Q2 2020 Kelly Services Inc Earnings Call
Good morning, and welcome to Kelly Services second quarter earnings Conference call. All parties will be on a lesson only until the question. After a portion of the presentation. 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 turn there.
<unk> over to your host Mr., Peter Quigley, President and CEO, Sir you may begin.
Thank you, Brad [noise] Glory, one and welcome to Kelly services.
Second quarter Conference call with me on the call is Olivier T. Rowe, our Chief Financial Officer.
I'll start the call by reviewing the impact of cold at 19 on Kelly's business in the second quarter.
The actions, we've taken to mitigate its impact on our financial position.
And steps, we've taken to capture available upside.
Olivier will walk us through the highlights of our quarterly performance that were announced today in this morning's earnings release.
Oh, then share what we're seeing in terms of customer demand and.
And how Kelly is pursuing growth opportunities. During this crisis Olivier will provide some perspectives on Q3.
And finally, I'll conclude with an update on what's next for Kelly, including our ongoing journey toward becoming a specialty talent solutions provider.
I'm pleased to say that despite disruption caused by the pandemic, we continue making solid progress on our strategy, how about which I'll provide some additional details as we conclude today's discussion.
Now, let's turn to Q2.
The impact of Cobot 19 continued throughout the second quarter, that's closures and widespread uncertainty.
Resulted in reduced customer demand and lower topline growth.
We've discussed previously how we've been closely monitoring the economic impact caused by.
Two parameters of the pandemic.
How deep will it be and how long will it last.
As Q2 progressed, the severity of the resulting economic impact started coming into focus and we believe the worst is behind us.
It's more challenging to called the duration of the downturn, although it appears that the recovery and economic and labor market improvement.
Our underway, though there are likely to be uneven and more gradual then some for a few months ago.
I mean amid this unprecedented environment Kelly continued to mitigate the downside and execute with speed and discipline.
The precautionary actions, we took to protect our balance sheet that I shared on last quarters earnings call.
Proved to be judicious. These temporary defensive measures included pay reductions for full time salaries Kelly employees in several regions more.
More significant pay reductions for me and our senior leadership team.
Reduced compensation for our board of directors reduced hours in some regions suspension of the company match, where most retirement accounts redeployments for some employees and temporary furloughs for others.
Suspension of the quarterly dividend and significantly reduced capital spending.
I did not take these moves lightly and I'd like to acknowledge everyone in the Kelly community, our employees board and shareholders for their shared sacrifices.
These sacrifices mattered in this quarter's results and they give us flexibility to weather the ongoing crisis and go on the offensive when opportunities present themselves in the months ahead.
So decisive expense management served us well in Q2, and so did speed agility and execution of our operational plans.
Over the past several years, we had intentionally reduced reliance on brick and mortar branch offices established remote recruiting that works and move to a progressive work from anywhere model at our headquarters.
When that pandemic fit these earlier decisions aimed at being a more technology enabled agile organization meant we had robust I T systems and remote work protocols already in place.
We quickly transition to a fully remote regular workforce for reasons of employee safety, and we were ready and able to seamlessly serve our talent and customers.
This speed and agility have enabled us to creatively capture new opportunities on several fronts, even in the face of overall declines in demand and a challenging supply environment.
I will share more about that in a few minutes, but first I'll turn it over to Olivier to cover the specifics of our Q2 financial results. Thank you Peter and a good morning, everyone I'm before the Q2 highlights let me remind you that any comments made during the score including the queuing. They may include forward looking state.
Months about our expectations folks should jump that foments actual results could differ materially from those suggested valuable governments.
And we have no obligation to update the statements made on this call pretty easily fell to <unk> agency filings for a description of the risk factors that within friends. The companys actual future that Foments. In addition, during the quarter. So often that I wouldn't be discussed on the reported and on an adjusted base.
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Discussion of items on an adjusted basis I'll Nongaap financial measures designed to give insight into certain trends you know operations. We have also provided more information on our performance in the second quarter slide deck, which is available on our website.
As Peter just mentioned, our Q2 results reflect the impact as a covenant 19 pandemic and the resulting disruption in economic activity and the available the availability of tenant. The results also reflect the impact of all of them pretty expensive mitigation actions and the positive impact.
If one time over the duration governments' documentaries and funded me assistance in the U.S.
In Europe.
Revenue does that in 1 billion down 29 fell SUNS from the second quarter of the Pio you included a 100 basis respond favorably unfavorable impact from foreign exchange.
The <unk> 19 crises and the resulting impact on bus customer demand and tenants you fly impacted the fourth quarter.
As we entered the quarter demand decline as customers closed facilities to politics that walk foresees and in response to government directories.
And consistent with the end of Q1, our education business was back to get out impacted as most U.S. school districts as closed in response to the crises basie on as much.
We did see some swenson as a quite a progressed and our June rather than you exit rate a decline of 23.1 person's all 22.5 person in constant currency would reflect lower yield all the yield declines than we experienced in April and May.
These improvements came primarily from America steps.
As we move through the quarter. Our Q2 revenue results were also impacted by tenants you Blake on slides in the U.S. as cookies 19 related safety concerns and the impact of enhanced unemployment benefits. We use a poll the pool of available talent in some skill sets is.
Fishing, you know will come out sort of business.
Looking at each segment on the we bought it basis, the Americas staffing revenue declines well the most pronounced down 45 persons given the impact of lower demand in education and the allow Joe reliance on the mentioned the manufacturing sector and see skill sets, we didn't see segment.
The international stepping Rosen, you kind of certainly one person's reflects a continuation of the covered 19 impact which began in the first quarter.
And finally I will GTS segment was the most what did you me and we've done a person declining revenue for the quarter.
Why certain customer industries, such as a too much you've and you know.
Well negatively impacted the demand from life sciences customers and so our outcome based services, including Kitty connect our remote quotas Santo specialty remained strong.
But and then placement fees, well down 52 cents year over year as fees declined in the Americas staffing and international establishing as the impact of economic uncertainty as you pressed for time hiring.
Overall gross profit was down 22.5 persons.
Our gross profits weight was 19.4% up one and read that 60 basis points when compared to the second quarter of the priority.
The rate increase was primarily driven by suite factors the impact of governments to me loosen pandemic relief of about 100 basis points lower employee related costs.
And also the impact of improved product mix.
This was partially offset by the impact of lower film placement fees.
Why is the government stimulus and pandemic relief as being a handful of to dump early economic impact of the crises and the load as to retain critical tenant.
Benefits generally and only in this quarter.
As Ginny expenses went down 19.6% year over year.
The decline in expenses and reflects the Tumblr, we expense mitigation actions, we took stocking in April.
Including the compensation adjustments vetoed the east coast and also lower performance based incentive compensation expenses.
Second we have seen benefits from the cost reduction actions. We took in Q1 2020 prior to the pandemic and why we have been quick to react to the crises. We have been deliberate actions to avoid Joe Bob that using our ability to but no we though what customers now and to go.
Upto growth during the recovery failure.
I will report earnings from operations for the second quarter was 11.1 million compared to Q2 2019 reported earnings of 34.8 million.
Well Q2 2019 earnings included 12.3 million gain on sale of assets.
And then adjustment to our Q1 29, gls lecturing charge. So after adjusting for those items on the like for like basis Q2, 2020 earnings from operations declined by 50% that's just last year.
Kitties earnings before tax also include the unrealized gains and losses on our equity investment in below sort of holdings.
For the quarter, we recognized a 29.6 million pretax gain on our pursuit of common stock compared to 61.2 million pre tax gain in the priority.
These noncash gains I recognize below earnings from operations as a separate line item.
Income tax expense for the second quarter was 900000 compared to our 2019 income income tax expense of 12.7 million.
Our effective tax rate for the quarter was 2% as tax expense on current valued earnings was mostly offset by a onetime benefit from the recognition of some deferred tax assets.
And finally reported earnings per share folder second quarter of 2020 was $1.74 cents, both share compared to earnings of 2012 cents per share in 29.
You know the to better understand the underlying trend you know things, let me provide so much and then inflammation 2020 earnings per share was favorably impacted by the gain on pill sort of common stock in 29 gene as was positively impacted by you gain until sort of stuck again.
And on set of assets and then that judgment to a selection challenges.
Adjusting for these items Q2, 2020, EPS was 51 cents compared to 81 cents Bill sharing Q2, 2019, a decline of 77%.
Now moving to the balance sheet.
Cash totaled 22, and then 16 million compared to 67 million a year ago that wasn't nearly zero down from 2 million that year end 2019.
We ended the quarter with no borrowings on our U.S. credit facilities I.
Our cash balance you reflect the impact of reduction seen walking depth that probably Murray accounts receivable as the revenues declined during the quarter.
As we navigate these value of the economic uncertainty, we continue to manage our cash and debt closely to ensure that we have the working capital available to capitalize on the economic recovery and to take advantage of should show market growth opportunities.
Accounts receivable was 1.1 billion and decreased 15% year over year.
Nobody is so was 61 days an increase of three days of a yearend 2019 and full days frozen same valued last year.
While we have experienced an increase in India. So it does not reflect a deterioration of the quality of all receivables.
The increase does reflect two main trends we are seeing as a result of the pandemic first certain customers are making efforts to manage that one cash flows and asked the king advantage of that for payment terms with us.
Second.
There they are being the shift in our business mix as a result of the crises, which has resulted in a greater proportion of business, which is that I'll just go simos, who generally on joy longer payment terms.
In addition, we have historically had to season that a reduction in dsos at the end of Q2 as this quarter year ends in June but.
But given the decline in you dig in education revenue, we discovered 19 relating to school closing at the end of the first quarter.
The season that impact happen earlier in the second quarter in 2020.
We continue to money to a customer payment patterns closely and haven't shown that our collection James I have the resources necessary to respond to current conditions.
In our cash flow for the quarter, we generated 100 than 70 million of free cash flow compared to 65 million of free cash flow into the same valued in 2019.
As I mention we benefited from free cash flow generation due to the current market conditions, we generate free cash flow during the initial benefits of an economic downturn as we continued to collect our receivables widen payroll costs declined in line with human.
We also took advantage of the ability to defer certain tax payments I spoke to 19 related economic stimulus.
Addition, we monetize certain tax receivables as part of an existing asset Monetizations cottage and now back to you Peter Thanks, Olivier It's clear that covered 19 is significantly muted demand, although some higher margin specialties.
I know coincidence areas, where our specialty strategy is increasingly taking us have proven more resilient.
We are encouraged that we exited the quarter better than we started it and we are now using our observations on the ground.
To give us insight into the months ahead, which we expect to be variable by industry geography product line and available skill sets.
Thanks to Kelly's operational agility, I mentioned earlier and more resilient areas and skill sets that were required ramping up in Q2, we stepped up and delivered high quality talent quickly unemployment office agents contact center agents logistics professionals remote learning educators scientists support.
In clinical trials and more.
We also demonstrated the flexibility to provide talent in skill sets supporting the response to the pandemic.
Kelly has placed thousands of temperature checkers at businesses and employers that are screening guests and workers for covert 19.
Similarly contact tracing has been an end demand skill set as public health agencies work to prevent community spread of the virus.
The demand for these new jobs, certainly don't offset overall declines, but our ability to fill these new roles quickly is indicative of the more agile in creative company, we are becoming.
Overall, we are encouraged by this quarter's results and signs of strengthening demand from existing customers, new customer wins and solid new business pipelines, while we keep a close eye on the recoveries trajectory at some level of uncertainty remains as the pandemic continues Olivier will now provide his thoughts. Thank you.
Peter as we announced in mid April we drew our previously issued full year guidance full year guidance.
And then.
I don't know our quarterly known he May I described to the scenario planning that we hadn't taken in the early stages of the crises.
And while we are now more than four months into it the near and medium economy conditions continued to be highly uncertain.
We have continued with our scenario planning updating fall most recent data points and confirming responds plans that they align with our priorities.
These scenarios consider vitality to you if you mentioned values based on the duration of the economy compaction and the speed of the subsequent economic recovery.
The possibly deal for repeated psychos offer reopening of the economy and subsequent reserve Jones infection rates as well as a longer and slower recovery also included in our planning.
In addition to the customer and tenancy bags that Peter discussed we are utilizing economic forecast as well as predictive until nine activity based make tweaks to inform our scenario planning.
We continue to review, the resulting impact on earnings cash flows and that covenant mid tweaks.
We have a data that will stress test of cash flows and debt covenants and at this point we remain confident.
That we have adequate financial resources and liquidity to weather the crises.
Sure emerging growth of booking cheese and to take advantage of the recovery and subsequent values of economy gross.
Given where we haven't go cycle, we have determined that we did not be providing guidance between provide some perspective on the south corridor.
Why if current trends may not be predictive of future with those that helpful to understand the current level of demand and customer buying behavior.
As mentioned in my remarks on the second quarter results revenue declines wellness, even across the segments and neither as meaning the pace of subsequently improvements in revenue trends.
Declines have been more pronounced in America, establishing well education and light than just write a business.
Going back.
I will June of year revenue declines in America Stashing, excluding education was better than I walk you through trend at down, 74%, which reflects slow but positive momentum education was down 79% year over year for the second quarter.
Any significant we go very navigation revenue will be dependent on this quarter reopening patents.
That's a national establishing reflex decline across Europe and June revenue exit rates are in line with second quarter. However, we do have some bright spots like Russia, where I was specialization unite and remote call center business as moderated impact.
And finally, GTS as being the most resilient to date as many customers in the segment operating the essential Andrew stories. She built remote work Oh I've begun to reopen their facilities.
The exit rate for did yes was also generated in line with in Q2 trend and customer demand trends are stable.
As I noted in my remarks on the Q2 GP rate, we did benefit from government stimulus, which we don't currently expect to continue in Q3.
On certain employee related costs are underway subject to a degree of liability that we would expect could be even more pronounced doings appending Mick.
We have continued to work closely with our customers and that is not yet seen any material sign of margin pressure due to the current environments.
And as Peter discussed we have taken some additional steps with respect to as Ginny expense levels. Both in advance of funding responds to the crises.
While we have made significant Scott close I do actions, we may not be able to entirely offset the expected Q3 year over year revenue decline stemming from the crises.
We continue to when you talk conditions and take actions comes consistent with I will say now you're planning.
If needed would take solace steps to align that walk us like show, we still playing with us.
And that quickly mention one other chains that we'd be visible in Q sweet beginning with our earnings announcements.
For Q3 Candy result will be reported on find we'll be reporting.
Our financial information in new operating segments to align with a new specialty business unit structure, we recently implemented I.
Let me to give you multi davis on that in Boston milestone and his concluding thoughts. Thank you Olivier.
Due to 2020 was a tumultuous quarter, but its times of crisis that reveal true character and Kelly employees have risen to the occasion.
We remain confident in our ability to serve our talent and customers in this challenging environment and we are well positioned for growth as customer confidence talent supply and the economy improve.
Equally important amid the painful moments of crisis stemming from systemic racism in our society. Our identity is also unwavering we know who we are and we are a company that stands up for equity inclusion fair treatment and opportunity for all.
I have shared in previous calls what's next for Kelly's business and that remains unchanged. We are aggressively pursuing our strategy toward specialization both organically and inorganically.
Im pleased that notwithstanding external headwinds, we took a bold step forward on this path as we closed out Q2.
As of July Onest, Kelly is now organized as five distinct business units based on our chosen specialties, Kelly Science Engineering and technology Kelly education.
Kelly professional and industrial previously known as commercial.
Kelly O CJ and Kelly International.
We also completed on schedule our planned upgrade of our best in class front office platform and several state of the our technology enhancements to further productivity of our recruiters and other frontline employees.
Today, we are more focused and better position to capture high margin business in the skill sets modern organizations need to grow and thrive.
We've already seen this playing out during the pandemic as certain specialties proved to be more resilient.
We are actively working toward future growth and we see positive momentum in many parts of our business.
As Kelly steadfastly pursues our transformation into a specialty talent company, we're doubling down on the talent essential to this strategy.
We are affirming our commitment to talent on assignment around the globe with our new five point talent promise.
It's a bold stand to always do the right thing for our talent in five areas safety value wellbeing investment and opportunity.
We've also turned up the volume on our voice in the marketplace during covered 19, rather than retreating and waiting for things to improve.
In Q2, we launched television spots in select markets for the first time in many years.
Reintroducing Kelly the companies and highlighting our specialty skillset array of services and refresh brand.
Our larger share of voice is indicative of a fresh in Boulder, Kelly that attracts attention as evidenced by Forbes ranking Kelly number three on their annual list of the best professional recruitment firms in the U.S.
Q2 was a quarter. Unlike any we've seen during our nearly 75 years in business and I'm very proud of how Kelly navigated through it all with our purpose of connecting people to work front and center.
I'd like to thank our internal teams our talent on assignment our customers our board of directors and shareholders for their support.
Brad you can now open the call to questions.
Thank you, ladies and gentlemen, you do wish to ask a question. Please press one and then zero on your telephone keypad you can withdraw your question I repeating the one they will command and if using a speakerphone. Please pick up the handset.
Again, it's one zero to ask a question.
And we'll go first to line up.
JD Gomes with noble capital. Please go ahead.
This is Joe Gomes good morning, Good morning, Joe Good morning to.
Just.
Want to make sure here I heard you properly the government stimulus added roughly a 100 basis points to the gross profit in the quarter.
Yes, I mean, if you if you add a you know us on Europe as I say, it's about 100 basis points.
And then to complement the 160 basis points, we have about 20 basis points from employee related costs that I did mention and about 40 basis 0.4, I would say our success throughout the mix improvement.
Okay.
Okay and on the back to school.
Yes.
I'm showing little might north east bias here can school here, yes, generally doesn't start until September but would July and August typically be a little lower demand months for you on the back office on the on the school.
Segment, or given where we are today some school starting August that's not quite as true.
Im just trying to.
Get an idea some of the seasonality.
On the the education segment there.
Yes, Joe we see significant fall off towards the end of the school year in June and into this summer months July it again because of the staggered openings of school districts across the US we begin to see a normal in a normal environment upticks starting in August and then.
With more fulsome in in September.
So thats the normal cyclicality.
The education business.
Okay.
I guess, that's it's a bit hawk want to read right now, but it doesn't seem to be any type of consensus out there in terms of.
What I read opening of schools may or may not be.
You know just trying to get some more color from you guys and what you're seeing out there. So far are what your expectations are hearing.
As to what might be.
The.
Back to school environment.
Yeah, It's a great question, Joe and given the given the environment on top of mind for a lot of people.
The I'll use.
Our top 15 school districts as a proxy for for what we're seeing in the.
Among our other customers and among those 15.
It's pretty evenly split for those that have made a decision which is the majority about half are.
Going remote only to open schools and then the other half are doing a hybrid of a mix between online and on site.
And there's still a handful that have not yet declared which direction, they're going to go but I think thats representative of what we're.
Seeing among school districts as they deal with a pandemic.
And how does that.
Play out and then for your.
Staffing business there.
You are growing remote.
And you're able to just do everything out of your own how's that.
Lessen the opportunities available for you guys.
Well that will remain to be seen but we've been using the time between the onset of the pandemic and today to prepare our teachers and work with the school districts to make sure that whether its remote or onsite.
We're we're satisfying the demand for teachers, which.
We'll continue in even during the pandemic.
You may have.
Seeing in the press reports of.
Accelerated teacher retirements, obviously, there are teachers that concerned about.
Their own.
Safety. So we think there is going to be school district demand for our services during the.
Q3 in Q4.
We're in uncharted territory as I know you know so it's hard to forecast and predictive precisely.
But I would comment that school districts are continuing to award contracts and Kelly has.
Had a very.
Positive track record recently in terms of our wins when you comparative into.
2019, when we weren't in they pandemic situation.
Okay. Let me, let me ask Wal Mart and I'll get back in queue.
So you ended the quarter with.
216 million of cash and no debt.
Do you expect Hess and paid.
Continuing to build cash for the rest of this year.
Any plans for that sizable cash that's on the balance sheet the or.
Any clarity there would be appreciated.
Yes, I mean, we.
We have you all right to say, we have about 216 million of cash plus about.
Shy of 300 million of debt capacity.
You know that seating I 103 during the first phase will send economic downturn, you start to accumulate cash and these what you see on the free cash flow, which is 170 underwritten 70 million.
Q2 yesterday diversity is about 65 million last few it's a normal pattern that we see.
Each economic downturn, but of course, depending on how the recoveries going they look like some of these cash is going to be used to fund our recovery because our working get that needs are going to quickly go up, especially in some areas where they are expectation for.
No time recovery.
On top of that of course, as you know leverage and available.
You know dead capacities.
Confirming that we have very strong balance sheet and we continue to have a strong balance sheet and of course is going to give us on top of funding.
Recovery, So my munitions to basically swiech, our balance sheet from a defensive to an offensive mode whether to eat Sweet organ. You go of course, you know again, you can you should use.
Okay. Thanks, I'll jump back in queue, alright, Thanks, Joe.
And next we can go to the line of Kevin Stinky with Barrington Research. Please go ahead.
Morning, Kevin.
Good morning.
Hey, I wanted to start out by asking about.
You mentioned some of your higher measure margin specialty businesses being more resilient you called out life Sciences, and Kelly connect specifically or should we be thinking of any others that have been.
Performing a little but better than.
Average in this environment.
Any of the customers in the essential services, So life science being obviously, one but there are number of others that.
Stayed open during the pandemic and particularly our outcome based.
Services.
Business process outsourcing held up very well during the.
During the quarter and.
That we do provide that in life sciences, but we also provide that another essential services as well Kevin you will see that outcome based business. If you look thats revenue was up by about 10% so similar to Q1.
Our GP in the so area was up by about 18%.
Due to customer mix. So you see that the traction we have there basically is a very similar to what we have seen.
Q1 of the she all I would say even in the best.
Okay. That's helpful.
No in this environment are you.
Able to kind of see any signs of.
Continued benefits from the US branch restructuring that you completed.
Last year in terms of maybe the pipeline or.
Potential future growth or is that just kind of.
Most things been put on hold.
With the pipeline there.
Kevin I'd Theres been a couple of benefits from that.
Reorganization and restructure.
One it provided additional financial flexibility those steps were pre pandemic, but.
They have helped with our ability to to manage our financial position of the company during the Pandemics.
I mentioned.
In my prepared remarks, how the.
Organization, which has reduced its reliance on brick and mortar was well prepared to respond to customer demand by going remote.
I think as quickly if not more quickly than than.
Some of our competitors and we're very encouraged by the.
Pipeline.
As I mentioned not only a.
We're seeing strengthening among existing customers, but also.
New wins.
Some of which I think.
Our from other competitors that.
Haven potentially demonstrated the agility that Kelly has during the pandemic to respond to the challenges of remote recruiting so.
We think that those moves that we took again without the knowledge of the pandemic.
Our proof points that we are becoming a more technology enabled and agile organization.
Okay, Great and you mentioned that.
You saw some strengthening in June primarily in Americas staffing.
What are the areas within American staff.
Americas stepping where you maybe saw the most strengthening.
Yeah, I'm going to start we used to numbers and told you to understand beat that will exit rate.
I'm going against us and commercial versus the average for the quarter and then icing vetoed is going to go.
On a which we see on a on the markets play on the marketplace. So our commercial within the Americas Stashing.
It was down roughly by minus 68 person for the quarter.
And I will exit rate was about to minus silty suite.
So, yes, so unfair Kevin.
During the quarter when non essential services were shut down.
That was a significant impact on for example in automotive.
Those businesses are now.
Either online or close to being fully back online. So those are the areas where.
We're likely to see.
Improvement in.
US commercial because with exposure to light industrial in non essential services and.
Small and medium sized enterprises as well were most likely shutdown during the.
Shelter in place rules and they're beginning to come back online and we're seeing demand there.
As we move into Q3.
Okay, good and how should we think about.
Vince management as we move.
Through the rest of the year here.
Our the initiatives that you.
Put in place.
In Q O Q is going to continue as is moving forward or should we expect.
Cost coming back is revenue rebounds.
I would you frame that.
Yes, as I mentioned, we are looking at several scenarios, including small Q suite.
And we have always you know the flexibility to address that will go space, especially with the numerous initiatives, we have taken and and that Peter as a shared with you.
On average and I'd like to use what these calls recovery ratio that I think everybody should be semi now with our recovery ratio. In Q2 was about 79 person so pretty good I would say and we expect the threeq ovary ratio to be actually.
I just add 50 person is not more.
In Q suite, and probably around similar numbers in Q4.
Okay. Thanks, and then this lastly from me.
You mentioned continue to aggressively pursue your specialty strategy in this environment, what does the M&A pipeline look now like now.
Opportunities slowed are you seeing more opportunities or.
Got it just give us the flavor for.
It was inorganic pursuits as they stand now yes, Kevin we saw.
Dramatic drop off in.
Late March April.
May.
But.
We have seen in the last especially in the last few weeks probably starting in late June early July significant uptick in activity.
Type line is.
Not at pre covered levels by any means but it is.
Again, we've seen a nice uptick and we havent.
We haven't.
Hit the pause on our own proactive efforts to.
Continue.
Enquiring speaking to.
Evaluating properties that we think provide.
And opportunity for Kelly to.
Advance our specialty strategy so.
We're leaning into it and I think when.
When industry adjust to the fact that you can actually do things remotely we've had a couple of management.
Meetings online and frankly, while I wouldn't have said, that's how I would prefer to do management meetings.
Because of it I think they worked pretty well and I think we can advance deals during the pandemic because of people getting used to the fact that this is the new normal.
And we are looking more and more add to what we call pastiche candidates, meaning proactively looking at potential of booking keys.
Coupled with a you know more what we could act on musket candidates as well.
Okay, Great Thats all that for now thank you thanks, Kevin too.
And again, ladies and gentlemen, we'd like to ask a question. Please press one and then zero.
And go back to line of Joe Gomes. Please go ahead.
One quick follow up here, if I may.
You guys had talked about some other responses you had implemented or the Colgate, including free online training and certification program just wondering.
How was the uptake on that it has that helped you at all in either retaining or maybe expanding your candidate pool.
I think the uptake has been.
As been about what we expected Joe.
I would point to a couple of other things of how we've connected with with our talent during the summer our education business spend a lot of time working with our teachers.
To prepare them for working in any kind of scenario.
We had really positive reaction to to that training as well as.
Ongoing.
Meetings to maintain contact to assure our teachers that we're focused on.
Their training, but also their safety.
And so I think our outreach during this.
Pandemic.
In across all of our business has been well received by our talent and I think it represents.
Our focus on on concentrating on talent as I mentioned during my prepared remarks that were.
Committed to.
Having a relationship long term relationship with talent for helping them determine what's next in their their journey and.
Thats.
I think going to create some differentiation.
Among.
Kelly versus some of our competitors. So we're excited about that and.
The response to our efforts in the pandemic I think are just emblematic of a larger effort underway of Kelly.
Great. Thanks.
And next and go to line of Josh Vogel with Sidoti and company. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions warning job running Josh.
I apologize I've been bouncing back and forth between a couple of calls so if any of this is repetitive I'm sorry, but.
I thought I caught.
Let me say that education was down 79% in Q2 is that correct number yes, that's correct 78 said, okay. Yes.
Okay, and I know you were giving a little bit of commentary around Q3, and I just wanted to kind of get a feel you stand at the consolidated June exit rates are good idea of what to think about Q3 years or incremental improvement.
That you expect especially of schools reopened.
Yeah, I would start with few numbers and then I think there's going to complement.
So our exit rate overall was minus 22.5 person in constant currency the main improvement from the average of.
28% in constant currency for the full quarter was really coming from improvement we have seen.
Especially in June.
Our.
I'm going to get Stashing commercial business, where we the average decline for the quarter was about 68, and we ended the quarter at minus 33, what we see in July ease Simi laugh too.
No what we've seen in June progress Youve, but slow improvement.
On our topline versus a year.
Yes, we're seeing Josh sequential growth week over week and its now.
Now that businesses are reopening it's not concentrated in any.
Particular area, we're seeing good growth in E Commerce logistics.
Retail.
Mentioned the automotive.
So and our finance business actually been been pretty resilient through the pandemic. So we're seeing.
The growth and we like the pipeline we're seeing.
Customers continue to let contracts and.
We are pleased with our win ratio versus prior periods and so we think we have.
Momentum recognizing as I mentioned in my prepared remarks, we're keeping an eye on the trajectory because these are uncertain times for sure.
That's helpful. Thank you.
It's it's nice to see the transition.
The five specialties I think it'll be.
Good for investors to see the pillars of the business.
Is it possible when we think about those five specialty that you can you give us the exit rates of those businesses coming coming out of June or what you're seeing in July.
Well, we are you know as we speak.
We are going to of course reports.
Our new segments at the end as Q suite.
Yes, we have shared we though is you some sizing revenue wise for each of them and what I call marginal value profile.
I would see shoe seeing above them I mean, what's we quoted science engineering and technology.
Knowing that type of season as the specialization is likely to be you know.
What's recording that will resilient, especially when you look at that will GTS business education. These base on which we have discussed today.
Proficient talented and do so I mean, what we are going to see is what we are describing around.
Manufacturing as well as.
I would say clearly colon position or so, but we cannot really give you more inside because.
We need to of course now too.
Get 24.
The current quarter restate of calls of fast and we are going to be able to show much more around that doings acute Q3 owning score.
Just the only thing.
Yes, the only thing I would add is.
Outside of education, and international is still a bit a bit uneven.
The comments about the the slow and steady growth and the pipeline.
Work with existing customers as well as new wins I think applies to the other three business units.
That's great. Thank you.
Question around education.
If schools stay close through at least.
The end of this year and there is this this pivot we're seeing to extended online learning do do you want a presence there.
We have an increasing our growing presence there we don't actually own a technology that we will.
Deployed, but we work with school districts.
And our teachers would be trained on the.
We have E learning training that we've conducted throughout the summer with our teachers and they're prepared do.
Use the.
Technology that school districts to use and.
It should be seamless given the amount of attention that's been given to it during the four or five months of the pandemic.
Okay, great and.
Shifting gears, a little bit I know you've made investments in.
Technology and I know, we may be tough to gauge in this environment, but are you seeing any notable or quantifiable productivity improvements stemming from those investments.
Well.
I think we are glad that now you know we have implemented will fully implemented the these new phone doshi under the digital tools that that will run need or desire on the just outside the small the beginning than the end because we are going to continued to fine tune investing you know new tools around digital technologies.
I would say, yes. It is challenging in these on volume and to really.
Starting some measures. Although we have started I think we are going to need to lead B dubs time, probably you know as a second that for this year to when you start to see trends.
In del move productivity efficiency speed.
We were expecting of course as an outcome of these project for those of cools talent expense, how we can they can we see customers and so on but we haven't they need to believe me tough time is sufficient ngs.
Disrupted environment to make an assessment, but I believe you again sit in that flows as these currencies is targeted to really get on share some assessment on what all the outcome.
Of the so initiative and anecdotally, Josh I would say that new technology has been very well received in our front line very excited about the.
Advantages that it provides to them.
In terms of.
Matching.
Candidates.
Communicating with candidates, allowing candidates to know where they are in a in the queue. If you will so.
We'll have more data later in the year, but anecdotally were.
Confident that we're going to see improvements in the.
In the frontline.
Alright, great and there.
I think there was an earlier question around you know the acquisition pipeline or appetite there, but obviously.
Maintaining a strong cash balance in the balance sheet is very impressive in this environment.
Yes, and again, if you adjust as I apologize, but what do you need to see from a macro level, where you feel comfortable either getting active or aggressive on the acquisition front and when what are your thoughts around reinstating the dividend at some point.
Thank you.
It's.
More than one question, but let's let's see I mean, what are the key point Teza of course.
We need to be mindful that some of the cash we all generic 18 now is basically because.
And the early stage of a downturn no andries three you generate more cash the fact that our free cash flow.
Year to date Q2 is 170 million investors 65 million a year ago of course, we haven't they need some of these cash when the recovery has been a progressive unicom, but as a matter of fact on top of having a 260 million of cash I mean, we have no debt so our available debt capacity.
Very clear on the exact 297 million.
So I would say I didnt pointing dining when we see some of books and she's flow inorganic we are not going to wait you know.
Forever I mean, if we find something.
In the next coming malls that are you speaking with our strategy ads is the right price tag.
I think when we're going to go for it and as Peter explained previously we are still very active on the marketplace and looking at present geez, whether they are activity on the market or basically what we called best fish candidates.
On the DB done side.
We.
As we speak I mean, we have student in a very uncertain environments that something of course, we assess and discuss regularly.
I would say for us.
That number one is going to be.
To get more clarity on what is going on and how it seems on evolving.
So I would say, we all know kits ready to give you a precise timetable on when we are going to reestablish dividends, but its of course.
Something we have in mind and that is part of our competitive location, whether it's now or in the near future.
Well I appreciate the clarity.
Thank you guys are taking my questions and it's always good talking to you.
Thanks, Josh.
And currently no further questions in queue again, it is one and then zero.
And no questions currently.
Okay, Brett I guess, we can end the call. Thank you very much. Thank you Brian. Thank you everyone welcome.
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