Q2 2020 Kelly Services Inc Earnings Call
Moving over to your host Mr., Peter quickly President and CEO, Sir you may begin.
Your bread [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 covert 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 about which I'll provide some additional details as we conclude today's discussion.
Now, let's turn to Q2.
The impact of covert 19 continued throughout the second quarter as 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 call the duration of the downturn, although it appears that the recovery and economic and labor market improvements.
Our underway, though there are likely to be uneven and more gradual then some thought a few months ago.
I'm in amid this unprecedented environment Kelly continue 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 for 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 have intentionally reduced reliance on brick and mortar branch offices established remote recruiting networks 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 IP 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. 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 for future performance.
Total results could differ materially from those suggested valuable commands.
And we have no obligation to update the statements made on this call pretty easily fell to our key findings from a description of the risk factors that could influenza companies Act was future that Foments. In addition, during the quarter Sefton data will be discussed on the reported and on an adjusted.
This discussion of items on an adjusted basis, our non-GAAP 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 these are 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 our thumb fully expensed mitigation actions and the positive impact of.
One time, only limited duration governments' commuters and funding assistance in the U.S. and in Europe.
Revenue does that 1 billion down 29% from the second quarter of the Pio you included.
100 basis points favoring unfavorable impact from foreign exchange.
As a coffee 19 crises and the resulting impact on bus customer demand and tenants imply 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 particularly impacted as most you a school districts as closed in response to the crises by the end as much we.
We did see some strengthening as the quarter progressed and our June revenue exit rate a decline of 23.1 person's all 22.5 person in constant currency reflect lower yield all the yield declines than we experienced in April and May.
These improvements came primarily from Amrica steps.
As we move through the quarter. Our Q2 revenue results were also impacted by tenants you Blake on slides in the us as cooking 19 related safety concerns and the impact of enhanced unemployment benefits with use of both the pool of available talent in some skill sets. This.
Mission in our commercial business.
Looking at each segment on the reported basis.
The Americas staffing revenue declines were the most pronounced down 45% given the impact of lower demand in education, and new larger reliance on the mines and manufacturing sector and seats skill sets within the segment.
The international staffing revenue decline of 31 person's reflects a continuation of the covered 19 impact which began in the first quarter.
And finally, our GTS segment was the most resilient with an eight person declining revenue for the quarter.
Why to certain customer industries, such as a too much of an NLG well negatively impacted the demand from life sciences customers and for our outcome based services, including Kitty connect our remote quarter Santo specialty remained strong.
Baumann, then placement fees were down 52% year over year as fees declined in America with the staffing and international establishing as the impact of economic uncertainty as the priced fulltime hiring.
Overall gross profit was down 22.5%.
Our gross profit rate was 19.4%.
160 basis points, when compared to the second quarter of the Pio.
The rate increase was primarily driven by suite factors the impact of government stimulus and 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 did the government stimulus and pandemic relief as being the headphone to dump early economic impact of the crises and the load as to retain critical tenant these benefits generated and early in this quarter.
As Jan expenses were down 19.6% year over year.
The decline in expenses reflects the Tumblr, we expense mitigation actions, we took stocking in April.
Including the compensation adjustments vetoed the Skus and also lower performance based incentive compensation expenses. In addition, we have seen many feeds from the cost reduction actions. We took in Q1 2020 prior to the pandemic and why we have been quick trulia.
To the crises, we have been deliberate actions to avoid Joe by using our ability to but now with our customers now and to capture growth during the recall the revalued.
Our reported earnings from operations for the second quarter was 11.1 million compared to Q2 2019 reported earnings of 64.8 million.
Q2, 2019 earnings included a 12.3 million gain on sale of assets and an adjustment to our Q1 2019 analysts lecturing charge soon after adjusting for those items on the lag far lag basis Q2, 2020 earnings from operations did.
Line by 50% versus last year.
Kitties earnings before tax also include the unrealized gains and losses on our equity investment in both 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 pioneer.
He is noncash gains are recognized 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 for the second quarter of 2020 was $1.74 cents per share compared to earnings of two that on 12 cents per share in 2019.
In order to better understand the underlying trend you know earnings let me provide some action that information 2020 earnings per share was favorably impacted by the gain on pursuit of common stock in 2019, EPS was positively impacted by again until sort of stuck again.
On set of assets and an adjustment to a selection charges.
Adjusting for these items Q2, 2020, EPS was 51 cents compared to 81 cents Bill share in Q2, 2019, a decline of 77%.
Now moving to the balance sheet.
Cash totaled 216 million compared to 37 million a year ago debt was nearly zero down from 2 million at year end 2019.
We ended the quarter with no borrowings on our us credit facilities I.
Our cash balance you reflect the impact of reductions in working capital primary accounts receivable as the revenues declined during the quarter.
As we navigate these failure the economic uncertainty will continue to manage our cash and debt closely to ensure that we have the working capital available to catch delays on the economic recovery and to take advantage of future market growth opportunities.
Accounts receivable was 1.1 billion and decreased 15% year over year.
But it is so was 61 days an increase of three days of a year end 2019, and full days from 7% valued last year.
While we have experienced an increase in yes. So it doesn't reflect a deterioration of the quality of our receivables. The increase does reflect two main trends, we're seeing as a result of the pandemic first certain customers are making efforts to manage their own cash flows and now.
Taking advantage of their full payment terms with us.
Second.
There there's been a shift in our business mix as a result of the crises, which has resulted in a greater proportion of business with large customers, who generally on joy longer settlement payment terms.
In addition, we have historically had the season that reduction in Dsos at the end of Q2 as a school year ends in June but given the decline in the dig in education revenue. We discovered 19 related to school closing at the end of the first quarter the season that impact happen earlier in the second quarter.
In 2020.
We'll continue to monitor customer payment patterns closely and haven't shared that our collection teams I have the resources necessary to respond to current conditions.
In our cash flow for the quarter, we generated 170 million of free cash flow compared to 65 million of free cash flow into this embryo during 2019.
As I mentioned, we benefited from free cash flow generation due to the current market conditions, we generate free cash flow during the initial periods of an economic downturn as we continue to collect our receivables while payroll costs declined in line with demand.
We also took advantage of the ability to defer certain tax payments as part of covered 19 related economic stimulus.
In addition, we monetized certain tax receivables as part of an existing asset monetization cottage and now back to you Peter Thanks, Olivier It's clear that covered 19 is significantly muted demand, although some higher margin specialties.
By no coincidence areas, where our specialty strategy is increasingly taking us have proven more resilient.
We're 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 and 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 as 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 grew our previously issued full year guidance full year guidance.
And then.
No our call in early 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 economic conditions continued to be highly uncertain.
We have continued with our scenario planning updating fall most recent data points and confirming responds plans that align with our priorities.
These scenarios considered a variety of demand scenarios based on the duration of the economy compaction and the speed of the subsequent economic recovery.
The possibility of who repeated psychos offer reopening of the economy and subsequent reserve Jones infection rates as well as a longer and slow recovery also included in our planning.
In addition to the customer and tenancy back that Peter discussed we are utilizing economic forecast as well as predictive antonella activity based make tweaks to inform our scenario planning.
We continue to review, the resulting impact on earnings cash flows and debt covenant matrix.
We have updated our 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 to capture emerging growth opportunities and to take advantage of the recovery and subsequent valued of economy gross.
Given where we having to cycle, we have determined that we did not be providing guidance, but will provide some perspective on this up quarter.
Wide current trends may not be predictive of future results. They are helpful to understand the current level of demand and customer buying behavior.
As mentioned in my remarks on the second quarter results revenue declines, while not even across the segments and neither as being the pace of subsequent improvements in revenue trends.
Declines have been more pronounced in Americas staffing well towards education and life than just writing business are heavily impacted.
I will June of a year revenue declines in America stashing existing education was better than our Q2 trend at down 34%, which reflects slow but positive momentum education was down 79% year over year for the second quarter.
Any significant recovery in education revenue will be dependent on school reopening patents.
And to National staffing reflex decline across Europe and June revenue exit rates are in line Wizard quarter. However, we do have some bright spots like Russia, where our specialization United 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 essential Andrew stories, Shufelt remote work, Oh, I have begun to reopen their facilities.
The exit rate for Dgs 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.
And certain employee related costs are always 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 have not yet seen any material sign of margin pressure due to the current environment.
And as Peter discussed we have taken some definitive steps with respect to SGN expense levels. Both in advance of funding responds to the crises.
While we have made significant Scott contributions, we may not be able to entirely offset the expected Q3 year over year revenue decline stemming from the crises.
We'll continue to when you talk conditions and take actions cons consistent with our scenario planning.
If needed will take further steps to align our cost structure, we stop line results.
And I quickly mention one other chains that will be visible in Q3, beginning with our earnings announcement.
For Q3, Kelly 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.
Let Peter gives you more details on that important milestone and his concluding thoughts. Thank you Olivier.
Q2, 2020 was a tumultuous quarter, but its times of crisis that revealed 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 AOCI, Jay 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 their productivity.
Of our recruiters and other front line 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 well being investment and opportunity.
We've also turned up the volume on our voice in the marketplace during covert 19, rather than retreating and waiting for things to improve.
In Q2, we launch 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 zero 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.
He gomes with noble capital. Please go ahead.
This is Joe Gomes good morning, Good morning, Joe Good morning too.
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.
No 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 a mix improvement.
Okay.
Okay and on the back to school.
[music].
I am showing a little might more ease bias here can school here.
No. It doesn't start until September but would July and August typically be a little lower demand launch for you on the back office on the on the school.
Segment ours, given where we are today some school starting August thats, but not quite as true.
Im just trying to.
Get an idea some of the seasonality.
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 began to see.
A normal in a normal environment uptick starting in August and then.
More fulsome and in September.
So that's the normal cyclicality.
Of the education business.
Okay.
And I guess thats.
Hi, Quanta read right now, but it doesnt seem to be any type of consensus out there in terms of.
What I reopening of schools may or may not be.
You know just trying to get some more color from you guys in what you're seeing out there. So far are what your expectations are hearing.
As to.
What may 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 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.
In you're able to just do everything out of your own how's that.
Less than 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.
Were satisfying the demand for teachers, which.
We will continue in even during the pandemic.
You may have.
Seeing in the press reports of.
Accelerated teacher retirement, 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 and Q4.
We're in uncharted territory as I know you know so it's hard to forecast and predicted 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 compare it even too.
2019, when we weren't in they pandemic situation.
Okay. Let me, let me ask while more than I'll get back in Q.
So we ended the quarter with.
$216 million of cash and no debt.
Do you expect headset paid.
Continuing to build cash for the rest of this year.
Any plans for that sizable cash that's on the balance sheet or.
Any clarity there would be appreciated.
Yes, I mean, we we have youre right to say, we have about 260 million of cash but us about.
You have 300 million of that capacity.
You know that in our industry during the first phase of an 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 divestiture is about 65 million last few it's it's a normal pattern that we see each economic downturn, but of course, depending on how the recoveries going to look like some of these cash is going to be used to fund our recovery because that will working.
Kept that needs are going to quickly go up, especially in some areas, where the expectation for a near term recovery.
On top of that of course, as you know leverage and available.
No debt capacities.
Yes, confirming that we have a 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 the recovery.
So my munitions to basically switch.
Our balance sheet from a defensive to an offensive mode, whether he eats we all get the goal of course inorganic initiatives.
Okay. Thanks, I'll jump back in queue, our thanks Joe.
Okay.
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 your higher measure margin specialty businesses being more resilient you called out life Sciences, and Kelly connect specifically or should we be thinking of many others that had 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 a 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 yes, you'll see that outcome based business. If you look at revenue was up by about 10% So similar to Q1.
Our GP in these area was up by about 18%.
Two customer mix. So you see that the traction we have there basically is very similar to what we have seen in Q1 of Xueshi, all I would say than in the past.
Okay. That's helpful.
No in this environment are you.
Able to kind of unique signs of.
Continued benefits from the US branch restructuring that you completed.
Last year in terms of maybe the pipeline or.
Central future growth or is that just kind of.
The most things been put on hold with the pipeline there.
Kevin I know 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 our with our ability to to manage our financial position of the company during the pandemic.
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.
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.
Yes, 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 Steph.
Because staffing 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.
America steps in commercial versus the average for the quarter and then icing vetoed is going to Google.
On what we see on on the markets play on the marketplace. So I will commercial.
In the Americas Stashing.
Was down roughly by minus 68 person for the quarter.
And our exit rate was about minus silky suite.
So Peter 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. This how would you frame that.
As I mentioned, we are looking at several scenarios, including small Q suite.
And we have always you know the flexibility to adjust our cost base, 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 is called 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 at least at 50 person is not more.
In Q3, and probably around similar numbers in Q4.
Okay. Thanks, and then just lastly for 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 or are you seeing more opportunities or.
What kind of just give us the flavor for Ah.
Those 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.
Right line is.
Not at pre covert 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 too.
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 on line and frankly, while I wouldn't have said, that's how I would prefer to do management meetings.
Pre cove 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 called Aktiv on market can dates as well.
Okay, Great. That's all in it for now thank you.
Thanks, Kevin too.
And again, ladies and gents, we'd like to ask a question. Please one and then zero.
And go back to line of Joe Gomes. Please go ahead.
One quick follow up here, if I may.
You know you guys talked about some of the responses you had implemented for the Colgate, including free online training and certification program.
Just wondering.
How long 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 but.
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.
That's.
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 go to line of Josh Vogel with Sidoti and company. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions when Im just learning Josh.
I apologize I've been bouncing back and forth between a couple of calls so it's anyone's repetitive I'm sorry, but.
I thought I caught.
Having said that education was down.
79% in Q2 is that correct number yes, that's correct 78 system had not yet.
Okay, and I know you were giving a little bit a commentary around Q3 and I just wanted to kind of get a feel you say that 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 steps with few numbers and then I think there is 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.
In our.
I'm going to get stashing commercial business, where we.
Average decline for the quarter was about 68, and we ended the quarter or minus 33, what we see in July ease.
We'll have to you know what we've seen in June progressive but slow improvement.
On our top line versus a year.
Yes, we're seeing Josh sequential growth week over week and.
It's now.
Now that businesses are reopening it's not concentrated in any.
Particular area, we're seeing good growth in E Commerce logistics.
Retail I mentioned the automotive.
So and our finance business has 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 nice to see the transition to 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 Youre seeing in July.
Well, we are you know as we speak.
We are going to of course report with our new segments at the end of Q3.
Yes, yes, we have shared we though is you some sizing revenue wise for each of them and what I equal marginal value profile.
I would see shoe seeing above them I mean, what we called science engineering and technology.
Knowing that type of businesses specialization is likely to be you know.
What we call now resilient, especially when you look at the well 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 professional so but we cannot really gives you more inside because.
We need to of course now to.
Get 24.
In.
The current quarter restate of calls a vast and we're going to be able to show much more on that.
Doings acute Q3 owning score.
Just the only thing on where they live.
Yes, the only thing I would add is.
Outside of education.
In 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.
Schools stay close through at least.
The end of this year and there's this this pivot we're seeing to extended online learning do do you have 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 their prepare do.
Use the.
Technology that school districts 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 A. 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 this new phone doses and the D. Digital tools that that will run need or desire on the G decided small the beginning than the end because we are going to continue to fine tune investing you new 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 really start to see trends.
In del move productivity efficiency speed.
That we were expecting of course as an outcome of these project plus of course talent expands how we can they can we see customers and so on but we haven't they need to lead to be tough time efficiencies.
Disrupted the environment to to make an assessment, but I believe again sit in that forces discontinuities is a good 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 and.
Our front line very excited about the.
Advantage is 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 a 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.
At an early stage of the downturn no 103, 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 recoveries going to progressively come 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 one within 97 million.
So I would say I didnt pointing down when we see some of buttons useful inorganic we are not going to wait you know.
Forever I mean, if we find something.
In the next coming months that is fitting with our strategy adds the right price tag.
I think when we have been go for it and as Peter explained previously we feel very active on the marketplace and looking at properties, whether they are activity on the market or basically what we could best fish candidates.
On the deals done side.
We.
As we speak I mean, we have student in a very uncertain environment that something of cools, 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 seems on evolving.
So I would say we are not hit for the to give you a precise timetable on when we are going to reestablish dividends, but its of course.
Something we averaged mine and that is part of our competitive location, whether it's now while in the near future.
Appreciate the clarity.
Thank you guys for 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 you're welcome.
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