KELYB

The FY2025 headline is alarming — a $254M net loss and -$7.24 EPS — but it decomposes into items that are not the operating run-rate. Pre-tax loss was only -$78.8M, and inside that sit a $102M goodwill impairment and a $13.5M asset impairment (both non-cash). The single largest line is a $175.3M income-tax *expense* booked against a pre-tax loss — an NM swing that reads as a deferred-tax valuation allowance. That is the key tell: management is effectively conceding it does not expect enough near-term taxable income to use those assets. Stripping the non-cash charges, the core still generated $123M of operating cash flow (up 356%) on just $8.5M of capex, so this is a cash-generative business having a bad accounting year, not a cash-burning one.

Quality is nonetheless weak and drifting the wrong way. Revenue has fallen from a $4.91B peak (FY2022) to $4.25B (FY2025, -1.9% YoY), and the MD&A blames 'sluggish labor market demand and policy shifts' — a demand problem, not a share problem. Gross margin held at 20.1% but the model barely clears its own SG&A: gross profit $853M against $774.9M SG&A (ex-D&A) and $51M D&A leaves only ~$27M before impairments and gains. Operating margin is -1.6%. So even normalized, this is a low-single-digit-margin cyclical whose earnings power is currently near zero — the 2022 net income of $156M looks like the top of the cycle, not the base.