ケリー・サービシズ (KELYA) 2026年第3四半期決算説明会：基調的な売上高が増収に転じる

主要ポイント

• ケリー・サービシズが発表した2026年第3四半期の売上高は前年同期比0.8%減の9億2,700万ドルとなった。一方、実質売上高は2.3%増となり、増収基調への転換を果たした。
• 調整後EBITDAは前年同期比29%増の2,130万ドルに拡大し、調整後EBITDAマージンは50ベーシスポイント改善して2.3%となり、経営陣のガイダンス上限に達した。
• ETM部門の実質売上高は、人材派遣の約7%増とタレント・ソリューション事業の売上高11.6%増に支えられ、7.7%増となった。
• SET部門の実質売上高は0.8%減少したものの、第2四半期から200ベーシスポイント以上改善した。高マージンのソリューション事業が同部門売上高の40%を占めた。
• エデュケーション部門の売上高は、在籍生徒数の減少に伴い代理教員の需要が減少したことで6.4%減となった。経営陣は、増収への回復ペースが当初想定していたよりも緩やかになると見込んでいる。
• 2026年第4四半期について、経営陣は会計年度の追加の1週による影響を含め、売上高が前年同期比で横ばいから1%増、調整後EBITDAマージンは3.8%〜4.0%になると予想している。

主要財務データ

同社は当四半期中に5,500万ドルの現金を使用したが、これは主に通常の季節要因および実質的な成長に伴う運転資本の投資によるものである。ケリーは1株当たり0.075ドルの四半期配当を維持し、自社株買いは実施しなかった。

事業および営業実績

ETM部門はセグメント設立以来、初めて前年同期比での増収を達成した。実質売上高は7.7%増となり、第2四半期から460ベーシスポイント改善した。タレント・ソリューション事業は3四半期連続で増収となり、MSPおよびRPOが2桁成長を記録したことで売上高は11.6%増となった。人材派遣の実質売上高は約7%増となった一方、BPOはプロジェクトおよび新規案件の開始時期の影響により小幅に減少した。

SET部門の実質売上高は0.8%減少したものの、前四半期から200ベーシスポイント以上改善した。成果連動型ソリューションが力強い伸びを示し、正社員紹介売上高は3四半期連続で増加した。テクノロジー分野はソリューションを通じて強化され、ライフサイエンス分野は増収、エンジニアリング分野も増収に転じた。SET部門の調整後EBITDAマージンは10ベーシスポイント上昇して6.6%となった。

エデュケーション部門の売上高は6.4%減少した。一部のK-12学区における在籍生徒数の減少により教室数が減少し、代理教員の需要が軟化した。経営陣はセラピー分野へのリソースシフトを進めており、理学療法士・作業療法士（PT/OT）や言語療法の専門職に対する需要は堅調を維持しているものの、案件獲得（成約への転換）のペースは想定を下回っている。

ケリーは、10の専門分野を中心に構成された刷新版ブランド体系をはじめとする「One Kelly」戦略の実行を継続した。また、全社的な人的資本管理プラットフォームとしてワークデイ（Workday）を導入し、バックオフィス業務の大部分を単一のインスタンスに移行した。同社のAIプラットフォーム「Grace Boost」は、採用の最終判断をケリーの従業員が担う体制を維持しつつ、定型的な採用実務の自動化に引き続き注力している。

経営陣の業績見通し

2026年第4四半期について、経営陣は以下の見通しを示している：

• 総売上高は前年同期比0%〜1%の増収。
• 調整後EBITDAマージンは180〜200ベーシスポイント拡大。
• 調整後EBITDAマージンは3.8%〜4.0%。

第4四半期の見通しには会計年度の追加の1週が含まれており、経営陣によれば、これにより売上高成長率が約3パーセントポイント押し上げられる一方、調整後EBITDAは数百万ドル押し下げられる見込みである。

2026年度通期について、経営陣は引き続き総売上高が1桁台半ばの減収、調整後EBITDAマージンが2.6%〜2.7%（前年比で横ばいから10ベーシスポイントの改善）になると見込んでいる。

ケリーは現在、テクノロジーおよびグロース・オフィスへの継続的な投資にもかかわらず、2026年度通期のコア調整後販管費が前年比で2,500万〜3,000万ドル（約4%相当）削減されると予測している。

リスクと注視すべきポイント

エデュケーション部門は、在籍生徒数の減少、学区の統合、学校閉鎖に伴う短期的な逆風に直面している。これらの要因により教室数が減少し、求められる人員構成が変化している。

ETM部門の大手顧客1社において、第3四半期終盤に需要のさらなる縮小が見られた。経営陣は第4四半期に一段の重荷になるとみているものの、この減少は一時的なものと捉えている。

ケリーは、テクノロジーの近代化および最適化の取り組みを推進する中で、統合、事業再編、リストラ関連の費用を引き続き計上する見込みである。また、テクノロジー投資や一部の商号の償却加速により、減価償却費および無形資産償却費は前年同期の1,260万ドルから1,520万ドルに増加した。

アナリスト質疑応答のハイライト

経営陣は、ETM部門の成長について、新規MSP顧客の獲得、過去の期間に契約し現在も立ち上げ段階にあるプログラム、既存の人材派遣顧客からの需要拡大が複合的に寄与したものだと説明した。また、長年にわたり取引のあるグローバル顧客において、提供サービスを拡大する機会も見出している。

人材派遣の景気サイクルについて、クリス・レイデン最高経営責任者（CEO）は市場が「回復の初期段階」にあると表現した。経営陣は、産業、物流、製薬、先端モビリティ、デジタル・インフラの各分野で需要の改善が見られると指摘する一方、正社員採用は依然として力強さを欠く水準にとどまっていると説明した。

エデュケーション部門に対するケリーの自信は、市場における未開拓領域（ホワイトスペース）にも一部起因している。経営陣によれば、学区の70%が依然として代理教員の手配を自前で運用しているという。また、同社は市場が依然として断片化しているものの、セラピー分野における供給能力（デリバリー能力）の拡充を進めている。

経営陣は、より高マージンな事業構成へのシフト、業務効率化、事業規模の拡大を通じて、EBITDAマージンが一段と拡大すると見込んでいる。ただし、具体的なEBITDAマージン改善幅の目標値は示さなかった。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to Kelly Services Third Quarter 2026 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 Vice President of Corporate Affairs. Please go ahead.

Scott Thomas

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 Chris.

Chris Layden

Thank you, Scott, and good morning, everyone. It's great to be with all of you. In the third quarter, we delivered another solid performance while advancing our strategic initiatives and positioning the company for the future. Revenue came in above the midpoint of our guidance and adjusted EBITDA margin was at the top end of our expected range. Our overall performance was driven by continued momentum in ETM and SET, reflecting our ongoing focus on improving our execution and the progress we've made positioning the business to capitalize as the early stages of recovery take shape. This was somewhat offset by near-term demand dynamics in Education, which I'll discuss shortly.

Let me first start with ETM, which delivered positive year-over-year revenue growth for the first time since the segment was established. Staffing performed well in the period, capitalizing on increasing demand for industrial talent. Growth in Talent Solutions was also strong, led by double-digit gains in MSP and RPO as new programs continue to ramp. Across ETM, we continue to drive new business wins as we capitalize on demand from enterprise clients across pharmaceuticals, energy and logistics.

Our technology-enabled and AI-powered capabilities remain a clear differentiator in these pursuits. This is among the reasons why Kelly was once again recognized by Everest Group as a global leader in its 2026 PEAK Matrix for both MSP and RPO and by HRO Today as the #1 global provider of total workforce solutions. We also continue to deepen our relationships within existing accounts as our growth office champions our One Kelly approach to meeting the evolving needs of our clients. Notably, we recently renewed and expanded our global MSP program with one of our largest clients, a leading semiconductor manufacturer that has partnered with Kelly for nearly 40 years.

Our relationship has continued to grow globally across our lines of business as they capitalize on the digital infrastructure build-out. The depth of this relationship reflects the trust our largest clients place in Kelly to support their workforce needs wherever they operate and the confidence they have in our technology-enabled and AI-powered offerings. Turning to SET. We maintained our momentum as revenue grew on a sequential basis for the second consecutive quarter. This improvement was led by our higher-margin solutions business, which outperformed in the period, representing 40% of SET's revenue. Within the specialties, we saw growing demand for outcome-based solutions in engineering among aerospace, pharmaceutical manufacturing and advanced mobility clients.

And in Life Sciences, we delivered another quarter of year-over-year revenue growth as we continue to capture demand for our differentiated functional service provider solution. Industrial reshoring drove activity across key technology and advanced manufacturing verticals as well this quarter, leading to the addition of new clients and the expansion of existing business. Another example of how our One Kelly approach positions us to grow with our existing clients is our relationship with one of the world's largest IT infrastructure services providers. What began as a small number of specialized IT staffing placements to our technology business has grown into a multinational solutions-based engagement spanning staffing and statement of work delivery.

The scope now includes advanced software development and cloud architecture projects as well as support of the clients' expansion into new offerings, including the build-out of a cutting-edge AI innovation center, which launched last month. Today, this relationship spans our technology, digital infrastructure and industrial specialties with KellyOCG's global capabilities extending our support outside of the U.S. From 1 line of business to 4, from domestic to multinational, this is our One Kelly strategy in action. Finally, in Education, our results reflect 2 distinct dynamics.

First is near-term enrollment pressure in some K-12 districts, which became more visible as we began a new school year in the quarter. In districts where enrollment has declined, schools are consolidating into fewer larger classrooms or in some cases, closing altogether. Fewer classrooms have contributed to lower-than-expected demand for substitute teachers despite the strong selling cycle we concluded in the second quarter. Second is a highly fragmented market in therapy, where demand for PT/OT and speech therapy professionals remain solid, but we have not yet captured it at the pace we expect.

To better position Kelly to capitalize on this opportunity, we're taking swift action to align resources with our growth priorities. This includes shifting capacity to where demand is strongest, ensuring the right team structure is in place to best identify and convert those opportunities to wins and optimizing our processes to accelerate fulfillment. Together, these dynamics are contributing to a more gradual pivot back to growth within Education, but we expect they'll strengthen the case for Kelly over the long term as districts facing persistent talent shortages and larger class sizes increasingly turn to a partner who can bring new sources of talent into the classroom.

As the largest provider of education workforce solutions in the U.S. and with industry-leading fill rates, we remain well positioned to capture that opportunity. Our conviction in this market remains strong as we execute through this transitional period. As we focus on delivering near-term results in the quarter, we also drove meaningful progress on our strategic priorities, which are positioning Kelly for the future. Across each of our segments, we continue to transform how we go to market to raise our visibility and to make it easier to do business with Kelly. In October, we launched a refreshed brand architecture, a direct response to what we've heard from our clients about how they want to engage with us.

We're bringing all of our brands together under One Kelly organized into 10 specialties and offering a full suite of differentiated capabilities for individual placements, outsourcing, consulting and talent solutions. We've included a supplement in today's presentation that illustrates how the 10 specialties map to our existing segment structure. We announced one of those specialties, Kelly Digital Infrastructure in September, bringing together Kelly Telecom, NextGen-GTA and Motion Telco under a single brand. This builds on our 20 years of experience in the space to serve growing demand from AI and the broader digital infrastructure build-out. It's the final stage of integrating our legacy acquisitions.

We've already brought these teams together organizationally and now the way they go to market reflects it as well. We're backing all of this with ongoing investment in technology. Last month marked another significant milestone in our technology modernization journey. We established Workday as our enterprise human capital management platform and cut over a significant portion of our back-office processes onto a single enterprise scale instance. Later phases of this key initiative will modernize our remaining back office and ancillary systems across the rest of the business, positioning us to operate with greater efficiency and better data as we scale our One Kelly strategy.

Our AI initiatives are also becoming more deeply integrated across the organization and helping our team move faster while improving the client and talent experience. For recruiters, we remain focused on automating transactional work through our proprietary internal AI platform, Grace Boost, so they can spend more of their time on the parts of the job only a person can do. This is important because job seekers are looking for a more personalized experience. They want an advocate who can offer tailored guidance to help them navigate a rapidly changing and increasingly unfamiliar job market.

Our approach to AI enables that experience, matching job seekers to the right opportunity faster, while the recruiter with specialized domain expertise guides their job search from start to finish. Simply put, humans lead the process and AI elevates it. No matter how a candidate reaches us through a branch, an MSP program or our AI recruiting agent, every hiring decision is made by a member of our team. Overall, I'm pleased with the progress we delivered in the third quarter.

Our momentum within ETM and SET is growing. We're accelerating conversion of our new business pipeline while building deeper relationships with our largest clients. And the investments we're making in our brand, technology and AI are positioning Kelly for the future. With that, I'll turn the call over to Troy to talk through the quarter in more detail and our expectations for the balance of the year. Troy?

Troy Anderson

Thank you, Chris, and good morning, everyone. Our third quarter results reflect continued sequential improvements, and we're on the favorable end of the commitments we outlined last quarter. Underlying revenue returned to growth and adjusted EBITDA margin expanded year-over-year, both for the first time in at least 4 quarters. For the quarter, revenue totaled $927 million, a decline of 0.8% versus the prior year quarter and solidly within our guidance of flat to down 2%. The year-over-year revenue decline improved 500 basis points relative to the second quarter.

Underlying revenue, which excludes the previously disclosed discrete impacts driven by reduced demand from the federal government and 3 large ETM clients, grew 2.3%, ahead of our guidance of 1% to 2%. This represents an improvement of 290 basis points versus the second quarter, thus contributing more than half of the overall year-over-year improvement in the quarter. As a brief update, demand with the federal government continues to be stable, while we have seen more recent demand pressure within the larger ETM customer who remains active. We expect this pressure to continue into the fourth quarter.

At the segment level, ETM underlying revenue grew 7.7% year-over-year, an improvement of 460 basis points versus the second quarter. Talent Solutions grew for the third consecutive quarter with revenue up 11.6% versus the prior year quarter, driven by strong demand in all of our service offerings, including double-digit growth in MSP and RPO. Underlying staffing revenue grew approximately 7%, driven by strong demand and improved fill rates across our client base, while BPO showed a modest decline due to project and new business timing.

SET underlying revenue declined 0.8%, an improvement of more than 200 basis points versus the second quarter. Outcome-based revenue showed strong growth in the quarter, while permanent placement revenue grew for the third straight quarter. Across the specialties, technology revenue continued to strengthen driven by solutions, while Life Sciences had another quarter of growth and engineering pivoted to growth as they convert their strong pipeline to revenue. Education revenue declined 6.4%, which was below our expectations.

For reference, at the beginning of each school year, we established a new baseline for each customer as far as the number of enrolled students, their full-time staffing levels, number of classes and class sizes and multiple other factors. With the enrollment declines in some of our key markets and the impact on our customer staffing needs, our demand is pressured more than we anticipated, both overall and for the mix of resource types, which is outweighing our new business and renewal momentum in the near term. With our leading K-12 and therapy offerings and market share and the white space opportunities available to us, we continue to expect Education to pivot to growth in the coming quarters.

Gross profit was $194.4 million, up slightly versus the prior year quarter despite lower revenue, resulting in a 20 basis point improvement in our gross profit rate to 21%. Education seasonality and continued growth in talent solutions and SET outcome-based solutions, along with higher permanent placement fees, all contributed to the increase. At the segment level, ETM's gross profit rate improved 40 basis points year-over-year, while SET and Education had modest declines. Reported SG&A expenses were $193.6 million, down slightly versus the prior year quarter, and adjusted SG&A expenses were $188.3 million, down approximately 1%.

Excluding depreciation and amortization, adjusted SG&A expenses decreased 2.5%, driven by 3% declines in both ETM and SET. Depreciation and amortization increased to $15.2 million from $12.6 million in the prior year quarter, reflecting our continued technology modernization investments and accelerated amortization on certain trade names as a result of our branding initiative. We recognized $5.3 million of charges and reported SG&A in the quarter, primarily integration, realignment and restructuring costs, including severance. We expect to continue incurring various charges as we advance our technology modernization journey and expand upon our various optimization efforts.

For the year, we are now projecting a net year-over-year decline in core adjusted SG&A expenses of $25 million to $30 million or approximately 4% despite investments being made in technology, the growth office and other areas. The structural changes we are making will allow us to scale more efficiently as we grow, thus supporting our margin expansion expectations. Our reported diluted loss per share was $0.05 compared to a loss of $4.26 in the prior year quarter, which included a noncash goodwill impairment charge and a valuation allowance on deferred tax assets. On an adjusted basis, we delivered earnings per share of $0.07 compared to $0.17 in the prior year, reflecting impacts from discrete tax items.

Adjusted EBITDA was $21.3 million, an increase of 29% despite lower revenue. Adjusted EBITDA margin was 2.3%, which represents 50 basis points of year-over-year improvement, the top end of our guidance and a return to year-over-year margin expansion. As I've noted previously, Q3 is our lowest revenue and a lower profit quarter given the Education segment seasonality. For the segment, ETM adjusted EBITDA margin was 3.1%, up 130 basis points year-over-year, reflecting the improved gross profit rate and lower SG&A. SET adjusted EBITDA margin was 6.6%, up 10 basis points, while Education is negative EBITDA in the quarter due to schools being on summer break, a portion of the quarter.

Throughout the quarter, we maintained a strong balance sheet, which provides ample capital allocation flexibility. Total available liquidity as of the end of the quarter was $256 million, comprised of $22 million in cash and $234 million available on our credit facilities. We used $55 million of cash in the quarter, resulting in total debt of $122.5 million at the end of the quarter. The use of cash was primarily driven by normal seasonality, along with the working capital investment to support our return to underlying growth.

During the quarter, we maintained the quarterly dividend of $0.075 per share, and there were no share repurchases. Due to our current share repurchase authorization expiring in December, we are refreshing and extending it to maintain shareholder return optionality. Overall, from a capital allocation perspective, our near-term focus continues to skew towards organic investments supporting profitable growth, maintaining the dividend and managing leverage. We also expect inorganic activity to increase over time. We remain confident in Kelly's cash generation and are committed to a disciplined and opportunistic approach to capital allocation in pursuit of attractive returns for shareholders.

Turning to the outlook for Q4 and fiscal 2026. In February, we set an expectation for the fiscal year as we felt it was important given where we were from a business perspective to provide visibility into the year versus the established practice of 1 quarter of guidance. I'm pleased to report we continue to expect to deliver in line with that full year expectation. For our current view of Q4, we are revising our most recent expectations, largely driven by the more gradual return to growth in our education business and the near-term incremental demand pressure from the one discrete ETM client.

For Q4, we expect total revenue to be flat to up 1% on a year-over-year basis and adjusted EBITDA margin expansion of 180 to 200 basis points, resulting in adjusted EBITDA margin of 3.8% to 4%. These include the impact of an extra fiscal week in the fourth quarter, which benefits revenue growth by approximately 3 points relative to the prior year and negatively impacts adjusted EBITDA by several million dollars. On a fiscal year basis, we expect a mid-single-digit total revenue decline and adjusted EBITDA margin of 2.6% to 2.7%, which will be flat to 10 basis points of year-over-year improvement.

We are encouraged by the trajectory of our business across multiple dimensions, including returning to underlying revenue growth and year-over-year margin expansion in the quarter. I'm thankful for all the Kelly team members and their commitment and resilience as we focus on delivering sustained growth and enhanced profitability over the long term. I'll now turn the call back over to Chris for his closing remarks.

Chris Layden

Thank you, Troy. Let me close with a few thoughts on where we're headed. This quarter marks 1 year since I joined Kelly as CEO, and it coincides with Kelly's 80th year as a company. Since our founding, a lot has changed from the scale and complexity of the workforce challenges employers face to the breadth of capabilities we offer to solve them. What hasn't changed is the commitment of our Kelly team. I'm proud of the meaningful progress we delivered in just a short time while keeping client centricity, visibility and accountability at the center of everything we do. These priorities are visible throughout our achievements in the third quarter.

They also show up in how we're engaging with both current and prospective clients. This includes Talent Leadership in Action, our growing thought leadership forum, which brings together employers with Kelly leaders for candid conversations about the future of work. At our most recent events last month in Detroit, London and Kuala Lumpur, we were pleased to host leaders from many of the largest companies across consumer goods, financial services, advanced mobility and pharmaceuticals, a majority of whom were new prospects. Reflecting on our conversations, one thing is clear. We're at an inflection point in the world of work. AI is reshaping how work gets done.

Skills gaps are widening, and both talent and employers are seeking greater flexibility. Kelly has navigated significant change at many points throughout its history. At every turn, our clients kept discovering, kept innovating and kept gaining, and we kept evolving right alongside them. That's what the work this past year has been about, building on 80 years of impact while making clear we're just getting started. It's also what employers demand, whether it's flexibility in how they source and deploy talent, putting AI to work or gaining a full view of their total workforce. Employers want a partner who can meet them where they are.

That demand is showing up in our pipeline, which is growing alongside the new business we're winning in ETM and SET and further strengthened by events like Talent Leadership in Action. The trend is clear. More clients are engaging with us and engaging in more of what we offer. We have more work to do, but our trajectory is positive, and I remain confident in the growth potential of every part of our business. I'm grateful to our team for their efforts to position Kelly for the next 80 years and to our shareholders, clients and talent for their continued trust. Operator, you can now open the call to questions.

Operator

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

質疑応答

Joseph Gomes

I wanted to start off on the ETM. Chris, you talked about new clients and getting increased share of wallet helping to drive revenue there. Can you break out or give us any kind of indication what percent of it is due to new clients and what percent of the growth is due to increasing share of wallet at existing clients?

Chris Layden

Yes. Thanks, Joe. And I'll, let me talk to the segment at a high level, then I'll have Troy provide a little color, too. First, we feel really good about the progress we're making in ETM, the first time that we've seen year-over-year growth since the segment was established, that's 7 quarters out. So making progress. From a new business standpoint, we feel really good about the work in the talent solutions space. Our MSP and RPO business continues to take share. And some of that, some of those wins we highlighted in the first quarter continue to gain momentum. We also saw really strong perm growth in the quarter across talent solutions, actually across the whole business as well in SET.

And we believe that continues to be us picking up some market share. The P&I business, industrial staffing, that demand continued, and we continue to believe that, that's a differentiator for us, both our Professional & Industrial business and the BPO business overall. And so we feel really good about what we've established. And keep in mind, right, this is now the second quarter since establishing the growth office and really making sure that we're changing the visibility in the market, how we're talking to new clients.

And I would just say, lastly, I just returned from Europe where I spent the last week meeting with customers across ETM, also talking to a number of new customers that were at the final stages of opportunities. And it is as clear as ever that the opportunity that we have in the ETM space is present, and we really feel good about the way the pipeline has been building.

Troy Anderson

Yes, Joe, I'll just add. The, I would say in the, and Chris hit on this a little bit, in the talent solutions space, it's a bit of a mix of new business, right, some new logos that we signed, particularly in MSP latter part of last year that have been ramping this year, but also just the overall demand increases that we're seeing across the industry, of course, flows through our MSP platforms for those clients. So it's a bit of a mix. And then on the ETM, really on the staffing side, I'd say it's more skewed toward expansion of existing demand within existing clients, but some of those are newer clients, say, in the last 2 years that are ramping rapidly, but also some longer-term clients. Chris referenced the one renewal, a very large client of ours, where we have multiple services there and continue to grow, for example. So a bit of a blend.

Joseph Gomes

Okay. And on the Education segment, I understand what you said. I just, what kind of gives you confidence that we will see the rebound there as opposed to just the continuation of the current trends there?

Chris Layden

Well, really 2 things, I would say, Joe. I mean, first, the kind of well-documented enrollment declines are things that are going to take shape now over this coming school year. Keep in mind, we still have the full breadth to be able to support school districts beyond just substitute teachers. And so we're seeing some of that volume continue to come in. It obviously resets our mix a little bit. And we believe that over the long term, as classrooms get larger and the persistent talent shortages continue for teachers, that's only going to drive more demand for the breadth of our offering first.

The second is we still have 70% of school districts that are in-sourcing their substitute teacher management. That continues to be the white space we're focused on every single day. And then finally, therapy. Therapy demand continues to be high. We talked about some of the capacity we're shifting to meet that demand. We've got to continue to take advantage of the opportunity. It is a fragmented market, but we continue to sell into the districts that we're supporting today and to capture new business wins in the therapy space. So that gives us some confidence as we move into the new year.

Operator

Our next question or comment comes from the line of Kartik Mehta from Northcoast Research.

Kartik Mehta

Chris, maybe just a bigger picture question. We've now had almost every temporary staffing company report. It seems like things are on the mend and the fundamentals in the industry are improving. Maybe there's a weakness here or there, but overall, it seems like things are improving and moving in the right direction. And I'm wondering from your perspective and your conversations with customers and what you're seeing in the pipeline, where do you think we are in the recovery process?

Chris Layden

Kartik, thank you. We continue to see that we're at the early stages of a recovery. I mean demand trends are increasing constructively. We talked a little bit about that in the prepared remarks. And as I think about each part of our business, we continue to see strength across the industrial space and industrial reshoring, certainly the broader digital infrastructure boom helping drive that. But it's actually more widespread across other sectors as well that we've highlighted, logistics, pharmaceuticals, advanced mobility.

We feel good about the demand in ETM and maybe a positive sign in terms of some of that maybe client confidence and constructive trends around perm. Perm continues to be at a lower starting point. We're not seeing robust permanent hiring across the markets we operate, but we're likely taking share there, and it is a positive sign that perm hiring has been up now 3 consecutive quarters. We feel good about the demand we're seeing across our tech business. We're still focused on converting more of that demand to revenue and to profit, but we feel good about those exit rates.

And from an education standpoint, we've rebaselined with the enrollment declines, but we feel really good about that business overall. And we know there's more therapy demand out there that we can go and capture. So that's how we're kind of thinking about seeing the market right now, and that shows up in client conversations we're having as I'm on the road almost every week with customers who are looking for more flexibility. And we're really thinking and helping them think through that as they take advantage of opportunities to grow their own businesses in the market we're in.

Kartik Mehta

And Troy, you had gross margin improved sequentially. EBITDA margins improved year-over-year. And I'm wondering, as you look at that gross margin improvement, how much of that is sustainable in terms of price? How much do you think is mix and efficiency? And as we move forward, what do you think the incremental EBITDA margins are for the business?

Troy Anderson

Yes. Thanks, Kartik. The GP rates, we had some downward pressure exiting last year, first part of this year. We've normalized that. We've captured that now in our burdens and worked that back through the system. And so we're seeing some of that normalization of where that pressure came out. So back at 20% and then we expect to, of course, we get the seasonal impact in Q3 because of education, right? It has a lower GP rate and lower revenue in the third quarter and then bounces back up in the fourth quarter. So you'll see some flip between Q3 and Q4, but still strong year-over-year performance in Q4.

So I think we're on the right track with GP as we continue to drive the higher margin mix of some of our outcome-based solutions across SET, the therapy offering, as Chris was just describing in the prior question. So I think we'll be roughly flat on a full year basis on GP, just a different trajectory this year versus last year. And I think we would expect to continue driving that margin expansion as we go forward. As far as EBITDA, look, we're, we feel strongly about driving EBITDA margin expansion over time. We've now returned back to expansion this quarter. We expect further expansion next quarter.

And certainly, it is our intent as we pivot into next year to continue driving that expansion, both through business mix as well as continue to drive efficiencies and scale across our business. Hard to really translate that down to dollar per revenue just because we are still investing and we're pivoting to growth. And, but we certainly expect to see some margin expansion as we continue forward.

Operator

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

Kevin Steinke

I wanted to continue talking about ETM and as well SET. You saw the continued improvement in revenue trends there. How are you feeling about kind of the sustainability of improvement? It seems like there are some legs there with your growth initiatives taking hold and the overall market demand environment improving. So as kind of you look out and plan for the 2027, what are you thinking about the sustainability of continued demand trends in those segments?

Chris Layden

Yes. No, thank you, Kevin. We feel really good about the underlying performance across ETM and really the momentum we've been building all year. We exited September with year-over-year growth for the first time across the whole business, certainly ETM driving it. And we really see it across all of the segments of ETM. The industrial business is certainly continuing to benefit from the demand increases that we're seeing more broadly across multiple sectors. Our BPO business continues to take market share. We feel good about the opportunity to continue to sell and win new business in that space.

And then finally, we've got the leading MSP RPO offering in the world. And that business continues to win new and renew large clients. And so we feel really good about what that means for us for the long term. And look, we're building on our One Kelly strategy, which is having the entire business work better together. And that includes more work that we're going to be doing with shared clients like the couple of clients we highlighted in our prepared remarks that are working not only in ETM but across ETM and SET. And so we're going to continue to see that momentum as we move into next year.

Kevin Steinke

Great. And specifically on technology and SET, you noted some continued improvement there. Is the market kind of bouncing back? Or do you feel like you're getting to a position where you can kind of grow more in line with the market as you've discussed? Just any comments on how that specialty is progressing?

Chris Layden

Yes. We feel good about the progress we're making in SET. We continue to stack sequential improvement quarter-on-quarter across the business. As we look at demand, again, that continues to build in our exit rates as well. And look, this is demand that's coming from staffing and solutions. I'm really pleased with the progress we're making on the solutions side of that business. That continues to be a place of real differentiation. That's in the science space and engineering and digital infrastructure, certainly in technology as well, where our offering continues to drive value in the market, and we got to go win more market share. And so that's where we're focused, but I'm pleased with the progress we're making.

Kevin Steinke

Okay. Great. With some of the enrollment pressures you talked about in education, you talked about specific districts, but it seems like it's more widespread across the country from what I've been reading. But it sounds like the pipeline of new opportunities is still good despite those enrollment pressures. I mean there's still a need for school districts to outsource this function and you said 70% still not doing it. So just can you talk about the pipeline? Is there still kind of the demand for this solution out in the market?

Chris Layden

Yes. No, thank you. We feel very good about the pipeline. And let me talk a little bit about kind of how that takes shape. I mean, first, we continue to have a strong pipeline with some of the largest school districts in the U.S. As you indicated, some of the enrollment declines are pretty well documented of what schools are facing, not only with enrollment declines, but rising fuel and food prices that are driving some short-term headwinds. But as classrooms get filled with more kids, that is going to continue to drive more demand even in the districts, honestly, that we have today. And so while we continue to be focused on selling into some of the largest districts in the U.S., we also have a lot of strength building around smaller, more rural districts where we know we're also gaining share.

And so it's multifold there. And then finally, everywhere we're selling also now includes therapy. And we have our therapy business fully integrated. We feel good about the selling that's happening in therapy. We know there's a lot of demand out there. And so as we indicated, this is as much about how we're putting more capacity on the delivery side of what we're doing to take advantage of that demand in a market that is a little bit more fragmented than the traditional K-12 space. So it's still a great market, and we feel really good about our leading position, our industry-leading fill rates and what the opportunity looks like as we pivot back to growth.

Kevin Steinke

Okay. Great. Maybe just on the discrete impact. You mentioned a little more pressure from one particular ETM customer. Maybe just a little more insight into what's going on there. I think you termed it as being near term or shorter term, but, and then related to that, I don't know if I missed it, but did you call out what you expect the impact from the discrete impact to be in the fourth quarter overall?

Troy Anderson

Yes. Thanks, Kevin. The, on the latter point, again, we had said we were going to really just focus on total revenue growth in the fourth quarter. So the guide of 0, flat to 1% incorporates a little bit of that incremental pressure we talked about in total. But other than that, there's really no difference between the underlying and the total reported number. So our Q4 guide captures that. As far as the, what we saw there, we had seen pretty steady demand over the first few quarters here, saw a little bit of a step down in the latter part of this quarter and are expecting some more step down in the fourth quarter. We do view that as temporary.

We're working, and they're still navigating a bit of a challenging market environment, and we've continued to work with them throughout the year and also work with them on new opportunities where we can support them in a more fulsome way and help them on their recovery as well. So that's why we view it as a little bit unexpected step down, but we don't view it as a sustained item. It's a long-term client, a very large client and somebody we worked closely with for many years.

Operator

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

Marc Riddick

So I was wondering if you could talk a little bit about some of the things that you're seeing in the meetings that you've had, Chris, with some of the larger customers in particular. And you've talked about approaching larger customers, gaining greater wallet share there. Maybe talk a little bit about some of those touch points and some of the catalysts that you're seeing from those customers that are kind of leading your expectations for gaining greater wallet share and expanding breadth with those customers.

Chris Layden

Yes. Great. Well, yes, we've been very busy meeting with customers around the world, and the key theme is flexibility. As we kind of enter into this era, flexibility and really an integrated workforce strategy more broadly as people think about their external workforce, their permanent workforce, their digital workforce increasingly and how that all works together. And our real benefit working with some of the largest global employers around the world gives us a lot of data and insight to be able to help companies navigate this, take advantage of opportunity. And so as they think about flexibility, the other key theme is also visibility into where that workforce sits and how to flex it up and down.

And so we're seeing a lot of benefit from Sevayo, our data intelligence layer that sits across all of our large MSP customers, allowing us to drive more workforce insights than oftentimes some of our customers or even prospects are getting on their own from their HCM system. And so there's a lot of need right now there. We also continue to capture demand based on the value we provide, not just on price.

We've referenced this a couple of times with some of our more recent MSP wins, people seeing the value of our tech-enabled and AI-powered offerings. And that's also showing up in really the strength of our gross profit that you saw in the quarter, up 20 basis points. We feel good about the way the value is being sold and understood in the market, and we see that continue to be able to hold as we move into next year.

Marc Riddick

And that's helpful. And then I was wondering if you're seeing much in the way of differentiation in engagement levels, whether that's from a client industry vertical perspective or a geographic perspective? Are you seeing any particular standouts that kind of jumped out at you over the last 3 to 6 months?

Chris Layden

It's really the sector diversity right now for us maybe is as strong as I've seen it. And we've talked a little bit about some of the ways that has come together with the digital infrastructure build-out, certainly industrial reshoring more broadly and the impact it has across a lot of different sectors. And I was just traveling last week down in El Paso on the borderplex and smaller town, but another example of a lot of import/export activity, a lot of manufacturing, investments in digital infrastructure.

And so as I think about where that's taking shape in more rural communities in maybe more emerging Borderplex parts of the U.S. and then more broadly across a lot of our larger clients, it's more really about how you manage your entire footprint, the complexity of your workforce model and the flexibility you need overall to take advantage of the demand in the market. And so it's maybe less location-based. And in some ways, that plays right into our value proposition and our specialization strategy. So we're excited about what that means for the future.

Marc Riddick

And then last one for me. Can you sort of maybe give an update as to sort of how you're seeing things and/or the feedback that you're getting from folks regarding the work from home versus return to office dynamic and kind of maybe how that has shifted or if it shifted over the last, maybe say, half a year or so. I mean has that evolved as we go into next year in any way that's sort of different than maybe what you're expecting? Or how should we think about that?

Chris Layden

No, I wouldn't say that there's really been any change over the last couple of quarters on more broadly work-from-home policy. I think employers, I think we all learned there's new ways we can work in the way we're connected more globally. We haven't seen an increase in employers making new decisions on hybrid or full-time in-office work this year. And I suspect that, that will continue as we move into next year and likely also vary a little bit by sector and by country. But I do think that, yes, there's stability there, and I don't see that more broadly impacting our business. It is honestly not really often coming up in client conversations.

Operator

[Operator Instructions] I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing remarks.

Chris Layden

Thanks so much for joining us. We look forward to talking to everyone next quarter.

Troy Anderson

Thank you, everybody.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.