Q3 2020 Kelly Services Inc Earnings Call
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[music] Your conference will begin momentarily please continue to hold.
Good morning, and welcome to Kelly Services third quarter earnings Conference call all parties will be in listen only until the question and answer portion of the presentation today's call.
All 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., Peter Quigley President and CEO. Please go ahead.
Thank you John Hello, everyone and welcome to Kelly services third quarter Conference call.
Is designed to accelerate growth in our chosen specialties.
Olivier will give you a brief overview of the new segments, and then walk us through the highlights of our quarterly performance that were announced in this morning's earnings release.
I'll then share some observations before Olivier provides perspectives on queue for.
And finally, I'll conclude by highlighting Kelly's plans to connect even more people with work that enriches their lives.
Now, let's turn to Q3.
While COVID-19 continued to impact Kelly's business in the third quarter.
Lowering top line growth compared to Q3 last year revenue trends in all of Kelly's operating segments showed sequential improvement.
Reinforcing our earlier assessment that the worst is behind us.
What we're currently seeing in our business is some gradual but uneven recovery featuring stronger demand tempered by some ongoing challenges and talents supply, particularly in lower wage jobs.
Or larger customers have gained momentum and many have quickly adapted to challenges and the talent market with more attractive pay and benefits.
All of our growth to come organically.
We are reviewing strategic targeted M&A opportunities and our specialties most prime for growth such as technology in education, while at the same time continuing to optimize our portfolio as demonstrated by the sale of our staffing operations in Brazil during Q3.
I will now turn it over to Olivier to further explain each of our operating segments and to review their Q3 results.
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On slide seven of the deck, we issued today, we have another view of the five segments that out of the outcome of the new operating model and their respective pre pandemic 2019 financial information.
So quickly as we can go into more detail during the cute name and stuffing, we science engineering and technology. It some more than 1 billion dollar business operating primarily in the U S and Canada.
Zebra rates in education reflects the delivery of services to both large metropolitan school districts as well as smaller districts across 41 states.
Professional and then just real with more than $2 billion of revenue in the us and Canada.
Combines our branch based and centrally delivered staffing solutions in the office professional light industrial and call Center specialties together with our outcome based products that deliver turnaround in those same skill sets.
Mexico and also Brazil before sales in Q3 of 2020.
Moving forward the segment operating seating countries in Europe, and you'd Mexico and provide what both white and blue collar talent. Most countries will continue to focus on delivering solutions to laugh science customers in their respective geography as well as the local irrelevant special.
T niches, such as watch making in Switzerland.
The deep the rightful segment reflect the blend of loud and SME businesses. So.
And formation about the financial performance of each of these operating segments was included in our prepared materials released earlier. This morning, and now I would move to a discussion of our queue three results for the company as a whole.
As Peter mentioned hour Kyushu your results reflect the continuing impact of the COVID-19 pandemic, the beginning of some stabilization and economic activity.
And the impact of the availability of talent.
The results also reflects the continuation of a temporary expense mitigation actions and to a lesser extent in queue too limited duration government stimulus and Panamiga assistance in the U S.
Revenue totaled 1 billion down 18 person from the third quarter of the Pio Yeah.
The impact of foreign exchange on our revenue growth rate was not significant.
As we mentioned last quarter in queue to we reached the full depth of impact of the COVID-19 crisis on demand and I'd begun to see sequential growth in customer demand as we exited cute.
During Q3, we continued to see gradual improvement in demand, particularly in large accounts, we experienced the biggest gains early in the corner and the queue to exit the Q3 exit right.
The queue to exit right, sorry, Oh, you know a a year revenue trends for the month of September were consistent with our average for the quota for the total company.
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Like in queue to our education business continues to be Batticaloa impacted as you a school districts returned to school in the fall using a virus T of delivery models, including vehicle and hybrid, which which has an impact on the demand for our services.
As we moved through the quarter hour cuso be revenue results were also impacted by tenants uplay concerns in the U S.
Pending.
And finally as the year over year comparisons are impacted by the unusually low level of incentive compensation expense into suite of 2019.
Sequentially expense levels in Q3 have increased modestly over the course of the quarter as we brought back employees, who had been temporarily followed in Q2.
Our reported loss from operations for the quarter was $2.4 million compared to Q3 2019, the reported earnings of $17.1 million.
Our Q3 2020 earnings includes a 9.5 million non cash charge related to a customer dispute.
Laura quite a it was a nine person benefit as tax expense on cooling failures earnings was more than upset by the benefit of the work opportunity tax credits.
And finally reported earnings per share for the third quarter of 2020 with 42 cents a share compared to a loss of 27 cents bookshelf in 2019 in order to better understand the underlining trying you know things let me provide some additional information 20.
20th openings per share was favorably impacted by the gain on personal common stock partially upset buys a non-cash charge related to the customer dispute.
Intage of their full payment terms with US second has been achieved in our customer mix as large account demand as we covered faster and has resulted in a greater proportion of business with large customers would generally enjoy longer payment payment terms.
We continue to make money talk customer payment patterns very closely and are confident that our collection teams as the resources necessary to respond to current conditions.
In our cash flow for the quarter, we generated 34 million of free cash flow compared to a use of $4 million from free cash flow in the same period in 2019.
As I mentioned, we have continued to benefit from the ability to defer certain payroll tax payments as part of COVID-19 related economic stimulus and that is a primary reason for our increase in free cash flow for the quarter compared to a year ago.
Given that we have been operating at a reduced level of demand for the past two quarters and demand and reduced revenue have gradually improved from their Q2 lows. We would expect to begin to use some of our existing cash balances to meet working capital needs if volumes continue to improve.
Over the next several quarters and now back to you Peter Thanks Olivier.
Our strategic decision to shift our portfolio toward higher value specialties was made prior to the pandemic and we are already seeing benefits higher margin specialties have been some of the most resilient parts of our business in the COVID-19 environment Kelly Science virtual call Center and C. G.
Solutions have all performed well in this challenging climate.
And while our education specialty has been dramatically impacted by COVID-19, we continue to believe it offers considerable growth potential.
In a post pandemic environment, we believe the demand for educators and instructors is going to increase and our acquisition of New School district customers. During the pandemic plus a strong pipeline of new prospects support this assertion.
What's less clear and opposed pandemic environment is a staffing demand, we'll see from small and medium size businesses, we serve within Kelly professional and industrial without the resources of larger companies, which are showing good signs of recovery small and medium enterprises have been disproportionately impacted by COVID-19 and are not yet showing.
The same signs of recovery.
Overall, we delivered acceptable Q3 results in a tough business environment, we're encouraged by our sequential improvements and strong pipelines in all of our operating segments and will continue to closely track the recoveries trajectory as we enter the next phase of the pandemic Olivier will now share his thoughts on.
What lies ahead. Thank you Peter consistent with the best two quarters, we are not providing guidance based on where we are in the cycle.
Economy conditions continue to be highly uncertain. However, we will focus voted that after reviewing fourth quarter economic data and completing our annual planning cycle, we'll be in a position to return to providing an outlook each quarter beginning with our year end 2020 owning score in meat.
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Since the early stages of the crises. We have continued we evaluate the value and Telus immense and values based on the depths of the downturn and now is the speed and stability of the economic recovery.
Including the possibility that they will be repeated cycles of reopening of the economy and then the subsequent reasons infection rates. We continue to review the routing impact of these scenarios on the earnings cash flows and debt covenants metrics, we continue to see a thrust as our cash flow.
Sales and debt covenants and at this point, we remain confident that we have adequate financial resources and liquidity to weather the crisis.
We are also planning so that we are prepared to take actions that advance our cottage.
For example, during the quarter, we completed the sale of our staffing operations in Brazil, and that evaluating opportunities to advance our inorganic strategy in the specialties, where we choose to focus to accelerate our growth.
So why we aren't providing guidance I will share some perspective on the fourth quarter correct.
Current trends may not be predictive of future results, but they are helpful to understand the current level of demand and customer buying behavior.
As mentioned in my remarks on the third quarter results revenue declines, while not even across the segments and neither as being the pace of subsequent improvements in revenue trends.
Education in particular will be challenging in Q4 as less than 25% of the suites. We sell these are back to fully in person instruction.
While we are supporting our K 12 customers with remote and hybrid inflection demand for our services will be higher when all schools are able to return to in person inflection.
Assuming the current global response to COVID-19, and the related economic impact doesn't Chen significantly we expect the recovery period to reach pre crises revenue levels will be longer than our view when we reported in Q2.
To give a sense of the speed of recovery, we are seeing for the months of June our year over year constant currency revenue decline was 22.5% and our Q3 course on current year over year revenue decline was 18.2% revenue trends were consistent for each month.
During Q3.
Other factors specific to Q4, we are starting to see some of the traditional seasonal lift in demand for our services in the distribution and logistics sectors, which is encouraging.
And we anticipate that revenue in education with also will also exhibit the normal seasonal trend caused by the K 12 school calendar.
And as a reminder, 2022 is a 50 threerd week fiscal year for Us. So Q4 will have 14 weeks of revenue, but the additional week is a holiday week. So we will gain about two working days in Q4.
We continue to expect revenue trends to reflect year over year declines until we anniversary the economic impact of the crisis in March 2021.
We expect our Q4 Q4 GP rate to be slightly lower than Q3, we expect to have the seasonal increase of education revenue at lower margins on certain employee related costs that are always subject to a degree of variability that we would expect could be even more pronounced during the pandemic.
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 discussed we have taken some definitive steps will is really with respect to SGN expense levels.
Response to the crisis and we'll continue with strict cost control. However, we are handing the temporary compensation reductions enacted at the beginning of the crisis in the months of November and ended all furloughs in October.
Based on the anticipated speed of the recovery, we have continued to assess our service delivery infrastructure and cost base.
In mid October we made the difficult decision to start reducing our internal staffing levels in line with expected volumes will continue to monitor conditions and take actions consistent with our scenario planning back.
Back to you now Peter Thank you Olivier even though our aggressive plans for growth have coincided with a global pandemic I'm encouraged that we are making significant progress in reinventing ourselves progress that will serve us our customers and talent when the crisis ends we have an aggressive path to pursue.
Our specialization strategy and we have organized the kelley of the future to grow and thrive.
We're making strides in our digital transformation journey building, a technology foundation to sustain growth, we're affirming our commitment to talent on assignment last quarter, introducing our five point talent promise and we continue to monitor the market for acquisition targets to bolster our inorganic growth aspirations.
This progress would not be possible without the talent and dedication of the Kelly team.
And their passion, we share for our purpose of connecting people to work in ways that enrich their lives.
And we are now looking to extend this purpose from our vantage point operating squarely in the middle of the talent supply and demand equation, we continue to see that longstanding systemic barriers in the us make it hard or even impossible for some people to secure enriching work.
As a talent company that's always considering what's next for talent. We believe we can and should do more to champion those who aren't given a fair opportunity to secure meaningful work on.
Our new platform announced last month equity at work sets, a course to up and the systemic barriers to employment and make the us labor market more equitable and accessible for more people.
Kelly is uniquely capable of being a catalyst for positive change and we believe that change will not only help Kelly place more people in great careers at great organizations, but also help their families communities and the overall economy thrive.
In closing I'd like to thank our internal teams our talent on assignment our customers our board of directors and shareholders for their support.
These are challenging times, but together, we are rising to the occasion and will emerge stronger than before.
John you can now open the call for questions.
Certainly and ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad. You mean withdraw your question at any time by repeating the ones demand.
Using the speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question you may press one than zero at this time.
One moment for our first question and then we'll go to Josh Vogel with Sidoti. Please go ahead.
Thanks, Good morning, guys hope Youre doing well.
Good morning, Josh Good morning, Josh.
Yes.
Pete Peter earlier on in your commentary talking about seeing some supply issues in lower wage jobs and assuming that.
Stimulus in unemployment level.
People getting paid in unemployment.
Now I'm, assuming that's in professional and industrial but I'm curious if you could just talk to.
Order flow with in these in relative to three months ago.
Are you seeing stronger orders coming in but you just don't have the supply and do you expect that that supply to who once.
Stimulus now that the stimulus is over.
Yes, Thanks, Josh and I hope, you're doing well too.
Yes, we're very encouraged by the order demand that we're seeing.
In professional and industrial but also in in other parts of our business.
I think it's not only the stimulus.
Dollars, but it's also.
Small and medium sized enterprises that are reluctant to really match the market.
Wage rates, particularly when you have big box.
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Companies that are paying $15 an hour if if a small and medium sized business is unwilling to match that it's a challenge to find talent.
Particularly in a.
Environment, where.
People have transportation needs child care needs.
May be reluctant to go into a workplace because of concerns about the pandemic.
I would say its a combination, particularly at the lower end of the weight scale, we don't see the same dynamic.
In our professional.
Skillsets, just maybe to add on that specific to the Kanye segments. We have seen wage inflation basically on the segment moving up we were at about four.
Last year, our Q1 of this year is a 4% increase we are now more at 6% to 7%.
Meaning that in some cases, we are successful at convincing some customers probably mainly large customers to really get more competes achieving demo of wages, which of course I mean, knowing the numbers I was saying we will resume positive for us also.
Thank you for the insights there.
Olivier you may have talked a little bit to this but I was writing down notes so I missed that.
Looking at.
Your science engineering and Tech I'm not sure. If you guys are going to call that set or or whatnot, but.
Down 14%.
It's mostly us and Canada seeing.
Some of your peers that are.
Provide services to that end market they were down more in the mid single digits. I was just wondering if you could talk to.
The difference maybe in your business.
And just talk to some pockets of strength there versus weakness that you saw in the quarter.
Yes, I mean, the we see very positive signs of improvement in the science clearly we have seen some pickup over time.
From Q1.
I would say.
Q2 was pretty resilient, but we have seen no seems moving up.
Pretty quickly.
Engineering is much more challenging on one of the reason ease oil and gas, where we still see some downside.
We start to see I keep picking up to.
Telecommunication, which is basically next and then GTL were 2019.
Acquisitions.
It is a little bit down not because of the market, but more because of some customer dynamics, I mean, namely a wrong T mobiles and.
And the mills are on that.
But I would say we start to see very good sign in term of science and to some extent.
Our technology and Josh I would just point out that our exposure or the volume of business. We have an IP is smaller by comparison to a number of.
Companies in the professional and technical space, Hence our inorganic strategy as I mentioned earlier. In addition to education also looking to bolster our portfolio if the if the right opportunity came along.
For an acquisition.
Right sure that Nick.
That makes sense.
The the customer just in Mexico is that an isolated events are you having any other negotiations with clients, whether there or elsewhere globally.
No as I said, it's really a one time event, it's a noncash site than it was a dispute that uses.
Or the sales on size yield.
He is basically want to focus on were in Mexico to make it clear.
We don't have any more relationship with this customer.
So I would Cody.
Isolated case.
That is pretty old.
And.
But we have not seen no we have not in yield curve simulate exposure. So far we have but we have a great track record with our customers as you know or.
Our our accounts receivable are.
One of our strongest assets and.
Over many many years with that this is a one off situation that.
Resulted from a.
Just a.
Extenuating Sedums circumstances, and the Mexican court system, where and when you look at our.
Balance sheet than we mention in the balance sheet and also in some disclosures the level of bad debt, we have historically Uh huh.
He is really a very unusual type of event not because we don't.
As bad debt, but small the magnitude so unique might make initiatives. This event.
Sure sure I, just one more and then I'll hop back into the queue, but just trying to get a handle on.
Cash flow.
Especially thinking out into 2021, and when we look at the balance sheet. The line item for accrued payroll related taxes that that's all for payroll taxes, and we should expect half of that to be paid at the end that 21 and the other half at the end the 22.
Yes.
When the when you see the balance sheet, you youre going to steer you to speak like nine Tim.
In the long term liabilities now it's about 70 76 million that.
That is basically mainly the deferral of the U.S. payroll tax.
Yes.
It was.
A positive moves too.
Our Q2 free cash flow for about 68 Dominion and again in Q3 feels the same type of amount.
We expect of course.
Similar amount of benefits in Q4 sales adultery is going to be probably around 110 million and 60% of each be.
Paid basically at the end of next year and the second that if at the end of 2022.
Great well, thanks, guys for taking my questions I look forward to talking soon yes. Thanks, Josh.
Next we'll go to Kevin Steinke with Barrington Research. Please go ahead.
Hey, good morning morning, Kevin Good morning.
So you referenced.
Strong new business pipelines I believe.
Maybe could you just talk about what's contributing to the strength in the pipeline as you see it.
Yes, I think.
Particularly among our large accounts, Kevin we're seeing.
Very strong demand.
And that's both in.
Our professional industrial and also in our set business as science engineering and technology and I think it's just a reflection that that those businesses are figuring out how to operate in a in a pandemic environment and.
There's some some pent up demand for the products and so.
Services that they.
That they offer our life Sciences practice for example has been resilient throughout the pandemic, but were seeing.
Nice increases in order demand there.
Distribution logistics.
But particularly it's particularly apparent among our large accounts I would add automotive where we CEO.
You know a lot of improvement.
Which is very helpful for us as well.
Okay, great and so.
Those those opportunities are actually.
Moving forward in the pipeline in this environment, it's not a situation where maybe things are in the pipeline, but they're they're a little slow to convert or just trying to get a sense as to how quickly.
Those opportunities are moving towards actual revenue generation.
I think I'd actually say among the large customers they are accelerating.
Hi, thank among small and medium size as I said, it still remains a little bit slower.
Our outsourcing consulting.
New wins have been very.
Very encouraging as well as the pipeline the decision making cycles in that space tend to be a little bit longer than pre pandemic.
But again, we're we're seeing deals being.
Being closed a number of significant ones that last quarter and the pipeline looks strong as well in the OTSG space.
Okay great.
So eluvia you watch some of the factors through some of the factors.
Behind the.
The year over year gross margin improvement I.
I don't think you.
Actually broke out kind of the basis point contribution like product mix and employee costs would.
Would you be able to provide that.
As you have in the past.
Yes, I mean, when when when you get to choose we saw our margin is about the 18.4% so 40 basis points higher than 2019 and.
And he's very helpful. Because basically is moving our GP dollar.
Decline at minus 16 persons that of minus 18 revenue I would say when you look at the 40 basis point the.
The project mix, which is which is something we have seen structurally over time.
Out of the 40 basis points is around 20.
Which is something we have seen in the past and we have been always you know showing improvement yields the yield of about 2025 basis point.
Fees and customer mix our.
I would say fees is much more than that to national where.
We have more exposure into fee business.
Customer mix is slightly negative I would say.
These factors are more or less have said, we've only related cost.
And Im pleased related close I mean.
Federal tax in the U.S. These what I would say, it's a quarter over quarter normal fluctuations, we have and I would say that the main factors you need to sing about is our stock trading improvement of I will pause it makes about 2020 something.
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Basis points.
And the other 20 I would say ease.
The result of the some pretty related cost plead tiv.
Offset partially offset by a little bit of pressure on the fees they seem not to national and the customer mix that we are mentioning whether it's on managing but those who of course some diesel. So I think what you need to sing about to ease that we have seen on track to continue to improve our value profile LG.
The margin by about 2025 basis point.
Due to these product mix as we have down for the last five years in fact, as a reminder, I want GP margin in 2014 was 16 point suite and we have seen even during this challenging environment in 2020, our margin being you know even if you exclude one time cables AG.
And employee benefit of fluctuation I am continuing to show progress and again the main drilling fluctuated rivalries a project mix I was referring to.
Okay. That's helpful. Thank you.
So I just wanted to get a sense as to.
How you think SGN a might trend.
The fourth quarter you mentioned.
Ending temporary cost or.
Temporary.
Reductions too.
Compensation and also bringing back employees from furlough you also referenced.
Some adjustments to internal staffing.
So I guess kind of against that as you know you adjusted for the customer. It is viewed in Threeq. You would you expect as you need to kind of tick up sequentially or what how would you think about yes I would.
I think the way I see these Israeli.
We are keeping an eye on the what we call a recovery ratio right I mean, how much of the European Jiechi build out we basically have said.
By basically SGN in management right. So in Q1, it was about 63% Q.
2% to 18% to 374% does that mean that basically if you look at Q3.
We have managed to have said, 74% of the developing GT through SDN in management right.
I mean, it's it's a very good way to basically protect our.
But them line and and when I look at Q4.
We see a re.
Recovery ratio probably trending around I.
I would say 50%.
Meaning that we expect basically.
To cover on through cost management about 50%.
Okay.
Put on showed pressure on our GP dollar growth in Q4.
Okay. That's great that's very helpful.
So.
With your transition to the new segment structure I know, it's kind of early days, but any initial returns or early wins from from this structure that you are seeing just within the organization or within the pipeline.
Yes, very pleased Kevin already I think the the focus.
And the combination of the.
What I referred to as the earlier as the sub scale businesses that were.
In in different segments.
We've seen some some early customer wins I think the.
The discipline and focus around the specialty that the combination of those resources.
Has produced a I'll call it a reenergized.
Organization and.
I think we're.
Frankly ahead of head of where I thought we'd be after just one quarter.
Yes, first sales, which we see and that's one of the very positive outcome of the new structure amongst those things is combining outcome base business, we stashing.
He is creating a new a dynamic and if I look at foreign sales PNM and I'm, referring to Q3 numbers so not.
And then the extremely positive environment outcome based business in Pmnine in Q3, the revenue is up by 16% to one six and.
And we have seen some acceleration.
First of all it's a very resilient business, we've said that several times, but what I was looking at the numbers. We have seen some acceleration Q suite of these dynamic and I believe that path to VTS worthy combining.
Outcome based to visit we stashing falling sales into night that is creating a seeing broader integration.
Line synergies and opportunities that I think we start to see.
Phone calls we see example.
Okay. That's helpful color.
I think you mentioned in your prepared comments that stat.
Stably established growth targets for each segment.
I don't know.
In the future you would be open to discussing those are you know.
What what your plan would be.
For maybe longer term once we get past. This crisis, you know, perhaps talking about those targets.
Kevin I going back to pre Covance I think.
In my remarks in February.
Talk about the.
Aspiration to provide more transparency into.
Growth targets for for the company that the pandemic has.
Disrupted our.
That aspiration, but we would like to continue to.
Be transparent with with our internal targets, because we think that helps inform.
How were doing and how we're tracking but it's a work in progress.
Okay, Yeah fair enough makes sense I I'll turn it over for now thanks for taking the questions Yep. Thanks, Kevin appreciate it thank you Kevin.
Next we'll go to Joe comes with Noble capital. Please go ahead.
Good morning.
Morning, Joe.
So.
Quick.
Got a little more color in terms of.
The thought process behind and sizing you mentioned you saw.
In the third quarter your Brazilian staffing operations.
Yes, so I'll, let Livia gave you the numbers Joe but.
We made the investment in Brazil.
More than.
Probably 10 years ago.
With aspirations to have that be sort of a beachhead for.
Latin America expansion.
In the intervening decade.
We've obviously changed course, and while we continue to provide.
Our outsourcing consulting solutions in Brazil to our global customers.
The staffing operation just didn't line up with where we're headed and so we decided to exit the business.
Yeah, just just to give you an idea of sizing and so on and Youre going to see that.
In.
Our owning Sweeties and also of course, our 10-Q I mean, when you get the sizes collection and Youre going to see the cashing bagged the cash proceeds net west.
It was about 1.2 million and youre going to see that on our cash flow statement.
So small right and that the PNNT impact I mean east is close to zero, meaning.
I think overall as it's called action whether that book value.
To give you an idea of the size of the business.
The revenue if last year was about 74 million.
So pretty small overall.
The year to date, 2020, and youre going to see that and.
Again on the.
10-Q, one and also in the earnings release.
Yesterday 2020 about 17 million. So it was a small business I think is clearly.
And as a state on our focused Hudson G. You might remember that over time, we have basically.
Basically divested and scale to Eagle.
And Thats useful on this is Dave on I will focus contingent.
But pretty pretty small impact overall right.
Thank you for that.
Switching gears onto the education business and understanding some of the challenges there.
You did mention you acquired some new clients in the quarters wondering if you could give a little more color detail there and also.
Given the uncertainty in that business.
Have you seen any increase in difficulty and retaining talent here.
Justin.
Teachers, saying, Hey, I got to do something and if it's not it's not.
Goals aren't going to go back to.
Normalized.
Model anytime soon I just have to find something different is that is that becoming more and more of a challenge for you in that business.
So Joe Thanks for the question and sort of reverse order or maybe in the order you asked them then the new customer acquisition is very promising given the environment, but even compared to pre pandemic environments.
Our new customer wins are up substantially and I think it. It reflects the fact the comment I made earlier that when we get to the other side of the pandemic the demand for instructors and teachers.
He is going to be is going to increase and part of that is.
The number of teachers that are leaving the profession.
And retirees, which was already the case pre pandemic, but probably will be accelerated as a result of the pandemic.
And.
With respect to the pandemic environment pretty.
Particularly among I would say.
People.
In upper.
Upper demographic in terms of age.
Many teachers are reluctant to go back into a classroom. So that has impacted our ability to some extent.
With with our historic fill rates.
Then a little bit lower due to the fact that.
That.
Substitute teacher population tends to be.
Older than than.
Other.
Disciplines, because a lot of them are retirees or had had some role in education. We have I think done a nice job in a short amount of time pivoting to recruiting a different demographic.
In.
What we call our momentum seekers.
Which are individuals who.
Macy teaching as a.
New career.
Career opportunity coming out of the pandemic and so weve.
Stood up a number of different programs to try to recruit.
From that demographic into our.
Supply base, but I think the.
The combination of the teacher shortage is coupled with what we're seeing from school districts wanting our help.
To prepare for the post pandemic environment, where we're encouraged that even though the the topline has taken quite a hit during the crisis.
Thank you for that color and one last one from me.
See you.
Seeing the headlines about new Lockdowns in Europe.
Hi, Andy get.
A little bit more detail here on how your guidance, how that's been impacting.
Your business.
How big of a monkey wrenches at throwing.
Growing at you at this point.
Well as you know Joe our exposure to Europe is.
Significantly lower than some of our some of our competitors.
And but we are seeing.
No not necessarily an immediate impact of the lockdowns, but.
Customers are clearly dealing with it and it is.
There are some early indications that companies will deal with it differently than they did in March, but theres still going to have to grapple with transportation issues.
Child care issues and the like.
So it's I think too early to tell but.
You know the particularly in countries like France, and the UK, where there yeah.
Basically reinstituted the.
Almost total total lockdowns, there's likely to be.
Sort of.
And impact, although it's hard to hard to quantify.
Okay. Thank you for taking the questions really appreciate it yeah. Thanks, Joe good to hear from you. Thank you Joe.
Ladies and gentlemen, just a quick reminder, if you do have a question. Please press one than zero.
And allowing a few moments she quickly no further questions coming in okay.
Okay. John I appreciate your help thank you everyone. Thanks to John day, well anyone yet.
Stay well yep.
Thank you and ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.