Financial Performance Overview

The company reported strong financial results in the first quarter of 2025, with revenue from services increasing 11.5% compared to the same period in the prior year. This growth was primarily driven by the acquisition of MRP in May 2024. Excluding the impact of this acquisition, revenue from services was flat year-over-year.

Gross profit increased 15.0%, also largely due to the MRP acquisition. Excluding the acquisition impact, gross profit decreased 1.1%. The gross profit rate increased 60 basis points to 20.3%, primarily due to the higher margins from the MRP business, partially offset by lower permanent placement fees and changes in business mix.

Total SG&A expenses increased 18.5%, again mainly because of the MRP acquisition. Excluding the acquisition impact, SG&A expenses increased only 1.0%. The company incurred $10.7 million in integration and realignment costs related to the MRP integration and other initiatives.

Earnings from operations decreased 59.8% to $10.8 million, primarily due to the higher integration and realignment costs as well as the gain on the sale of the EMEA staffing operations in the prior year period. Net earnings declined 77.7% to $5.8 million.

Segment Performance

The Enterprise Talent Management (ETM) segment saw a 1.9% increase in revenue, driven by the Sevenstep and MRP acquisitions. Excluding the acquisitions, ETM revenue was flat. Gross profit increased 1.7%, but the gross profit rate declined 10 basis points due to lower permanent placement fees and changes in business mix.

The Science, Engineering & Technology (SET) segment had a 39.2% jump in revenue, again largely due to the MRP acquisition. Excluding the acquisition, SET revenue decreased 7.2%, primarily from declines in staffing services and permanent placement. However, the SET gross profit rate increased 70 basis points, benefiting from the higher-margin MRP business.

The Education segment grew revenue by 6.6% on increased demand for services, leading to a 9.8% rise in gross profit. The gross profit rate in Education improved 50 basis points.

Financial Condition and Liquidity

The company’s liquidity and capital resources remain strong. Cash, cash equivalents and restricted cash totaled $34.5 million at the end of the first quarter, down from $45.6 million at the end of 2024.

The company generated $23.9 million in cash from operating activities in the first three months of 2025, compared to using $25.5 million in the prior year period. This improvement was primarily due to decreased working capital requirements. Trade accounts receivable were $1.3 billion at quarter-end, with global DSO of 61 days.

The company’s working capital position (current assets less current liabilities) was $528.1 million at the end of the first quarter, down $10.9 million from year-end 2024. Excluding the decrease in cash, working capital was flat.

In the first quarter of 2025, the company generated $3.2 million from investing activities, compared to $72.1 million in the prior year period. The current year included $6.4 million from the sale of the PersolKelly investment, partially offset by $2.5 million in capital expenditures. The prior year included $77.1 million in proceeds from the sale of the EMEA staffing operations.

The company used $39.5 million in financing activities in the first quarter of 2025, primarily for net repayments of $34.8 million on its credit facilities. This compares to $4.7 million used in the prior year period.

The company’s debt-to-total capital ratio was 14.2% at the end of the first quarter, down from 16.2% at year-end 2024. The company has $120.0 million of available capacity on its $150.0 million revolving credit facility and $32.8 million available on its $250.0 million securitization facility.

Outlook and Risks

The company expects to meet its ongoing cash requirements through cash generated from operations, available cash and equivalents, securitization of receivables, and its committed credit facilities. The company also has an accordion feature that allows it to increase its borrowing capacity by an additional $250.0 million.

The company notes that its working capital requirements can fluctuate significantly based on changes in demand for its services. An economic downturn could lead to a decrease in working capital needs, but this would not be sustainable if the downturn continued for an extended period.

Key risk factors highlighted by the company include:

• Changing market and economic conditions
• Disruption in the labor market and weakened demand for human capital
• The impact of laws and regulations
• Unexpected changes in claim trends on insurance plans
• Litigation and legal liabilities
• Ability to achieve growth strategies
• Damage to the company’s brands
• Dependency on third parties
• Conducting business in foreign countries
• Availability of skilled temporary workers
• Cybersecurity breaches

The company states that it believes its cash flow, credit facilities, and access to capital markets will be sufficient to meet its anticipated cash requirements while maintaining liquidity for normal operations. However, it notes that actual events and results may differ materially from its forward-looking statements due to these and other risk factors.

Analysis

The company delivered a mixed performance in the first quarter of 2025. On the positive side, it reported strong revenue and gross profit growth, driven largely by the acquisition of MRP. This acquisition has expanded the company’s capabilities in the high-margin talent solutions and outcome-based services areas.

However, the company’s bottom-line results were negatively impacted by significant integration and realignment costs related to the MRP integration as well as other initiatives. These one-time charges masked the underlying profitability of the business.

Excluding the acquisition impact and one-time costs, the company’s organic performance was more muted, with flat revenue and a slight decline in gross profit. This suggests the company is facing some headwinds, particularly in its SET segment, where staffing and permanent placement revenues declined.

The company’s financial position remains strong, with ample liquidity and a conservative capital structure. The sale of the EMEA staffing operations last year provided a cash infusion that has bolstered the balance sheet. However, the company will need to carefully manage its working capital needs, which can fluctuate significantly based on changes in demand.

Looking ahead, the company faces a number of risks, including economic uncertainty, labor market disruption, regulatory changes, and cybersecurity threats. Successfully navigating these challenges while integrating the MRP acquisition will be critical to the company’s future performance.

Overall, the first quarter results demonstrate the company’s ability to grow inorganically through acquisitions, but also highlight the need to drive stronger organic growth and manage costs effectively. Investors will be watching closely to see if the company can translate the strategic benefits of the MRP deal into sustainable profitability improvements.