline to continue to grow as well. And as we go throughout the year, continue to see sequential quarter-on-quarter improvement. Troy, anything else do you want to add?

Sure. Yes. Thanks, Chris and Joe, for the question. The underlying has actually been -- we did have a little bit of an uptick here, 2 points or so relative to what we saw in the last 2 quarters. we were in the low 3s in Q2 and Q3 and around 4 in Q1. And similar to some comments we had offered last quarter. Last year, in the fourth quarter, we grew 4% organically overall. And a lot of that growth was in the -- at the time of the P&I segment, but SET held pretty firm as well, and we didn't see some of the normal seasonality we would see there where it does trend down a little bit in the fourth quarter given how their professional roles. And so you tend to see some holidays and the like. So I think it's really more a function of compare with SET and ETM as well versus really anything really changing in the business per se.

And our next question will be coming from Kartik Mehta of Northcoast Research.

Chris, I think you grabbed a little bit of this question in the previous answer you gave, but I'm interested there's so much talk about AI and the impact that's having on many companies. And you've talked about using AI at Kelly. And I'm wondering if you kind of sit back and look, do you think the net impact of AI has been positive, negative or neutral for Kelly as far as demand for services compared to maybe what you've been able to do from AI, from efficiency and cost perspective?

Kartik, yes, no, absolutely. We remain confident that AI presents a net positive opportunity for Kelly. Employers continue to be increasingly focused on leveraging the power of AI to drive productivity improvements and accelerate growth. The AI-enabled recruiting solution I discussed in our prepared remarks is just one demonstration of the way that we're bringing that to market and differentiating. Our unique solutions also continue to provide employers, particularly big employers, global employers with the flexibility, the scalability that they need to bridge their workforces into a more AI-enabled workforce.

And in that way, it unlocks really the power of people and technology and we think we'll unlock a lot of value for Kelly.

And then, Chris, as you kind of look at the trends for the first week of 2026 especially on the permanent hiring on the fee business. I'd be curious as to kind of what you're seeing in terms of demand from your customers and if that's giving you any kind of look forward into what 2026 could bring?

Yes, it's a good question, and we're really not seeing a significant change. It continues to be stable in that regard. Perm represents about 1% of total GP and we continue to see stability there.

And our next question will be coming from Kevin Steinke of Barrington Research Associates.

Just one of the start out by exploring kind of the margin trend here in the fourth quarter. And as you move into 2026, specifically to the fourth quarter, where adjusted EBITDA margin came in relative to your expectations. I think you mentioned incremental gross margin pressure. Was that the primary reason for the variance versus expectations? And can you just dig a little bit more into the drivers of that? I know you called out the higher employee-related costs and also business mix. But maybe a little bit more detail on how those affected the margin relative to your expectations? .

Yes, that sounds good. Well, I'll talk a little bit about the EBITDA margin performance, and I'll have Troy provide a little bit of color on just the kind of discrete impact on the GP side with some of the health care related costs. As you know and as we've talked about, our strategy continues to be centered around driving profitable growth. And EBITDA margin expansion has been it's going to continue to be an important part of that. Our EBITDA margin expansion in the fourth quarter and on a full year basis fell short of our expectations. Troy talked in his prepared remarks. I know we talked over the last couple of quarters about some of the discrete customer impacts. But with this in mind, we continue, as we've shown, our focus on aligning expenses with demand is a real lever for us, and this is reflected in the SG&A and cost management reductions you saw both in the third quarter and the fourth quarter, and we'll continue to be very focused there.

We also recognize the need to address longer-term opportunities to reengineer our cost base, shifting our business mix to higher margin markets, solutions and offerings, and that's a big part of our growth story. And I would say, just as I turn it over to Troy talk a little bit about the discrete GP impact. Some of this margin and the incremental expansion that we've talked about, it will play out as we move and anniversary some of those discrete impacts the first half of the year, where we're going to see margin expansion in the second half of 2026 with a modest increase on a full year basis. But I'll have Troy give you a little bit more color on the GP impact.

Yes. Thanks. Good coverage there, Chris. And Kevin, yes, the -- certainly, the 150 basis point decline on the GP rate was, again, incremental to what we expected. And you see the largest portion of that hitting ETM both at the GP level and at the EBITDA level and a little bit on SET as well. And we had some of this in Q3 also around the employee-related costs. We just had escalations, some changes as we pivot from '25 to '26 that drove some outsized utilization against the health care coverage. And then workers' comp is largely driven by health care costs, especially older claims that are still open and so periodically, we do have adjustments to those based upon the third-party estimates around those. So it's just a combination of factors as we came into the back part of the year here that put pressure on those 2 items that we expect we'll reset as we get into '26. And we've put some processes in place to have better visibility and better management there as we go forward.

Okay. That's helpful. And when we look ahead to 2026 here, just wanted to explore a little bit more the outlook you discussed in terms of successive improvement in quarterly performance as you move throughout 2026 on both I guess, revenue and adjusted EBITDA margin. I guess, obviously, the comparisons get easier as you move throughout the year, but can you talk about the other factors that you expect to drive that progressive improvement, say, in terms of organic growth drivers, business mix, et cetera.

Yes, sure. So I'll take that. And Chris, certainly add any color as I go through it. But the -- just Q4 to Q1, not a whole lot going to change in the business, still about an 8-point impact on those discrete items. The margin profile will not change dramatically. We'll have the payroll tax reset, which is common across all the companies. And so that puts some incremental pressure on Q1 margins. But as we work through the year, the various growth initiatives, again, Pat coming on board, some of the things that Chris has talked about as far as our organic growth drivers, opportunities we have to bring full Kelly to our customers and to the market along with the work we're doing from a technology modernization perspective and the benefits we expect to continue realizing there through '26 and '27 along with just other efficiency and optimization initiatives that we have planned throughout the year.

That should all be accumulating as we go through the year in addition to the easier comps, as you indicated, as we get into the back half of the year. But net returning to growth on an organic basis, again, assuming no new major material impacts, assuming no major change in the macro environment, returning to organic growth and measurable margin expansion in the back half of the year. And look, if we get some positive tailwinds out of the economy, we should -- we would expect to take our fair share of that as well.

Great. I just wanted to follow up there. You mentioned again the bringing on the Chief Growth Officer. And maybe you can just delve a little bit more into the opportunities you see by bringing on that role and where -- what sort of initiative is you can execute relative to maybe what the company had left on the table before.

Yes, exactly. The growth, as you've heard me say, it's the single most important value creation lever at this stage of our journey. We're excited to welcome Pat in this new role, a newly created role. And he's going to have a clear mandate, and that's really to bring the full strength of Kelly's portfolio to the market. And we've got to go win more market share with our large customers, in particular. We got to build a much more unified client-centric go-to-market model, reduce some of the access points, as you've heard us talk about. And he's going to help us drive organic growth. We know how much opportunity there is, particularly with these large customers to do more with them. We've got really an unmatched product portfolio now in product mix, and we've got to make sure we're bringing that to all of our customers, both in the traditional ways where we do staffing, but also in more outcome-based in solution work. And so it'll be focused also on driving acquisition of new customers, driving pipeline acceleration across the enterprise, and we're excited to bring him into the leadership team starting this Monday.

Great. Great. Lastly, I just wanted to ask about, Chris, you talked about in your prepared remarks a real-world example of an internal AI recruiting solution you built out, I think, for one particular customer. And I think you talked about looking to deploy that more broadly. What would that mean for Kelly from an efficiency and cost efficiency perspective? And is that -- do you think that's something could be meaningful in terms of the number of recruiters you employ or any other metrics that it could help on your journey to continue improving margins.

Well, we really see a lot of customer impact. And what I'll start with is really to say that we believe that we can really deliver AI at scale, helping us provide deeper data and insights, AI and automation at scale. And some of that productivity is really a little bore out in the EBITDA margin expansion as you see us growing throughout the year. And particularly in the second half of the year as we have the benefits of the program that I mentioned before, the impact of products like Grace Boost that are now deployed across all of our customer base and our employee base. And finally, our industry-leading talent management platform, Kelly Helix continues to lead the market helping customers with deep workforce insights around their workforce mix, integrating AI-based chatbot, to drive faster workflows and workforce decision-making. We really see that continuing to drive increased productivity and efficiency for us and again, we've -- we're showing some of that in the step-up you'll see throughout the year.

And I would now like to turn the conference back to Chris Layden for closing remarks. .

Great. Well, thank you all. We look forward to seeing you next quarter.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good morning, and welcome to Kelly Services Third Quarter Earnings Conference Call. [Operator Instructions] Today's call is being recorded at the request of Kelly Services. [Operator Instructions]

I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's Head of Investor Relations. Please go ahead.

Good morning, and welcome to Kelly's third quarter conference call. With me today are Kelly's Chief Executive Officer, Chris Layden; and our Chief Financial Officer, Troy Anderson.

Before we begin, I'll remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, we'll discuss certain data on a reported and on an adjusted basis. Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations. For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation and once filed Form 10-Q, all of which can be accessed through our Investor Relations website at ir.kellyservices.com.

With that, I'll turn the call over to Kelly's Chief Executive Officer, Chris Layden.

Thank you, Scott, and good morning, everyone. It's great to be with all of you. Let me start by saying what a privilege it is to serve as CEO of Kelly, the sixth in our storied history and the first to be selected from outside the company. Having spent my entire career in this industry, I've known and admired Kelly for many years. Our brand is iconic, synonymous with the industry we created when we were founded by William Russell Kelly in 1946. Since then, Kelly has connected millions of people to work, improving families, communities, economies and the world. This is also a company I've competed with. Throughout my career leading commercial organizations and customer pursuits, I've experienced up close Kelly's ability to win in the market. Our diverse portfolio of businesses has significant scale in attractive specialties and differentiated global capabilities that are widely recognized as leading the industry. With our Education business, Kelly has proven the ability to drive rapid organic growth in emerging markets, having established a dominant position in K-12 staffing and tripling the revenue of the business since 2020. This is among the best examples in our industry of what's possible when a team combines clear vision, sound strategy and consistent execution. Instead, I've watched a business that has acquired scale in higher-margin, higher-growth specialties like technology and telecom, moving up the value chain as a consultative partner to employers, seeking differentiated technical solutions. At the same time, SET has continued to win and retain market share in our established life sciences and engineering specialties, where for years, Kelly has led the market as the second and fourth largest staffing provider, respectively.

In ETM, Kelly brings enterprise customers unmatched global workforce capabilities and insights to our technology-enabled and AI-powered offerings delivered at scale. This includes talent solutions, business process outsourcing and staffing services, which Everest just recently recognized as leading the market. I've seen firsthand the competitive advantage that this breadth and depth of capabilities creates as employers increasingly seek partners who can meet their total talent management needs. Because of these assets, Kelly's track record of driving value for customers, including many of the largest employers in the world is as strong as any company in this space. Never have our core strength and ability to enhance flexibility and agility in an employer's workforce been more important than they are today.

As I step into this role, the operating environment is evolving, driven by a dynamic macroeconomic landscape, a sluggish labor market, global and domestic policy shifts and the AI boom. The impact of these trends on our industry is significant, and Kelly is not immune. These dynamics were more visible in our results in the third quarter. Despite continuing to capture growth in more resilient markets, our performance as a company fell short of expectations. Our team and I know that we can achieve more, having proven as much in the organic growth and margin expansion that Kelly has delivered in recent years. But to consistently win in the market and unlock Kelly's full potential, it's critical that we maximize our core strengths and address head-on opportunities to improve our strategy and execution.

To better understand where these opportunities exist, I'm spending much of my time in the field meeting with and listening to our employees and customers. Through my conversations with our team, it's clear that we have a highly engaged group of workforce experts who are passionate about winning in the market and serving our clients and talent. The expertise and high level of service they provide are among our key differentiators that drive employers to choose Kelly to meet their workforce needs. In meeting with many of our top customers, I've heard how Kelly's tailored solutions and unique insights are helping our clients maintain a competitive edge in their industries. I've also had the pleasure of connecting with the investment community who have shared with me their growing interest in the value creation opportunity we have here at Kelly.

During my time in the field, a few common themes have emerged. First, it's fundamentally important to customers that it'll be easy to do business with Kelly. We must ensure our structure and processes are designed with customers in mind, and they must be straightforward and intuitive to navigate.

Next, the scale Kelly has acquired in higher-margin, higher-growth specialties is a tremendous asset that has repositioned the company in the market. This has created inroads with employers in attractive end markets who are eager to know how our expanded capabilities can meet their evolving needs. Completing the integration of these investments is critical to our ability to realize their full value and capitalize on these growth opportunities.

And finally, much work has been done by our team to reduce complexity and improve efficiency. This work continues today with the efforts underway to consolidate disparate front-, middle- and back-office systems, leveraging the leading technology stack we obtained when we acquired MRP.

We must continue to assess our resources from technology platforms to our workforce mix to ensure they're optimized to drive profitable growth. These early observations are helping inform how we move forward on the next leg of Kelly's strategic journey. I'll share more in a moment about our short-term priorities and long-term focus.

First, I'll turn it over to our CFO, Troy Anderson, to provide more details on our results in the quarter.

Thank you, Chris, and good morning, everybody. Before I walk through our results, as a reminder, beginning in the third quarter, the Motion Recruitment Partners acquisition we completed in the second quarter of 2024 is fully in our year-over-year comparable results. Thus, I will only speak to reported and adjusted results for the current quarter. Revenue for the third quarter of 2025 totaled $935 million, a decrease of 9.9% versus Q3 of last year. This was lower than our expectations, most notably due to lower-than-expected growth in the ETM staffing specialty, education and select other specialties. As we discussed last quarter, we had discrete impacts from reduced demand from the federal government and 3 of our top customers. Combined, these impacts drove approximately 8% of year-over-year revenue decline, consistent with our expectations, leaving us with an underlying decline of 2%, excluding these impacts, which is in line with industry performance.

Kelly's underlying performance reflects positive trends in each business area that reinforces our confidence in our strategy. Education continued its long-running streak of quarterly growth and achieved a 90% fill rate overall in the quarter for the first time. Within SET, the telecom specialty achieved double-digit growth in the quarter after strong growth in the second quarter, while the engineering specialty has grown each quarter this year. SET's underlying performance was consistent with the second quarter and continues to outperform the market. And within ETM, staffing underlying revenue has been consistent across the quarters despite the macro variability. Outcome-based solutions, excluding contact center and Payroll Process Outsourcing, or PPO, both continued to grow in the quarter and have shown growth all year.

Finally, our managed service provider, or MSP specialty, showed modest growth in the quarter for the first time this year, reflecting the new customer wins we have referenced in prior quarters.

For Q3 revenue by service type, staffing services reflects modest growth in our education business and pressure from government, large customer and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding Contact Center solutions, were down year-over-year, reflecting timing of both project demand and new business within SET and ETM. Talent Solutions was down modestly year-over-year in the quarter, reflecting a mix of performance across the individual specialties. Perm fees represented approximately 1% of revenue, which was consistent with the prior year.

Drilling down into revenue by segment, Education grew 0.9% year-over-year in the quarter, driven primarily by ongoing fill rate improvement. While we believe we won our fair share of the new business opportunities for the school year, we saw a number of decision delays in light of the broader macro environment and the fill rate improvement benefit was lower year-over-year given our maturing customer portfolio, thus the relatively lower growth in the quarter. As a reminder, education volumes and revenues are reduced significantly in the third quarter due to the summer break.

In the SET segment, revenue was down 9% in the quarter or 3.5% excluding the federal government impact. Our Telecom and Engineering specialties continue to be growth areas within SET, while Life Sciences and Technology saw year-over-year declines consistent with the second quarter.

In the ETM segment, revenue declined 13.1% year-over-year or an underlying decline of 1.9%. Staffing services revenues declined 16.4%, driven primarily by the large customer and federal contract demand reductions, along with lower hours volume across other clients. Outcome-based revenues decreased by 17.2%, reflecting demand pressure from the large contact center customer that has fully run off as of the end of the quarter.

Excluding Contact Center, ETM outcome-based solutions grew modestly. Talent Solutions revenue decreased 1.4% overall, reflecting growth in PPO, MSP new customer wins and reduced customer volumes and recruitment process outsourcing. Reported gross profit was $194 million, down 12.5% versus the prior year quarter, primarily from reduced revenue. The gross profit rate was 20.8%, a decrease of 60 basis points compared to the prior year quarter and a 30 basis point sequential increase. The sequential lift, which is typical with the seasonality of our business, was more muted than we expected given the revenue dynamics, along with elevated employee-related costs in the quarter. Education's GP rate increased 20 basis points, while SET declined 80 basis points and ETM declined 60 basis points. We made significant progress improving our SG&A expense profile in the quarter with reported SG&A expenses of $194.4 million, a decrease of $24.6 million or 11.2%. On an adjusted basis, SG&A expenses decreased 9.7% year-over-year, reflecting the momentum we are gaining on structural and volume-related cost optimization efforts. Expenses increased in our Education segment in support of the revenue growth, while expenses decreased across the rest of the company. With the increased revenue pressure, we're enhancing our efforts to drive durable and sustainable efficiencies in our operating model through technology enhancements, including leveraging AI, process efficiencies and multiple other levers. Existing initiatives like the formation of the ETM segment and integration of MRP and other acquisitions within SET are progressing well and will drive both go-to-market and cost efficiencies going forward.

In connection with our various efforts, we recognized $4.7 million of charges in the quarter, down from $6.4 million in the second quarter. These included costs associated with improving technology and processes across the enterprise as well as severance expenses and executive transition costs. We expect to see these expenses increase in the fourth quarter as we make continued progress and expand upon our various optimization efforts.

Related to the realignment of SET and acquisition integration, during the quarter, we assessed the current goodwill reporting units and determined it was appropriate to combine them into a single SET segment reporting unit. As a result of the assessment, along with declines in the current and projected business performance driven by macroeconomic and industry conditions, we concluded that there was a triggering event for a noncash goodwill impairment totaling $102 million in the quarter. We are excluding the impairment from our adjusted results. Additionally, with the impairment activity, we were also required to reassess the recoverability of our deferred tax assets. While we have confidence in our business over the future recoverability time period, with a 3-year cumulative loss position in our near-term actual and expected financial performance, it was necessary to record a valuation allowance of $70 million, which is also noncash and excluded from our adjusted results.

As a result of the goodwill impairment and tax valuation allowance, our reported loss per share was $4.26 for the quarter. On an adjusted basis, earnings per share was $0.18 compared to $0.21 in the prior year, with the decline over the prior year primarily due to lower profitability and discrete tax items. Adjusted EBITDA was $16.5 million, a decrease of 36.7% versus the prior year period, while adjusted EBITDA margin declined to 1.8%, both of which were below our expectations, reflecting the revenue and gross profit declines I previously noted. SET expanded margins by 60 basis points year-over-year despite the lower gross profit due to their expense optimization efforts. ETM saw margin pressure due to the elevated revenue and gross profit declines despite substantial progress on their SG&A. Education experienced margin compression due to the seasonality of that business.

Moving to the balance sheet and cash flow. We are generating strong operating cash flow this year with $94 million through the third quarter, up significantly versus the prior year. Total available liquidity as of the end of the quarter was $269 million, comprising $30 million in cash and $239 million of available liquidity on our credit facilities, leaving us ample capital allocation flexibility. Total borrowing of $118 million increased versus the prior quarter due to our normal working capital seasonality. Our debt-to-EBITDA leverage ratio was less than 1 at the end of the quarter. We don't expect a material change in our net debt position over the remainder of the year from normal operations. We ended the quarter with $40 million remaining on our current Class A share repurchase authorization. We continue to believe the data demonstrates that the company is measurably undervalued by the market. With that backdrop and our capital allocation flexibility, we anticipate being active in our repurchase program during the remainder of the year. We also maintained our quarterly dividend of $0.075 per share. These actions reflect our confidence in Kelly's strategy and our commitment to opportunistically deploying capital in pursuit of attractive returns for shareholders.

As we look at the fourth quarter, we are assuming no material change in the macroeconomic or industry dynamics and a positive resolution to the federal government shutdown during the quarter. For revenue, we expect a decline of 12% to 14% in the quarter, which includes 8% of negative impact associated with reduced demand from discrete large customers and for federal contractors, consistent with the third quarter impact. Excluding these items, our underlying revenue decline would be 4% to 6%. The incremental revenue decline relative to the third quarter is primarily due to the strong growth we saw in the fourth quarter of last year and includes a modest impact related to the government shutdown.

For adjusted EBITDA, we expect margin of approximately 3% in the quarter. This represents a sequential increase of 120 basis points, consistent with the prior year change despite the incremental revenue pressure and a decrease of approximately 70 basis points year-over-year in the quarter, consistent with what we experienced in the third quarter. While we're not providing specific guidance beyond the fourth quarter, as we look out over the next few quarters and the anticipated residual year-over-year impacts from the reduced demand for federal contractors and from the 3 large customers in ETM, it's likely we'll see continued revenue and margin pressure at least through the first half of 2026.

As Chris said, across Kelly, we're addressing head-on opportunities to continue to improve our execution. This includes in the finance organization, where we're well underway with implementing measures that will enhance our agility, efficiency and business impact in this evolving operating environment.

I'm grateful to all of the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhanced profitability over the long term.

I'll now turn the call back to Chris for his closing remarks.

Thank you, Troy. As we move forward, our immediate focus is on stabilizing Kelly's performance and actions to this end are underway. We're moving swiftly to align resources with current demand trends while continuing to drive structural efficiencies across the enterprise. As part of this effort, we made the difficult but necessary decision last month to implement strategic restructuring actions that resulted in a targeted workforce reduction. These actions address excess capacity while further streamlining our organizational structure following the consolidation of the OCG and P&I businesses into the single ETM segment. We're also continuing and, where possible, accelerating our technology modernization initiative within SET and ultimately across the enterprise. This initiative will unlock substantial growth and efficiency opportunities, making it easier for our employees to serve our customers and talent, reducing expenses associated with managing disparate and outdated systems and enabling more rapid innovation and integration of AI. While executing our near-term priorities, we're also keeping our sights set on the future.

As I conclude my initial assessment of the business, our team is aligned where we must focus longer term to accelerate progress on Kelly's strategic journey. First and foremost is growth. Growth is the single most important value creation lever at this stage in Kelly's journey. To drive organic growth, we'll continue to enhance how we go to market, especially with our large enterprise customers to bring to bear the full strength of Kelly's portfolio and win more market share. We'll also continue to drive inorganic growth by pursuing targeted investments that add scale and capabilities in higher-margin specialties. We'll focus on evolving our product mix as well to address changing buyer preferences such as the shift towards statement of work solutions and to capitalize on the AI boom. Our widely recognized Global Re:work Report found nearly half of executives surveyed are struggling to find the talent with the right operational and technical skills in AI. This unmet demand represents a significant opportunity to position Kelly as the partner of choice for employers, navigating the transition to an AI-enabled workforce.

Next, we'll continue to focus on efficiency. This means continuing to align resources with demand, while reengineering our cost base to drive further structural efficiencies. That includes our initiatives to modernize our technology stack and integrate legacy acquisitions.

And finally, culture. Culture is fundamental to how we'll achieve our ambitions and win in the market. We're committed to building on the strong culture that exists here at Kelly, doubling down on customer centricity, visibility and accountability. I look forward to sharing with you more about these areas of focus and our progress as we move forward.

We're navigating a complex moment for our industry and/or company. These circumstances call for decisive action to address near-term dynamics while positioning the company to realize the significant value creation opportunity before us. There is much work to be done, but I'm excited and energized to meet this moment together with our team and contribute my operational experience to accelerate our progress. Our core strengths, an iconic brand, a differentiated portfolio and an engaged team give me the confidence that we'll emerge more agile, resilient and primed for growth.

I'm grateful to the Board of Directors for placing their trust in me to lead Kelly at this moment on the company's journey. I also want to extend my appreciation to Peter Quigley for his support as I stepped into this role and for his distinguished service to the company over the last 23 years. And to our team, thank you for welcoming me with openness and enthusiasm. I look forward to working alongside you to realize our collective ambitions and create long-term value for all of our stakeholders.

Operator, you can now open the call to questions.

[Operator Instructions] Our first question, we'll go to Joe Gomes from NOBLE Capital.

I wanted to start out, Troy, I don't know if you can kind of break out these discrete between the federal government and the large customer impacts. I know in total, it was, I think you said roughly 8%. But I don't know if you could break that down what was for the federal government, and what was for the large customers?

Yes, Joe, thanks for the question. They're roughly equal. So it's roughly 2 points each, plus/minus a little bit. But I'd say, generally speaking, they're roughly equal.

Okay. And I know, Chris, you just talked about some of this go-to-market here, optimizing large enterprise customer share of wallet. When I -- you see that, and I understand that goal, but then I also see, hey, 3 customers had a significant impact on revenue this quarter. How are you kind of like squaring that circle and making sure that we get even more concentrated in some big customers, the same things don't happen down the road.

Yes. Thanks, Joe. This is Chris. And it's a good question. And let me just start by reiterating that we know Kelly can achieve more. We saw the headwinds, and we know there's also execution gaps that we're going to continue to address head on. One of the things that you heard me talk about is the breadth and depth of our portfolio. And as we've gone and acquired really significant scale over the last few years, that's also built on a foundation where we've had incredible strength, right, #1 in education, #2 in science, #4 in engineering, just outside the top 10 in our technology business, Everest recognized specialization and strength in our MSP, BPO and Staffing Services. And so as I'm talking to customers, not only the 3 impacted, but also the thousands of customers we're working with from around the globe, they want to be doing more with Kelly. They want to make sure that it's easy to work with us, that we're bringing all of our capability to them. And one of the things I have been impressed with is -- I saw this from the outside before I got here, and I've been even more impressed as I've joined, is the depth of these relationships, the length of time we've been working with customers around the world. And we know we'll continue to partner with them in new ways as we continue to make sure that we're showing up and that we're easy to work with, and we're showing up with all of our capabilities. So we do have opportunity as we move forward around some of that execution, but that's what we're taking head on. And again, I have some confidence as I've been engaging with customers over the last 60 days.

Yes, Joe, this is Troy. I would just add that, again, these 4 discrete items are somewhat unique and completely unrelated, just happen to all be around the same time. But it's -- the macro environment affected each of them in varying ways. policy decisions affected them in varying ways and their industry challenges are also affecting them in varying ways. So it's less about customer concentration, and it's more about stickier services and just growing -- we have relationships, by the way, with all those customers still and still very significant for at least 1 or 2 of them. So anyway, I just wanted to remind the -- since we didn't really get into the details of what they were, but remind everybody of that.

Appreciate that. And one more for me, if I may. Troy, you got a slide here in the deck about the revenue trends, and you kind of break out excluding discrete impacts. And if I take a quick glance at those that quarter 1, quarter 2, quarter 3, they're pretty much trending the wrong way. And just trying to get an idea, I understand the federal government shutdown. But what else needs to occur in the macro environment that you think we can start to see these revenue trends reverse and start becoming positive or as opposed to negative and/or start growing again as opposed to trending downward?

Yes, it's a fair question. Again, I would say that SET -- and again, they're somewhat unique across the 3 segments. SET is fairly consistent across the quarters. We had great strength in telecom, double-digit growth there this quarter after nearly double digit last quarter. Engineering has been growing all year and consistent rate of decline in technology and life sciences. So we did expect a little bit more out of SET this quarter, but we're still pleased that we -- despite the broader environment around us that we saw at least consistent performance and some strength there in those 2 areas. Education, again, somewhat of a unique dynamic there, market, some decision delays. Those are decisions we still expect to win in -- at a future date, but there was some hesitancy in the market just given some of the policy changes and dynamics around the broader macro environment. So we expect education to continue to grow and us win our fair share, if not more. We've been taking share in a growing market there. And then on ETM, again, the underlying still low single digit. We think we're competitive in the market, as Chris said, highly ranked by the industry experts, and we saw growth in MSP. So we're starting to realize the benefits of some of the new logo wins there. Staffing has been consistent across the year despite the macro headwinds, the underlying staffing. And really, that decline there was just less growth in PPO and a bit of a downturn in RPO, recruitment process outsourcing. So there's different dynamics in each, and there's significant opportunity in each, as Chris outlined in his prior response. So I think it's just a matter of moving us forward with some of the initiatives and getting through some of the softness that we see more in the macro dynamics around us.

Our next question comes from the line of Kevin Steinke from Barrington Research Associates.

So I wanted to start out by asking about the various factors in the operating environment that you noted in your earnings release are currently impacting your results, largely the macroeconomic landscape and sluggish labor market. But on top of that, you specifically added in the AI boom. And so I'm just kind of wondering what you're seeing in terms of the impact of AI on demand for your business currently? And on the flip side, you also mentioned that could be an opportunity over the longer term as your customers look to find IA talent. So maybe if you could walk through the dynamics you're seeing with AI currently.

Yes, Kevin, thanks. This is Chris. We really see there to be an opportunity to continue to capture new AI growth opportunities. And from our standpoint, really not just in the SET business, but in ETM and in Education, we've got a unique opportunity in the market based on our capability to bring employers a flexible, more scalable solution as they're bridging into a more AI-enabled workforce. We think that's going to unlock a lot of value in a way that will combine the power of people and technology. And we have that opportunity as we move up the value chain in our SET business with a lot of the work we're doing in things like data modernization and other digital work, that's solutions-based business. And again, that's in growing demand. And as we indicated in our prepared remarks, more broadly across employers in our research, 50% told us that they are struggling to find the right operational and technical skills to help them navigate this transition into the AI-enabled workforce. So we see it as a real opportunity for us on the go-to-market side. Now internally, you heard Troy and I both talk about how we are going to continue to accelerate the modernization of our technology stack, the technology stack that we acquired when we acquired MRP. That continues to be a priority as we think about ways to improve both process and efficiency across our teams and bring our teams new tools. And a lot of that is underway. The integration of those AI-based tools in our recruiting process in our client portals, and we're going to continue to see that add value and drive opportunities for efficiency and productivity over the next couple of quarters.

Okay. Great. So it sounds like AI offers a nice longer-term growth opportunity for you. I was just curious if in the shorter term, perhaps are some customers kind of holding off or delaying hiring decisions as they assess the impact of AI on their businesses and as they assess whether they need to add as many people in the past, given that AI will bring them greater productivity. I'm just wondering if that's having any short-term impact on demand for your services?

Well, let me start, and I'll have Troy build on it. First, I think we just need to step back in the broader context of what we've been seeing, a pretty sluggish labor market. And many of the businesses that would support some of the disruption maybe you've seen and the lack of job growth that we've seen really pretty consistently across every month this year is a bit embedded already in the workforce dynamics. And so we see and have been seeing that sluggish impact all year. Now outside of that, we continue to see companies invest in bridging themselves into a more AI-enabled workforce. And we believe there could actually be opportunities, not only on the solutions side of how we can help companies navigate that, but it also could be an indication at some point on the staffing part of our business that companies use flexible labor as a bridge into that as they're navigating more certainty around the demand for their products and services. And so we'll continue to be navigating those indicators that will impact both parts of our business, our staffing and our solutions.

Yes. Kevin, I would just add, this is Troy. The -- I wouldn't say there's been a change this quarter versus last quarter or 2 quarters ago in terms of any impact that AI may have had in terms of our positions, the type of positions we staff or the type of opportunities we pursue. But we are seeing an uptick in our ability to leverage AI in terms of providing support to our customers, be it with our platforms from a workforce management perspective in the ETM space, be it some of the solutions that we're bringing to bear in SET, not just in the technology vertical, but also in telecom and engineering and life sciences. So I mean there's -- we're starting to be able to now move upstream into bumping into some of the major consulting players with some of our nimbleness and the capability that we bring, trying to fill that gap that Chris highlighted about companies not being able to find the right skills and the right workers. So -- yes, so no real change in what we've seen. And if anything, it's creating more opportunity for us to bring our solutions to bear.

Okay. Great. All right. So I just wanted to get a little more insight on education. You mentioned just some delayed decision-making there due to macro factors. And I'm just kind of trying to relate the macro environment to the K-12 space and perhaps why customers have been holding off on decisions there.

Yes, sure. This is Troy. The -- so I guess two things. One, again, I want to highlight across our portfolio, billion-dollar business now, largely in the K-12 substitute teacher, we achieved a 90% fill rate in the quarter for the first time ever. So that is a tremendous value that we deliver to our clients. And we have -- some of our largest customers are closer to 100% even. So we have tremendous offering there and value that for our customers. The new business there are really new opportunities for outsourcing. It's less about us and competitors taking each other's customers, and it's more about us competing with in-house offerings. Even when we lose a client here or there, it's usually they bring it back in-house that it's stabilized, and they now feel confident they can run it in-house. They may have implemented a technology solution that enables them to do that. But that, again, doesn't happen very often. What we saw with the -- so two things, really, the fill rate, we are maturing that portfolio. We've had tremendous growth there over the last number of years. Chris highlighted in his comments, we've tripled that business over the last 5 years. And so as those clients mature, I mean, you can only get to 100%. You can't get above that. And so as all those relationships mature, and we're operating in that 90-plus percent range, we're just not going to get as much fill rate lift across the portfolio that we've seen over the last few years that has been supplementing the new business wins, but we'll continue seeing some benefit there. So a little bit less benefit there than we've seen in prior years. And then the decision delays is really just around -- keep in mind, back in the summer, there was a $6 billion grant from the Department of Education that was withheld and put under review right around the time where certain decisions might have been made. Typically, these awards are done in the spring, late spring and early summer and then implemented for the new school year. So there was the future of the Department of Education, just -- there was just a lot of noise in the system and for a school district to venture into this new space of outsourcing their substitute teacher delivery, some felt like that was not a step they were ready to take. The work has been done. The relationships have been built. The value proposition has been sold. And so now it's just -- it's more of a when than an if on those. So we have confidence that we'll get, again, more than our fair share of those as they come back to market.

Okay. Got it. That's helpful. And can you just talk a little bit more about the time line on the integration work going on in the SET segment. Chris, I believe you said you're looking to even accelerate that a bit and just tie that to completion of the process, I think you said would be also beneficial with taking that SET offering to the market in an integrated way and driving greater growth out of that offering.

Yes, exactly. And as I mentioned a little earlier, we have significant scale, and we've deployed about $900 million of capital, mostly in the SET business. And our customers, as we're talking to them, continue to want to leverage those capabilities, not just in technology, but technology and telecom, technology and life sciences. And so what we're doing is accelerating the modernization of that tech stack. We acquired -- when we acquired MRP, they had a leading tech stack. We were in the process of looking at various ways to integrate our disparate front, middle and back office. We have selected the tech stack that we acquired when we bought MRP and are in the process now of migrating the rest of the organization to that tech stack. We're starting with the integration, though, of our SET business. And so we really -- we know that, that will give us an unlock as we go to market, making sure that it's easy for our internal teams to be collaborating, winning new business, helping go to market faster, leveraging that tech stack. And then as we get SET integrated and the legacy SET acquisitions integrated into that technology stack, we will also be bringing through our education and ETM segments. And so that is all underway, and all of it is on schedule.

Yes, Kevin, I might just add, this is Troy. The -- we have a big cut over here at the end of the year with the legacy acquisitions being integrated into the MRP tech stack and then in '26, the rest of SET, and we'll start making -- as Chris just indicated, we'll start moving some of the enterprise capabilities, likely leading with the human capital management component along with the rest of SET and then quickly follow that with education and ETM beyond '26. So those are some of the key near-term milestones around that. The go-to-market side of SET has been integrated. The management teams and the sales teams and the like there, but they're on separate systems, as Chris said. And so that creates some inefficiencies and some challenges with some of the collaboration, but we'll get through that here pretty quickly. Again, first big cut over into the year and then through '26.

Okay. Great. Yes, that's helpful. I guess, lastly, you talked about the fourth quarter outlook assuming a positive resolution to the government shutdown. I mean it sounds like the impact is -- on you has been pretty modest, but kind of what's the swing factor there in terms of this shutdown dragged on even longer than we expect?

Yes. So we can measure the direct impact, right? We know what our government business is. We were fortunate that there was a larger percentage of the positions that we have that were deemed essential. And so that was a pleasant surprise if there's such a thing in the dynamic. But -- so less than a point. It goes all the way through the quarter, maybe closer to a point of revenue impact, and we tried to capture that in the 12 to 14 expectation, give us some room there. What we can't measure really is the indirect impact. So just yesterday, right, 10% of flights across 50 major airports being reduced, 10%. That's going to have a ripple effect. There could be other ripple effects in other industries the longer this goes on. So that's a bit of a wildcard that we don't know. So really, all we know right now is what we can directly see. And I think the longer this goes on, it's not going to help anybody.

Our next question comes from the line of Marc Riddick from Sidoti.

So I was wondering if we could talk a little bit on the cash usage and prioritization. Maybe we can start with what we're looking at for CapEx for this year, and then how the technology plays into what -- how that might skew '26? And then I have a follow-up after that.

Yes, sure, Marc. This is Troy. The CapEx year-to-date is about $7 million, probably be $10-ish on a full year basis, plus or minus a little bit. Some of that spend on the technology deployment is cloud-based implementation work. So it doesn't show up as CapEx, but it still gets capitalized. third-party labor and some of the software costs, et cetera. So it's up in the operating section of the cash flow statement. But overall, again, strong cash flow for the year. And with that, we're seeing the opportunity to -- with some of the debt paydown that we've done this year, we're seeing the opportunity to -- in the fourth quarter here, given the share price and just the undervaluation of the stock also engage in some repurchase activity. So I think net-net, as I said in my prepared remarks, no material change in the -- our net debt position relative to the third quarter here, which is about $90 million-or-so, $118 million in debt and $30 million in cash. And the wildcard could be if perhaps there's a small tuck-in acquisition or something like that, that we're able to get over the goal line before the end of the year. But otherwise, that's what we're expecting.

Okay. And then you kind of led yourself into where I was going next, which is acquisition. What you're seeing with the pipeline currently, maybe valuation-wise? And are you seeing how many opportunities out there vis-a-vis maybe 6 months ago or so? There seems to be a little bit of a pickup in activity there overall. So I was sort of wondering what your appetite is at the present time? And/or should we -- as far as larger acquisitions, are we things sort of on the sidelines for larger acquisitions now, or how you're feeling about that?

Yes, it's a fair question. The -- I mean we're active. We have an active corporate development team. They're constantly evaluating pipeline. We've been expanding our network of sources for opportunities. We have seen some certain assets that are fairly richly valued and that we've passed on or that we've thrown in maybe an inquiry, but quickly decided that was going in a direction we didn't want to go. But we continue to be active. We're looking at across -- primarily in the SET and Education areas, type of opportunities, therapy add-ons, some of the other add-ons that we can do in the SET verticals, be it technology, be it engineering or life sciences. But as we sit here today, unlikely that there's a large acquisition in the near term, but we never say never. But certainly, we're going to continue looking at building upon the scale that we've achieved. We're going to continue looking at adding capabilities. We believe we have a great foundation to be building upon both organic growth and inorganic growth. And so that's -- we've got strong cash flow, and we expect to continue to be able to deploy capital opportunistically across the various options, as I mentioned earlier.

Our next question comes from the line of Jessica Luce from Northcoast Research.

First of all, I don't know if it was already touched on, but I have a brief question and then a follow-up. First, in terms of the current macro environment having an impact on the quarter, just to go a bit deeper, how would you characterize the sales cycle for the business overall?

The sales cycle is still really robust. And we're continuing in some of the work I shared in my prepared remarks, our focus on growth is at the core of what we're doing right now, making sure that we are in front of our customers, helping them understand all of the ways that we can add value. And we're going to continue to make sure that all of Kelly is coming to our largest enterprise customers. We've also seen in our SET business, a really strong retail pickup this year, which has been driven -- driving some of the stability in the SET business and some of the growth in engineering and in telecom. And then finally, in the education space, as Troy indicated earlier, we're #1 in the market on the heels of a 90% fill rate in the quarter. It is maybe as exciting of a time as any to go and sell with that track record of success. And we are everywhere in the market, talking to districts, they're in-sourcing their model and helping them understand how we could add value as their partner. So we're going to continue to have that be a priority as we drive growth into the future.

All right. And then just as a brief follow-up again, if it was touched on or not. In terms of the pricing environment for the 3 segments, do you see any specific pressures within any of the segments?

I'll maybe start, and Troy, you feel free to weigh in. We're going to continue, I would say, overall, just to kind of set the stage to be disciplined in how we're going to approach new opportunities in the market. We're not going to go by business. We continue to see rationality in terms of where we play. We've got a huge opportunity to continue to move up the value chain in the statement of work solutions-based business, particularly in SET, and that continues to be a priority. And we're going to continue to monitor that over the next couple of quarters. I don't know, Troy, if there anything else you want to add?

Yes. I think as we look across the 3 segments, Education and SET are, I'd say, stable. The spreads there are stable too, actually improving as, again, we move up the value chain with both current and prospective clients on new opportunities. And then I would say it's a little more mixed in ETM as we -- some of the large enterprise as they come up for renewals, of course, we're trying to work with them on their cost structure. And so there could be a little bit of concession here or there. But generally speaking, I'd say maybe we see a little bit in ETM and actually more positive momentum than the other two. And it's not really translating. Our gross profit was, I commented, not as strong as we were expecting, down 60 basis points year-over-year, but it was really more a function of the business mix and some elevated cost of service in the quarter versus really spread or pricing pressure.

This concludes the question-and-answer session. I would now like to turn it back to Chris Layden for closing remarks.

Thank you all for joining today. That concludes, we'll see you next quarter.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Kelly Services Second Quarter Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to our first speaker today, Scott Thomas, Head of Investor Relations. Please go ahead.

Good morning, and welcome to Kelly's Second Quarter Conference Call. With me today are Kelly's President and Chief Executive Officer, Peter Quigley; and our Chief Financial Officer, Troy Anderson.

Before we begin, I'll remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

In addition, we'll discuss certain data on a reported and on an adjusted basis. Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations. For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation and once filed, Form 10-Q, all of which can be accessed through our Investor Relations website at ir.kellyservices.com.

With that, I'll turn the call over to Kelly's President and Chief Executive Officer, Peter Quigley.

Thank you, Scott, and good morning, everyone. Before I share my reflections on our second quarter results, I'll discuss the CEO transition update that we announced earlier this morning. Following a rigorous search process with the full engagement of Kelly's Board of Directors, including myself, Chris Layden has been selected to serve as the next President and CEO of Kelly. Chris will formally join Kelly and step into the role on September 2. I will remain with the company as a strategic adviser to Chris and the Board to ensure a smooth transition.

Chris is a dynamic industry leader with extensive experience leading organizations through transformations to advance go-to-market initiatives and accelerate profitable growth. He joins Kelly from workforce solutions provider, Prolink, where he served as Chief Operating Officer and oversaw a period of rapid growth. Prior to Prolink, Chris spent nearly 2 decades at ManpowerGroup, where he served in a range of senior roles spanning general management, regional leadership, corporate strategy and sales.

After many conversations with Chris, it was clear that his skills and experience are uniquely suited for this moment in Kelly's strategic evolution. He brings a track record of executing enterprise scale transformations and driving commercial excellence as well as visionary leadership that aligns well with our commitment to accelerate profitable growth and value creation. Under Chris' leadership, I'm confident that Kelly will build upon the strong foundation we've established and reach new heights of profitability and growth. I look forward to formally welcoming him to Kelly when he joins us next month and introducing him to our talent, customers and shareholders.

With that, let's review the highlights from our second quarter earnings. In the second quarter, we saw the benefits of our focus on more resilient markets to drive growth, with each business unit delivering strategic contributions to Kelly's results. Our education business achieved another quarter of revenue growth as we maintained strong fill rates in the K-12 staffing business. In SET, we capitalized on solid demand within the engineering and telecom verticals. Payroll Process Outsourcing remained a source of strength within the ETM segment, and delivered robust revenue growth over the prior year. Across both SET and ETM, outcome-based offerings, excluding our contact center business, sustained positive momentum with customers as we continue to shift our business mix toward higher-margin, higher-growth solutions.

Results were impacted by acute demand reductions with certain large customers. These reductions were largely the result of cost controls implemented by these customers in response to the increasingly dynamic trade and geopolitical landscape. More broadly, the current environment continued to drive employers in some sectors to take a more measured approach to hiring. As such, demand for staffing services decelerated in ETM.

Volumes within our U.S. federal government business declined at the outset of the quarter but leveled off in May and June. This was in line with our expectations, which we previously revised in light of reduced demand for federal contractors in the first quarter. As market conditions evolve, we doubled down on our commitment to operational discipline and took decisive action to align resource levels with demand. Our differentiated capabilities and agility in adapting to changing market conditions enables Kelly to pursue attractive new business opportunities.

Our unique solutions provide employers with a flexible, scalable approach to bridge the transition to an AI-enabled workforce in a way that unlocks the combined power of people and technology. They also position Kelly to harness the potential of AI and turn it into an opportunity to drive profitable growth for our customers and our shareholders. We'll continue to leverage our position as the partner of choice as employers increasingly integrate AI into their operations to drive efficiency and growth.

While delivering near-term results, we're also laser-focused on executing our growth and efficiency initiatives to position Kelly for the future. We advanced our efforts to integrate MRP's portfolio of businesses with our existing SET businesses, completing the realignment of sales, recruiting and functional teams as part of our redefined go-to-market strategy organized by specialty. We're also making excellent progress on the implementation of modernized front and back office systems within SET that will leverage MRP's leading technology stack and consolidate disparate systems to reduce complexity and drive efficiencies across the organization.

Our progress in the second quarter reflects our agility in both seizing and creating opportunities in any operating environment, while accelerating profitable growth over the long term. We're deliberate about staying close to our customers evolving workforce needs and leveraging our differentiated capabilities to provide them with innovative solutions.

The decisive actions we took earlier in the year to improve efficiencies and drive simplicity in our operating model have positioned us to better serve our customers and execute on our strategic priorities. Altogether, we continue to deliver for our customers and shareholders in the near term and position Kelly to compete and win over the long term.

For more details on our results in the quarter, I'll turn the call over to our Chief Financial Officer, Troy Anderson.

Thank you, Peter, and good morning, everybody. We're pleased with our performance in the first half of the year given the evolving macro environment and are encouraged by the adaptability and resiliency of our teams that we're seeing across our business. As referenced last quarter, we made changes to our operating model for 2025, which reduced our reportable segments from 4 to 3. Enterprise Talent Management, or ETM, Science, Engineering and Technology, or SET, and Education. We realigned certain customers and businesses as part of these changes. The 2024 results of ETM and SET have been recast accordingly. Please refer to our prepared remarks from the first quarter and our 10-Q for further details.

As a reminder, our reported results for 2025 include MRP and its portfolio of businesses and Children's Therapy Center, while our 2024 results only include them from their acquisition dates. To provide greater visibility into the underlying trends in our operating results, I'll discuss year-over-year changes on a reported and organic basis, with the organic information excluding these items. MRP will be fully in our year-over-year comparisons beginning in the third quarter.

Revenue for the second quarter of 2025 totaled $1.1 billion, an increase of 4.2% versus Q2 last year. We saw a number of positive trends across the business during the quarter. However, we also experienced a larger-than-anticipated negative impact from the evolving macro environment.

On an organic basis, year-over-year revenue was down 3.3%, including a 1.3% negative impact from reduced demand for federal contractors in the SET and ETM segments, and a 3.5% impact from a few large customers within ETM who materially decreased demand in conjunction with internal cost reduction initiatives. We expect the full impact of these actions to be realized by the end of the third quarter.

For Q2 organic revenue by service type, staffing services reflects continued strength in our Education business and pressure from government, large customer and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding contact center solutions, demonstrated resilience and were up 2% year-over-year driven by ETM. Perm fees, which were 1% of revenue in total, reflect growth in ETM offset by a moderating decline in SET.

Drilling down into revenue results by segment. Education grew 5.6% year-over-year in the quarter or 5.3% on an organic basis. Each of the Education specialties grew in the quarter, with the primary driver being ongoing fill rate improvement on stable demand for services in the K-12 space.

In the SET segment, revenue was up 19% on a reported basis, driven by the acquisition of MRP. SET organic revenue was down 8.5% in total and was down only 3.2%, excluding lower demand for federal contractors. This reflects year-over-year sequential improvement, building upon the positive trend we saw last quarter. Staffing Services was down 10% and outcome-based services down 4.5%. Lower staffing revenue was primarily due to the federal contractor impact. Outcome-based solutions revenue was down primarily due to lower demand in certain industry verticals and with a few key customers.

Excluding the government impact, SET continues to outperform the market as a result of its targeted mix of specialty offerings and industry verticals despite the variability in the macro environment and weaker demand in the technology segment. This includes the outcome-based business and the statement works suite of solutions, which are a growing portion of the market where we've sharpened our focus and are driving innovation, most recently by expanding this capability across the MRP sales team and customer base.

In the ETM segment, revenue declined 3.9% year-over-year on a reported basis or 5.1% on an organic basis. Staffing services revenues declined 7.7%, driven primarily by the large customer demand reductions and lower demand for federal contracts. Outcome-based revenues decreased by 6.2%, reflecting demand pressure from a large customer within our contact center offering. Declines for this customer accelerated materially in the quarter, and they'll be fully run off by the end of the third quarter. Excluding contact center, ETM outcome-based revenue increased 5%, reflecting strong demand from a variety of industry verticals, including semiconductors and manufacturing.

Talent Solutions revenue increased 8% overall or 2% organically, with overall growth driven by the addition of the Sevenstep business from the MRP acquisition and strong performance in the PPO specialty, partially offset by a sequentially lower year-over-year decline in MSP. We continue to gain momentum in the Talent Solutions space with new customer wins, the Sevenstep integration and enhanced go-to-market efforts and positive industry recognition. A recent example of this being the Everest Group, naming Kelly both a leader and star performer in RPO in its latest industry rankings.

Reported gross profit was $225.5 million, reflecting a gross profit rate of 20.5%, an improvement of 30 basis points compared to the prior year quarter. This includes 70 basis points of improvement from the acquisition of MRP and 40 basis points of organic decline from lower perm fees, business mix and employee-related costs. The business mix impact is similar to last quarter and reflects the strong growth in Education, which has a lower relative GP rate.

During the quarter, we saw GP rate improvement in SET as a result of the MRP acquisition. Education's GP rate was flat, while ETM's GP rate was down slightly, with benefits from the addition of Sevenstep and growth in perm fees, offset by growth in PPO, which carries a lower GP rate.

We remain focused on improving our SG&A expense profile in the quarter, with reported SG&A expenses of $207.3 million. On an adjusted organic basis, SG&A expenses declined 1% year-over-year. Expenses increased in our Education segment in conjunction with revenue growth, while expenses declined and ETM and SET . We remain focused on improving productivity and aligning resource levels with demand, while also driving structural and sustainable efficiencies in our operating model through technology enhancements, including leveraging AI, process efficiencies and other levers. Actions like the formation of the ETM segment and the integration of MRP will drive efficiencies throughout 2025 and into 2026.

In connection with these efforts, we recognized $6 million of charges in the quarter, down from $11 million in the first quarter. Included in these charges are costs associated with improving technology and processes across the enterprise as well as severance expenses. We expect to see this reduced level of charges over the next few quarters as we execute these initiatives. Also included in our Q2 results is a $4 million gain on the 2024 sale of our EMEA staffing operations as a result of the final net working capital and other adjustments.

For the quarter, reported earnings per share were $0.52 compared to earnings per share of $0.12 in Q2 2024. On an adjusted basis, earnings per share were $0.54 compared to $0.71 in the prior year. The decline over the prior year reflects lower earnings from operations and increased net interest expense as a result of the debt incurred for the MRP acquisition, and a higher average cash balance in the prior year quarter as a result of the sale of the EMEA staffing business.

Adjusted EBITDA was $37 million, a decrease of 9% versus the prior year period, while adjusted EBITDA margin declined 40 basis points to 3.4%, which reflects the incremental revenue pressure I previously noted. Education achieved year-over-year improvement in its adjusted EBITDA margin for the second straight quarter. Both SET and ETM expanded margins versus the first quarter, but were down year-over-year due to the timing of expense management actions relative to reduced demand.

Moving to the balance sheet. We maintained a disciplined yet opportunistic approach to capital allocation in pursuit of attractive returns. We ended the quarter with total available liquidity of $301 million, comprising $18 million in cash and $283 million of available liquidity on our credit facilities, leaving us ample capital allocation flexibility.

We had seasonally strong operating cash flow in the quarter and we benefited further from favorable working capital timing and $22 million of cash proceeds related to the final true-up from the sale of our EMEA staffing operations. As a result, we had a $130 million net paydown on our debt, leaving us with total borrowing of $74 million at the end of the quarter, and an adjusted EBITDA leverage ratio of 0.6.

We expect our net debt to increase over the balance of the year relative to the current level based upon our normal seasonal cash flow and capital deployment activities. For the year, we should see an overall reduction in net debt relative to the prior year-end balance.

For the third quarter outlook, while the macroeconomic environment appears to be stabilizing, a number of our clients are taking a measured approach to their workforce management strategies, given that we're assuming current macroeconomic conditions persist for the foreseeable future. Also with MRP fully in our comparable results, I'll only speak to the overall totals as the organic difference is immaterial.

For revenue, we expect a decline of 5% to 7% in the quarter, which includes 80% of negative impact associated with reduced demand from discrete large customers and for federal contractors. Excluding these items, our underlying revenue growth would be 1% to 3%. For adjusted EBITDA margin, we expect an increase of 80 to 90 basis points year-over-year in the third quarter. We also continue to expect modest year-over-year adjusted EBITDA margin expansion for the full year.

As we progress through the balance of the year, we'll continue to adapt as conditions evolve while remaining opportunistic and focusing on achieving or exceeding our expectations.

I'll now turn the call back to Peter for his closing remarks.

Thanks for those insights, Troy. As we move forward into the second half of the year, I remain confident in Kelly's ability to navigate this dynamic macroeconomic environment. Building on the meaningful progress we made in the first half, the company will continue to execute on its priorities.

As employers' needs continue to evolve, we'll quickly adapt alongside them. Whether driven by macroeconomic shifts or advancements in AI, we stand ready to provide tailored workforce solutions that will enable them to maintain a competitive edge. From staffing and outcome-based solutions to manage service provider and recruitment process outsourcing, our differentiated portfolio of solutions leads the market. This is how we've continued to capture market share, and why Everest Group named Kelly both a leader and star performer in each of its contingent talent and strategic solutions peak matrices, marking the first time a company has achieved this feat.

We'll further refine our go-to-market approach within our realigned SET and ETM businesses, to ensure that our teams, processes and technologies are optimized to enhance efficiency and effectiveness, while making it easier for both employers and talent to engage with Kelly. And we'll continue to align resources with demand, leveraging our operational discipline to respond quickly to changing trends and maintaining our capacity to capture growth in more resilient markets.

Executing on these priorities and remaining agile in the face of persistent change will enable Kelly to deliver on the commitments we outlined at the start of the year. And with greater scale in our chosen specialties, a streamlined operating model and enhanced profitability, the foundation is set for the next generation of leadership to take Kelly into a new phase of its strategic evolution.

As I prepare to conclude my nearly 23-year career here, I'm grateful to each member of Team Kelly for their contributions on our journey to realize our collective vision for this great company. Their resilience, agility and unwavering commitment to our noble purpose are the driving forces that continue to propel Kelly forward in pursuit of profitable growth. As the team moves forward together with Chris at the helm, I'm confident in their capacity to unleash Kelly's full potential and create long-term value for all of the company's stakeholders.

Operator, you can now open the call to questions.

[Operator Instructions] Our first question comes from Joe Gomes of NOBLE Capital.

So you touched on it briefly -- I mean a part of the business, but I wanted to try and see if we get a little more color, kind of how the quarter trended on a monthly basis or sequentially. Are we seeing any improvement throughout the quarter? Or was it more very lumpy throughout the quarter overall for the business?

Joe, this is Troy. Thanks for the question. You have to remember, our business portfolio is not as monthly sense as maybe some of the other players in the space. With our Education business, which has a distinct seasonality associated with the summer holiday -- the summer break from school to school season. Our outcome-based businesses tend to be more stable.

Really, the ETM staffing business, which is only about 25% of our revenue, is where you see more of that monthly up and down fluctuation. We did see a little bit of incremental pressure there as the quarter progressed. That's one of the areas that -- or the primary area where we saw a little bit more macro impact beyond the large customer impact that we called out. As we're looking at July, we've seen some more stability there, and we're -- feel good about the expectation we set overall.

For the quarter, if you look at Q2 relative to our Q3 outlook and you make the adjustment for government and the large customers, we're about the same, roughly around 1.5 points at the midpoint of expected growth, which is roughly where we were for Q2 when you take out the government and large customer impact we called out.

Okay. And kind of going back to these large customers, which I'm assuming was somewhat unanticipated. I guess the question is, how do you kind of -- or what steps do you guys take or are taking because as quickly as that switch has gotten thrown off, they could get thrown back on. So assuming you're not wanting to cut too far, too fast, but it's a challenge. I'm sure is trying to figure out how far that is without carrying that cost when you don't know how quickly that switch again back on. So kind of maybe just give us a little color, how is the thought process and how dealing with customers in an environment like this that are moving rapidly one way or the other.

Joe, it's Peter. Yes, as you noted, this is a feature of working with really large global enterprise-sized customers. They can flip that switch on and off very quickly. And in this case, due to the macroeconomic conditions, they responded as you said, in unanticipated way. But we are in a much better position than we have been historically to both flex with the decrease in demand, but also to ramp up. We're more streamlined in our operations, and we're very confident that when -- whether it's the specific customers that had an impact in Q2 or just overall demand when it returns to more normalized levels, we're confident we can quickly ramp up to respond to that.

And yes, Joe, I'll just add, this is Troy. The one -- there's 3 specific customers, and we understand we can't just pick and choose what we call out. There's 3 specific, one we highlighted in the contact center space. That is -- that will end in the third quarter. Still an important relationship from a customer perspective, and we'll look for other ways to service that customer. But that particular element will be completed in the third quarter. The other 2 are just material reductions in demand as they're addressing their business needs given their macro exposure.

Okay. And then one more for me, if I may, on the guidance. So I went back and looked in the second quarter -- or excuse me, in the first quarter, your guidance for the second quarter, you're pretty confident in that. And obviously, if we look at the numbers that you provided and the numbers that actually were derived, we're off from those. And just given this environment, I guess the question is how confident are you in the third quarter guided numbers?

Look, we're using the best available information at any given point in time to provide expectations to the investment community and even setting our own expectations, how we manage the business internally, to Peter's comments earlier. So we feel confident based on the information we have as we -- as I commented in the first question you asked. We see some stabilization. We have good visibility into our pipelines and many elements of our business.

The macro -- keep in mind, back in May, we were 30 days out from Liberation Day. We were 90 days out from those initiating actions. I mean there's quite a few moving pieces that are not things that we directly control, not that we control everything inside how we operate. But overall, I think we all see a little bit more stabilization, and we have a little bit better predictability in terms of what we see and how we're executing.

Our next question comes from Kartik Mehta of Northcoast Research.

Peter, first of all, it's been a pleasure working with you. Thank you for everything.

And Troy, I wanted to go to your third quarter guidance. It seems EBITDA margin expansion, even though you're going to have a revenue decline, is very positive, and you also said that for fourth quarter. I'm wondering what are the drivers to that? Is that just you're taking cost out? Or is it that you're anticipating just a higher margin revenue to grow -- continue to grow faster?

It's both. And we referenced in the prepared remarks about taking decisive actions. We came into the year, we realigned the 2 segments, P&I and OCG into the ETM segment. We've been with the passing of the earnout period with the MRP acquisition, we had been spent that time planning for the integration efforts and now are rapidly executing on integration efforts. So those are all driving efficiencies.

We've continued looking at all of our cost structure, driving efficiencies throughout leveraging AI, leveraging technology. We've talked about with the MRP integration and enhancing our moving toward a modernized technology stack initially with the SET business unit, but that has benefits to other functions. So a number of different actions across the business, really continuing the efforts that the company has been executing against for the last several years, while also improving our go-to-market, focusing more on the higher value specialties, driving growth in the areas where we can generate higher margin. We have a declining -- lessening decline in the SET segment, which is higher value. Education, we'll come back with a bit stronger growth in the back half of the year than the front half of the year, and we continue seeing growth in the outcome-based business within ETM, which is a higher-margin business. So it's a mix of all factors, but frankly, purposeful and intentional.

And then just from an industry standpoint, what are you seeing in terms of price competition? Especially if you look at it as each individual business, I'm wondering if any one of them is seeing pricing pressure or what the market is currently like?

Yes. Generally speaking, I'd say we're stable. The one area we do see a little bit of pressure is more in the light industrial commercial space. We are seeing some aggressiveness in the market as different players are trying to navigate the sustained demand challenges there. But otherwise, education is stable. We see actually some lift in a number of the areas within SET. So we feel good about our positioning and our offerings. And again, to your first question, driving towards higher value and higher margin opportunities in the market.

Our next question comes from Kevin Steinke of Barrington Research Associates.

I wanted to start off by asking -- again following up on your comments there just now on SET. You mentioned in your prepared remarks that excluding the government impact, you think you're outperforming the market. Can you just add a little bit more color on that statement about the outperformance and kind of the evidence you're seeing to support that?

Good question. And so when we parse out the public competitors information and we get a like-for-like view relative to our SET business, as close as we can at least, geography and offerings mix, again, just based on public disclosures, we see that we are consistently 1 point to 2 points better than their performance in aggregate. Again, so there's some puts and takes across there. And that's been a fairly consistent trend really over the last 2 years or so, 18 months to 24 months.

Kevin, we also take a look at industry sources like staffing industry analysts who analyze both public and private companies. Troy's comments reflect our ability to look at public company disclosures, but we also refer to industry indices to gauge our performance versus the market.

Okay. Great. And you mentioned there are some ranks in the telecom and engineering areas within SET. Can you just elaborate on what you're seeing there currently?

We're well positioned in the market. We're a top player with the scale that we've built through the MRP acquisition and organically, so we're just continuing -- and we've now refined that go-to-market strategy with the SET reorganization that we spoke about now with -- post the earn-out from MRP acquisition and realigning the 5 distinct verticals within SET. And so we're just seeing good traction in the market, and we have a really strong existing customer base, and we continue to identify new opportunities as well. So it's no one specific new contract or anything like that. I think it's more just a continued evolution of that business and are more deeply penetrating the opportunities in the marketplace.

And Kevin, we do think specifically, you referenced engineering and telecom, we do think that the big beautiful bill CapEx, tax advantages could boost some R&D investments, in particular, those areas.

Okay. Understood. That's helpful. Going back to the third quarter guidance, the underlying revenue growth of 1% to 3% excluding the government impact. Can you just kind of walk us through how you get to that underlying revenue growth number?

So yes, to be clear, the headline of down 5 to 7, there's about 8 points of impact between government and the 3 discrete customers we referenced, which is elevated relative to Q2. Q2, it was about 1.4 on government and about 3.5 on the customer. So 5 aggregate goes up to 8. That's peak. So that will be a full impact in the third quarter. And it's roughly evenly across government and each of the 3 customers, that relative impact. So when you back that out, that gets you the 1 to 3.

When you now parse out, well, where does that come from? Education will continue to grow likely at an elevated pace relative to what we saw in the first half of the year. SET has been on the lessening decline as we commented on a favorable trend in the last few quarters, and we expect to see some continued improvement there. And then some puts and takes within ETM between talent solutions and staffing, maybe some stabilization in staffing, but not improvement -- but some improvement in Talent Solutions as we land some of the -- or implement some of the new wins that we've had in the MSP and RPO space.

All right. That's helpful. Appreciate that. And you mentioned there expecting stronger growth in Education in the second half of the year. What leads you to believe that, that will be the case?

Well, it's a very predictable business. It's -- the school year starts in, in some cases, July, but August, September, at the latest. And the new business cycle -- the renewal and new business cycle largely occurs in the first half of the year and is complete. Usually by May, June, we did have some lingering decisions given some of the broader macro environment, but no real lost or funding concerns in that space.

So as we go into the back half of the year, we have a high degree of certainty of what our book of business looks like. Our fill rates are excellent. We sustain them in the accounts where we're mature and we ramp them in the newer accounts and up to 90-plus percent in most cases. And so it's -- at this stage, we have very good line of sight into what the back half of the year looks like.

Okay. Good. And then lastly, just -- I think you mentioned that the integration and realignment costs will be coming down. Is that correct? And I think there were $6 million in the second quarter. Just trying to think about run rate of costs over the next couple of quarters in the second half year.

Yes. Clarification. Maybe my comments were not as clear as I was hoping. The -- we had $11 million in Q1 and that decreased to $6 million in Q2, and that's what we expect the run rate for the next few quarters given the time line of the execution and implementation work that we're doing.

Okay. I probably didn't hear that correctly. I appreciate the clarification.

And Peter, let me add my congratulations and best wishes to you.

Thank you, Kevin. Appreciate it.

Our next question comes from Marc Riddick of Sidoti.

I wanted to echo similar sentiments -- congratulations. And certainly, it's been a pleasure working with you.

I was sort of curious as to -- most of my questions have already been answered, but I was sort of curious as to how we should be thinking about cash usage and prioritization. And then maybe as an offshoot of that, are there any thoughts as to sort of maybe what you're seeing currently or how you're viewing potential acquisition pipeline or maybe what you're seeing out there in valuations in the space?

Yes, sure. Good questions. The -- from a usage perspective, again, we had a nice quarter from a cash flow perspective, both seasonally strong as well as some incremental benefits from timing of collections and also the final settlement on the EMEA sale that occurred at the beginning of last year. So that -- as we indicated in our -- in the last quarter, our preference or at least our near-term priority given the macro backdrop was more focused on debt paydown and reducing interest expense. And so that all the extra cash went towards that this quarter.

We continue to actively explore acquisition opportunities. We have a team that's focused on that. We have an active pipeline. We have many different sources of opportunities for that pipeline. We've kick the tires on a few different things. At this point, more on the smaller scale tuck-in type assets, but nothing pop, nothing to announce at this juncture, but that's been an important part of our model and will continue to be as we've now accumulated scale in a number of areas through acquisition, both -- and organically. We have the opportunity to be a bit more selective and really more gap fill or look for adjacencies versus really trying to build scale, although we certainly wouldn't turn down a good opportunity to do that. So that's really our -- how we're thinking about it, how we're focused on it at this juncture.

That's very helpful. And then I might have missed this, but do we -- where did we end on the share repurchase authorization at the end of the quarter?

So we didn't execute any additional share repurchases in the quarter. So we still have the 40 million remaining on the authorization. And again, that doesn't expire until December of '26. So we have plenty of time to execute against that as we navigate through the macro landscape.

That's an option by the way, from a capital allocation perspective. It's not a guarantee, but it's certainly one of the paths we could deploy capital to be opportunistic and generate value creation for shareholders.

[Operator Instructions] I am showing no further questions at this time. I would now like to turn it back to the President and CEO, Peter Quigley, for closing remarks.

Thank you, Amber. I think we're good for the call. So we can end the call. Thank you very much.

Thank you, everyone.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.