Q1 2022 Kelly Services Inc Earnings Call
Yeah.
Yeah.
[music].
Uh huh.
[music].
Mhm.
[music].
Okay.
Okay.
Okay.
[music].
Oh.
Hum.
Okay.
Okay.
Good morning, and welcome to Kelly Services first quarter earnings Conference call all parties will be on listen only until the question and answer portion of the presentation. Today's call is being recorded at the request of Kelly services.
Anyone has any objections you may disconnect at this time.
A first quarter webcast presentation is also available on <unk> website for this mornings call I would now like to turn the meeting over to your host Mr. Peter Quigley President and CEO . Please go ahead Sir.
Thank you, Steve Hello, everyone and welcome to Kelly Services first quarter Conference call with me today is Olivier T. Rowe, our Chief Financial Officer, who will walk you through our safe Harbor language, which can be found in our presentation materials. Thank you Peter and good morning, everyone. As a reminder, any comments made during this call.
Including the Q&A may include forward looking statements about our expectations for future performance.
Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call. Please.
Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance in.
In addition, during the call certain data will be discussed on a reported and on an adjusted basis discussion of items on an adjusted basis, our non-GAAP financial measures designed to give insights into certain trends in our operations.
References to organic growth in our discussion today excludes the results of our Q2 2021 acquisition of self world.
While we did complete our acquisition of Iraqi power in the first quarter, which Peter will talk more about shortly will be consolidating the operating results on the one month lag so while our balance sheet and cash flows include the initial impact of the acquisition. When you start seeing the positive P&L impact of rocket power.
In Q2.
Finally, the slide deck that we are using on today's call is available on our website and now back to you Peter Thanks Olivier.
It's been an exceptionally productive start to the year and Kelly's first quarter performance provided substantial evidence that our strategy is paying off we achieved significant year over year improvement in revenue. We grew GP in every one of our five segments. Our G. P rate reached its highest.
Will in more than 25 years, and we more than doubled our earnings from operations.
All of which point to broad based structural improvements in our business. We also restored our dividend to its pre pandemic level of seven and a half cent per share a sign of our boards confidence in Kelly's performance and strategic progress.
Our education set in OCG segment, each delivered double digit constant currency year over year top line growth, while the impact of Mexico's legislation led to an overall decline in international we saw solid revenue growth in our European operations.
And notwithstanding a modest decline in revenue P&I substantially grew its J P and saw significant growth in fees in fact fees were higher across all segments as companies continue to ramp up their hiring a full time talent.
As we approach just the second anniversary of our new operating model, we were pleased with Kellys first quarter financial results.
And early in 2022, we're excited about the progress we're making in executing our strategy. We entered the year committed to advancing our boulder more acquisitive specialty growth strategy.
In February we unwound noncore investments in APAC that provided approximately $235 million of capital and said then that we would redeploy that capital toward higher margin growth, we haven't wasted anytime as of last week, we have completed two acquisitions this year.
In March we acquired rocket power, a silicon valley startup that Diversifies and strengthens Kelly's fast growing <unk> business by targeting clients in the high tech market in.
And last week, we acquired pediatric therapeutic services or Pts our specialty firm that extends our leadership position in K 12 workforce solutions with the provision of in school services, including occupational therapy, physical therapy speech language pathologists and mental and <unk>.
Hey Bureau health services.
The other two acquisitions are in separate businesses one in OCG. The other in education, both acquisitions clearly align with our inorganic growth strategy. Both meet our goal of expanding <unk> presence in high growth high margin specialties, both offer significant opportunities for top line synergies.
And both provide clients value by connecting them quickly to the REIT specialized talent.
We were able to act decisively to acquire these highly attractive assets because of our strategic decision to monetize noncore assets in APAC that move equipped us with an unprecedented amount of capital to invest in our specialty growth strategy. As a reminder, upon completion of the APAC.
<unk> actions and considering our borrowing capacity, we had more than a $5 billion of capital capital available to pursue high margin high growth acquisitions and drive structural improvements in our business that will deliver quantitative and qualitative results.
Even after the rocket power and Pts transactions that totaled $140 million, we have ample capital to deploy and continue to carry no debt.
As we execute our growth strategy, we're also making thoughtful long term decisions about our portfolio of businesses in the first quarter. We shared that we were considering options for Kelly's Russian operations first and foremost taking steps to ensure the safety and wellbeing of our employees in there.
Region.
After careful consideration, we have decided to transition our Russian operations, we are committed to an orderly transition of our Russian operations in full compliance with international and local laws now for a closer look at the details of Kellys Q1 results I'll turn it over to Olivier. Thank you.
Peter for the first quarter of 2022 revenue totaled $1 3 billion up seven 5% from the prior year, including 150 basis points of unfavorable currency impact so revenues for the quarter were up 9% in constant currency.
Included in net increase a 310 basis points of favorable impact from our acquisition of self world as well as a 230 basis point unfavorable impact, resulting from the Q3 2021 changes in the Mexican staffing market legislation.
Why is the current situation is Ukraine has contributed to additional economic uncertainty in Europe , we did not experience any significant impact on our Q1 revenues.
As we look at first quarter revenue by segment. Our education segment continues to report significant year over year growth up 55% as a comparable to 2021 period was still impacted by Covid related disruptions.
We have continued to expand and strong demand and new customer wins, even as we work through a challenging tenant market.
Our education business has been successful in broadening the supply of talent and we have started to see meaningful improvement in our <unk>.
Right.
Our OCG segment continued to deliver year over year revenue growth with revenue up 10% over last year in the first quarter OCG delivered strong growth in <unk>, reflecting customer demand for this product as well as solid growth in the MSP product, partially offset by declines in video as a risk.
There are some customer exits.
Revenue in our professional and retail segment declined 5% year over year in the quarter.
Overall, our results in this segment continue to reflect the impact of supply chain disruptions and the challenges to fulfill customer demand in the current talent environment.
In our outcome based business, we have continued to expand so a reduction in revenue down nine 9% year over year from the contraction in demand from our call center specialty which more than offset growth in other outcome based specialties.
Revenue from our staffing product declined three 5% on lower hours volume, which has been partially offset by higher bill rates, resulting from the upward pressure on wages in the current tenant market.
Revenue in our international segment declined 7% on a nominal currency basis and was down 1% on a constant currency basis. The year over year revenue growth trend was negatively impacted by results in Mexico due to the impact of the legislation enacted in Q3 of 2021 revenue.
Growth in the EMEA region was positive up 9% in constant currency.
And finally, Lisa said segment, while the results from our acquisition of so called as reported revenue was up 25% on a reported basis and 10% on an organic basis.
Organic revenue trends in set of continued to vary by efficiency and track visit customers served recovering demand in telecommunications continued demand for outcome based solutions remains strong and I will take <unk> specialty showed double digit growth and as we pass the one year anniversary of the software like <unk>.
<unk> at the end of the quarter. So called has continued its trajectory of double digit top line growth and delivered on the significant revenue growth we expected when we acquired the business.
Across all segments, we have continued to meet to meet clients' changing tenant needs, including placing talent directly into employment with our customers' permanent placement fees were up 69% year over year in constant currency and also up 26% sequentially. We continued to see significant increase.
And placement activity set international and education, which includes Greenwood Nashville.
<unk> also had significant growth up more than 100% year over year that does include about $2 million from conversion fees from a customer that decided to change its labor acquisition strategy from the heavy contingent staffing to full time hiring I.
Shambo details later as it has a bearing on our outlook.
Overall gross profit was up 21, 2% on a reported basis or 22, 6% in constant currency <unk>.
Excluding so foil GP increased 16, 2% on an organic constant currency basis. Our gross proceeds trade was 19, 9% compared to 17, 7% in the first quarter of last year, a 220 basis point improvement year over year GP rate improvement.
Driven by a combination of values factors.
Higher Perm fees contributed 70 basis points and we got another 40 basis points as a result of the accretion of so fault, which generates higher margins. These factors were coupled with lower employee related cost of 60 basis points and favorable business mix for 50 basis points.
Included in the 220 basis point GP rate improvement for the quarter, we did benefit from the onetime convert conversion fee with a large customer as I previously mentioned and we had a favorable adjustment in prior year yield workers' compensation cost in the first quarter, so about 40 basis points.
Of our GP rate improvement of 220 basis point came from these factors.
SG&A expenses were up 16% year over year on a reported basis 17, 2% on a constant currency basis.
<unk> for the first quarter of 2022 include the intangible amortization and other operating expenses of surf World, which added 500 basis points year over year expense growth rate.
So on an organic basis expense grew by 12, 1% year over year in constant currency.
The majority of the increase in SG&A reflects higher compensation related expenses for our full time talent. We have added head count in line with revenue growth and providing meaningful increases in performance based incentive compensation expenses for our client facing teams as well as smaller adjustment to base pay.
This is increasing as these increases reflect the need to attract and retain talent in the current environment, even with the increase in the cost of doing business. We produce additional operating leverage as GP growth largely exceeded expense growth for the quarter.
Our earnings from operations for the first quarter with $23 4 million more than double the $10 6 million earned in Q1 of 2021.
Included in our Q1 results are the operating earnings of surf World for $3 5 million inclusive of intangible asset amortization.
Or is it not included in the earnings for operations Kelly owning before taxes also include the impact of our investment in and Q1 sale of the personal holdings common shares.
Up to the date of the sale, we haven't recognized noncash gains and losses related to changes in the fair market value of the investment each quarter as.
As we discussed in the fourth quarter earnings call in February and disclosed in our 2021 Form 10-K in the first quarter, we recognized a 52 million pretax loss on our peso common stock related to the market value of the shares on the date of the sale compared to the end of Q4 2021, and then the additional cost.
15 million related to the transaction, including fees and expenses. This compares to a 30 million pretax noncash noncash gain in the pilot although reported below earnings from operations for the first quarter of 2022, we have realized a 20 million noncash foreign exchange loss related to the subs.
Currently liquidation of our <unk> subsidiary following the sale of the peso shares the impact of the sale of most of our interest in the <unk> joint venture was not significant and in the other income and expense we had one additional impact of the personal transactions, we recognized a $5 5 million.
Foreign exchange gain related to cash held in Japan. After the sale of the peso shelf until the wholesale or the cash to the U S. At the end of the quarter.
Non withstanding all these non cash charges the APAC cause actions favorably impacted our cash flow for the quarter and created 235 million of additional liquidity.
Income tax benefit for the first quarter was 13 million compared with our 2021 income tax expense of $10 5 million, our effective tax rate for the quarter was 21, 2%.
And finally reported loss per share for the first quarter of 2022 was $1.23 per share compared to earnings of 64 cents per share in 2021 the.
The decrease in earnings per share resulted from the impact of the personal chef chef transactions and the related liquidation of kidney Japan net of tax.
Adjusting for the peso transactions and related impact Q1, 2022, EPS was <unk> 46 cents compared to adjusted EPS of <unk> 12 per share in Q1 of 2021, so up almost 300 persons.
Now moving to the balance sheet at the end of the quarter.
Sale of most of our investment in the <unk> joint venture generated cash proceeds of 140 million net of taxes payable the sale of our investment in the common share of personal holdings generated approximately $145 million net of transaction cost and the expected income taxes do we expect.
Good to pays a majority of the taxes related to this collection in Q2 of 2022 and to complete the unwinding of our crush holding agreement arrangement we special.
We paid 27 million to repurchase the class a and B common shares owned by personal holdings in Q1, Wally This transaction will generate approximately 235 million of cash after the cash payment of taxes in Q2 of 2022.
In addition, the repurchase of common shares allowed us to reduce our shares outstanding by 4% without impacting the share liquidity.
We have already started to utilize these get tend to accelerate our strategic transformation completed the acquisition of rocket power, which is included in our Q1 balance sheet and cash flows and we recently completed the acquisition of Pts in early Q2.
At the end of Q1 cash totaled $230 million compared to $279 million a year ago, we had no debt consistent with debt nearly zero at the end of the first quarter of 2021.
With our 300 million in available capacity on our credit facilities and our cash balances. After the Q2 payment of the APAC transaction taxes and the acquisition of Pts will continue to have humble capital available to deploy.
At the end of Q1 accounts receivable was $1 5 billion and increased 19% year over year, reflecting our year over year increase in revenue as well as an increase in yes.
DSO was 62 days, an increase of two days of a year end 2021, and the first quarter of 2021.
For the first quarter of 2022, we used $108 million of free cash flow, reflecting increasing investment in working capital.
Cash flows in 2022 also includes approximately $29 million of cash outflows used to repay federal payroll tax balances, which were deferred in 2022 under the cares Act.
In addition to the 29 million paid in Q1 2022, we expect to pay the remaining balance of $58 million on January <unk> of 2020 suite and with all of that now back to you Peter.
Thanks, Thanks for those details Olivier.
We're encouraged by our momentum, leaving the first quarter and the increased demand healthy sales pipelines and new customer wins, we're seeing we expect each of our specialty business units to deliver strategic contributions to this year's performance.
In P&I, the well publicized dynamics of the current labor environment require Kelly and our clients to adjust the ways in which we connect with high quality talent and we are responding with speed and agility.
As Olivier mentioned, we are changing how we work with one of our large P&I staffing clients shifting to a direct hire model to better meet their needs. We are also making P&I as local teams more agile in January we made adjustments to the P&I organization to align with our local markets, enabling us to deliver service.
It's through the channel that works best for local talent and clients whether that be through technology, Our branch network or an onsite arrangement now.
Notwithstanding ongoing talent shortages in supply chain disruptions, we expect P&I, new local alignment coupled with the deployment of technology investments. We've described on previous calls we will drive improved productivity throughout the second half of the year.
In our <unk> segment, we said, we wanted to see meaningful returns on our inorganic and organic investments are double digit growth with and without soft world in the first quarter delivered on that expectation and we expect meaningful contributions from <unk> for the remainder of 2022 and beyond.
In education, we committed to capture K 12 growth this year improve our fill rates and further expand our adjacencies and we achieved that growth in Q1 and started Q2 with our acquisition of Pts, which creates yet another high margin high demand specialty within the education segment that can quickly drive.
Synergies across our market, leading client portfolio. We also expect to see improving fill rates in our K 12 staffing business throughout 2022.
C. J, we said, we would invest in our fast growing <unk> business and that's precisely what we did in the first quarter with the acquisition of rocket power and innovative <unk> leader in the high margin high Tech specialty.
In addition, many of the sizeable MSP wins from 2021 will begin to produce J P. Throughout 2022.
And in our International segment, we said, we expected continued growth in regional and local specialties. Our EMEA operations delivered solid top line growth in the first quarter, Notwithstanding Mexico and our transition from Russia, We expect our international segment to continue delivering nice revenue growth for the remainder of.
The year these growth strategies in our five business segments together with our aggressive and focused use of capital are designed to drive value for Kelly stakeholders in 2022 and beyond to share more about what we expect from the year ahead I'll now welcome back Olivier.
Thank you Peter as we reflect on the first quarter results and look ahead, we expect a continuation of many of the macro trends. We are currently seeing.
A steady increase in demand for talent, coupled with the continuation of balanced supply mismatch that puts pressure on our ability to fulfill that demand. We expect that recent trends in inflation and the airport pressure on wages at all skill levels will continue into the second half of 2022 and that's expected.
Increases in net interest rates may put pressure on certain industries as cost consumers and business adapt.
Specific to kill these are two unusual events that impact our outlook versus our intention to transition our operations in the Russia market. This we use 2022 revenues in our international segment and for the telco lead by about 200 basis points second is a change on.
In one of our lapsed customers label strategy mentioned earlier, essentially one of our large staffing customers decided to address today's talent challenges and work with scheduled differently by changing its heavy use of contingent labor to one that instead, we rely on hiring direct talent directly as <unk>.
Time employees.
<unk> P&I has secured a number of loud onsite positions from compete during the quarter. They will not be enough in Q2 to fully offset the top line impact of this change in these one customer's business.
Even with those headwinds we continue to expect revenue to be up organically four five to five 5% on a full year basis in nominal currency.
Of course, excluding the impact of our acquisition of rocket Bauer and Pts.
Stated another way, we are increasing our outlook for our non Russian business by approximately 200 basis points.
And finally, we expect an additional 150 basis points of Shneur organic revenue growth from our recent acquisitions of rocket power in the OCG segment and PTH in the education segment. So all in we expect revenue growth of 6% to 7% for the full year.
Our outlook reflects no material changes in the COVID-19 related impact of significant deterioration in macroeconomic conditions as we have mentioned on prior calls and to national its revenue growth rate will continue to be negatively impacted by the Mexico legislation change we until we anniversary the.
Impacting the second half of 2022.
While we arent, providing quarterly guidance, we do expect that the Q2 organic revenue growth rate may be lower than our full year expectation driven by many of the factors I've mentioned, but then we are expecting increasing revenue growth rates as we move into the second half of the year.
We expect our GP rate to be about 20%.
Thats, a 130 basis points improvement from the $18 seven persons we reported for 2021 on a full year basis and includes 20 basis points from our Q1 of our recent 2022 acquisitions.
Our continued structural improvement in GP rate expectations reflect sustained growth in our fee based business a continued shift in mix to higher margin specialty.
And a more gradual pace of growth in our lower margin specialties.
We expect SG&A expenses to be up 6% to 7% on an adjusted organic basis, we continued to take steps to drive meaningful cost savings and calibrate our expense, including additional action taken in Q1. However, there is continuing pressure to address talent attraction and retention in the <unk>.
Current market.
We are focused on evaluating of initiatives in that space and part of the equation is providing opportunities for higher incentive compensation for our fulltime tenant. In addition, we'll continue to focus on technology initiatives that enhance the experience of talents we place on that.
England.
We remain committed to improving productivity on all of our business units and ensuring that investments in our talent produces the workforce necessary for future growth. We also.
We expect that our two recent acquisitions will add approximately 200 basis points.
A phase G&A expense growth, including the impact of intangible amortization expense.
As we execute on our organic and inorganic strategy, we are utilizing our adjusted EBITDA and adjusted EBITDA margin as additional measures of our progress in delivering profitable growth based on our outlook for 2022, we expect adjusted organic EBITDA margin to improve.
70 to 90 basis points from the one 7% adjusted EBITDA margin delivered in 2021.
And finally, we expect an effective income tax rate in the high teens, which includes the impact of the work opportunity tax credit, which has been enacted through 2025 and with that back to you Peter.
Thank you Olivier we entered 2022 with energy and optimism and signaled that 2022 would be a year of bold progress for Kelly.
Kelly is leaning into market opportunities with a well defined and well capitalized specialization strategy ready to use the resources at our disposal to accelerate our progress and increased value to our shareholders.
We made a commitment to bold inorganic growth and we started 2022 by providing unprecedented capital to enable that growth the effectiveness with which we started putting our capital to work signals a newly confident Kelly one that has chosen our specialties wisely pursues high margin growth, where we know we can win.
And acts decisively to drive value for shareholders, we're thrilled to welcome rocket power and Pts to the Kelly team and we look forward to our shared success.
At the same time, we're delivering on our promise to accelerate high quality organic growth driving significant improvement in GP, while simultaneously investing in the talent and technology needed to bring innovative Kelly products to market with speed and impact as we continue to execute against our specialty strategy in 2000.
22, Kelly will create value for all of our stakeholders talent clients suppliers and shareholders alike.
Steve you can now open the call to questions.
Ladies and gentlemen, we will now begin the question and answer session of today's conference. If you wish to ask a question. Please press. The one followed by the zero on your Touchtone phone, you'll hear tone, indicating that took place yourself in Q and all questions will be pulled in the order. They are received you may remove yourself at any time by once again the pricing the one followed.
By the zero and if you're using a speakerphone. Please pick up your handset before pressing the keys one moment. Please.
Our first question will come from the line of Kevin Steinke of Barrington Research. Please go ahead.
Yeah.
Hey, good morning, congratulations on the solid start to the year.
Thank you Kevin Good morning, good morning, Kevin.
Good morning.
Wanted to start off by asking about.
Rocket power.
It seems like a really nice acquisition, but can you just give us a sense.
As to what they bring to Kelly.
It.
As additive to what you were doing before and recruitment process outsourcing.
Yes, thanks, Kevin.
We're really excited about the rocket power acquisition, it's another.
High quality high margin high growth.
<unk> that we think will add considerably to our existing.
Existing Kelly RPI practice, which is also experiencing.
Significant growth and demand.
Rocket power participates in.
Hi Tech industry that.
Kelly has not participated significantly in so it broadens the customer base, there was literally no overlap and our customers between Kelly and rocket power.
And they have a delivery model that includes leveraging resources in Latin America that we think.
Can be deployed in our legacy Kelly RPM practice to the advantage of our customers and also produce some meaningful financial returns.
Maybe I can.
I can add few few numbers, if you want to to tell you a little bit more.
About what we call pro forma full year expectations. So you know that's revenue of rocket power in 2021 was about $28 million, if you're seeing about our expectations and again full yield not basically the pro rata temporary is that we are going to recognize based on the acquisition date.
We expect revenue in the region of close to $60 million for the year. So as you compare that with $28 million in 2021 that would say very high growth and we are already seeing that in the 2021 versus 2020 GP rate in the region of 44% gross margin and very very high and <unk>.
Margin in the region of 20 person so already a high growth high value engine as Peter was describing during his prepared remarks.
Great. Thank you that's very helpful.
Okay.
A sense as to how.
How quickly you can.
Capitalize on revenue synergies, both from rocket power as well as your.
Our latest acquisition pediatric therapeutics Servicers in the education space.
Yes <unk>.
Priority Kevin.
Top line synergies as one is one of the parts of the investment thesis for both both of the rock and power in Pts.
And we think that there is opportunity as I said in the case of rock and power to.
Leverage their exposure in the high Tech.
Market, which we don't have a lot of exposure to.
Bring their delivery.
With our other other customers.
In the case of PPS.
An adjacency that we've been.
Looking for a high quality <unk>.
<unk> to add to the K 12 portfolio.
We believe we found it in Pts we have.
Uh huh.
School districts that are in need of the therapies that Pts provides.
And it's just a natural.
Complement to our leading K 12 core business to be able to support our school districts with the therapies that PPS provides and we believe it's a platform that we can scale.
Okay.
Great.
Just wanted to ask you about the education segment.
Really strong results at least relative to my expectations.
And we had been talking last quarter about labor shortages in that market.
You noted, a meaning and meaningful improvement in fill rates and your efforts to attract talent or gaining traction. So can you just talk a little bit about.
The education segment and the momentum there and.
Your ability to.
Attract more talent.
Yes, we're really encouraged by what we saw in Q1.
And leave in Q1 by the.
Improvement in fill rates that we talked about last quarter.
We're in some of the regions that Kelly education.
Participates in work.
At or.
Even exceeding pre pandemic levels in terms of fill rates.
There are some geographies that are still behind but all of them are showing levels of improvement as more individuals come off the sidelines.
Health care concerns are lessened and schools are open and.
No longer requiring a.
Vaccines and masking. So we're encouraged we're also encouraged by the pipeline of new wins.
<unk> of large school districts, we've added to the portfolio.
Even.
Even this year and as we look to the 'twenty two 'twenty three school year, we're encouraged by the combination of improved fill rates and increased demand.
And I would add on that debt.
Time of attraction, we see wage inflation continuing as you look at Q1 in our education wage inflation was about 14%. One four was of course the same impact on the bill rate. So thats good for kidney, but that <unk> seem to attract tenants.
And as Olivier said pay rates are higher and we're seeing an inflow of.
Talent from the healthcare sector as.
The COVID-19 induced stress individuals' are.
Migrating to the education space, which adds to the.
Labor pool for school districts, which is very positive for Kelly education.
Alright, yes, that's an interesting dynamic.
You called out there okay great.
So.
You talked about the shift to a direct hire model with your large tier.
My customer and it sounds like.
Opening.
Other places across the market I mean, when you talk to your customers.
Do you think this reflects oh.
Fairly permanent shift in their approach to hiring errors.
Racking talent or.
Do you think they might eventually revert back to the old model.
What's your sense on this.
The market trend and the sustainability of it.
Yes, I don't think I wouldn't call. It a trend Kevin I think there are a few isolated instances where customers have.
Decided to deal with the talent shortage by moving from a contingent workers strategy to.
Permanent.
Hiring strategy, but.
At the same time the demand for contingent workers support.
Is at an all time high according to the American Staffing Association numbers in terms of the penetration rate and customers are.
Due to the Covid.
Situation they have come to realize the benefits to their business models of the flexibility that contingent labor provides so it would be hard to predict whether these one or two customers are going to revert back to.
Using contingent workers, but we don't see it as a trend that's going to have a long term impact on our business.
Okay. Good that's helpful. Just a couple more here.
You noted the higher SG&A expenses related to higher compensation.
To attract and retain.
Your own workforce.
Do you feel like you're in a good position now with those compensation increases too.
Attract and retain the talent you need to fulfill all the customer demand youre seeing.
Well, it's a it's a competitive labor market as you know Kevin then we're addressing some of that through increased compensation, which is important.
Recognize our employees contributions to the success of our business.
But it's not the only.
It's not the only answer we need to provide a compelling value proposition to our employees and provide a workforce.
Workplace that is.
Flexible that is inclusive and welcoming and we have <unk>.
<unk> underway to ensure that that's the case at Kelly, but it's a competitive environment and.
We're doing everything we can to ensure that we have the talent and the capabilities, we need to deliver on our strategy.
Okay. Thanks, just lastly.
As we think about the gross margin as we move throughout the year should we think about that being pretty consistent from quarter to quarter. You were 19 nine in the first quarter and 20 for the full year. So is that.
Relatively.
Relatively consistent or anything we should think about.
Just the second quarter the quarters beyond.
No I would say we are confident on the on the 2020 plus percent for the year, including our two recent acquisitions.
We have a I would say solid set of.
The dynamics that we see as a fee business that is teed up 68%.
The mix that that has been useful for yield spread improvement, especially in our insert where we start to see now our beta rates moving at the higher pace than.
Our pay rate.
So we see all of those dynamics continuing as we have seen for.
Quite to widen now I was just recently looking at.
Our gross margin dedicated in 2018, we're at 17 six right. So and we have been able to improve our gross margin every single year since 2015, including in 2020, where basically the market conditions were extremely challenging so I would say, it's a long time.
So show that improvement that we expect to continue to see.
This year, but also beyond this year.
Yeah.
Yeah.
Great. Thank you for taking the questions.
Thanks, Kevin Thanksgiving.
If there are any additional questions. Please press the one followed by the zero at this time. Our next question will come from the line of Joe Gomes of Noble capital. Please go ahead.
Yeah.
Good morning, Thanks for taking the question Hey, good morning, Johnny Chou.
First one is it.
You've noted a little bit here.
On the in your remarks, if you look at the P&I business in <unk>.
International business, both had lower revenues, but increased GP dollars and rates I believe for ball I was just wondering if you could give us a little more color as to what is going on there that's allowing you to increase the GP rate even in the face of some lower revenues in those two segments.
Well the international segment was the headwind there is Mexico, primarily in EMEA.
Increase in revenue, 9% so.
Good growth there in both cases, though Joe the focus.
Of our <unk>.
Staffing businesses to improve the quality of the.
Business that we're acquiring and that allows us to.
As I said during the last earnings call to focus on.
Higher margin business in both of those segments. In addition in the case of P&I.
Higher margin outcome based solutions that we're offering.
To our customers in the new operating model, where we're able to offer outcome.
Outcome based business process out.
Business process outsourcing and.
Our Sps solution, we're able to offer those to all of our P&I customers and those solutions command higher margin.
They're growing at a.
At a good clip so that contributes to the improved GP performance in P&I.
Okay. Thanks for that insight.
Pardon me.
Okay.
Great movement here, an improvement on GP rate.
You've mentioned over the years our.
Hopefully this year will be at a 20% rate I mean, how much more upside do you think there is.
And that is it just continuing to get more like the saw and a software type of acquisition.
Other other things that you can be leveraged you can be pulling on to continue to grow that GP rate.
Well, Joe there are.
Our strategy is both organic and inorganic and we believe in both cases, we can improve.
Our GP rate and I think thats, what youre seeing it's a combination of the addition of high quality high growth.
Properties like software World like Pts like rocket power.
But also.
Improving the.
The solutions that we provide in our legacy Kelly businesses that command higher margins or outcome based solutions.
And a higher margin and we believe that there is upside.
Really all of our business segments too.
Improve our our GP rate if you take education as an example.
<unk> been relatively stable and Kelly education, but the addition of Pts which commands much higher margins.
You can have a meaningful impact on the <unk>.
The GP rate in Kelly education, as well as Kelly overall.
Yes, so far when you look back at all.
When you do so.
When you look back from let's say 2018.
Our average GP rate improvement.
Joe was about.
40% to 50 basis points.
It was about two so that.
That is basically purely organic and we still have a lot of opportunities even organically as Peter was describing.
Yeah.
Thanks Olivier for that.
And you talked a little bit.
Your own full time.
Talent.
Some of the things that Youre doing there.
Oh and your in your presentation, you talked about addressing the talent supply to meet customer demand.
<unk>.
Just wondering outside obviously.
Kris pay what other types of things.
Are you being able to offer to.
To help try and attract more talent.
For you so that you can meet your customer's supply demand.
Well as mentioned, Joe it's about the value proposition.
Today's workers want a.
<unk> flexible.
Environment, where they can adjust their work.
Their work requirements around there.
Other aspects of their life, we have.
A program that we started before the pandemic five years ago called Kelly anywhere, which provides a level of flexibility that we think is very attractive to today's workers. So combined with.
That as well as.
Improving our wellness and benefits plans.
Creating affinity groups so individuals of all.
Demographics will welcome in the workplace.
That that's a potent combination to attract people as well as telling this story of.
Our noble purpose of connecting people to work in ways that enrich their lives.
Today's workers want to feel a sense of purpose.
We believe that Kelly offers that combination that they can.
The excited about coming to work every day in.
In support of the great companies that we work with and the great talent that we work with.
Yeah.
Okay and one last for me if I may.
I know you.
Thank you.
We repurchased the shares held by <unk> you Jeff.
<unk> raised the dividend.
But given where what's happening in the market today, where the stock has been trading here recently.
Would be going back and buying some more shares.
Be of interest to you or the board in this environment or would you rather prefer to kind of hold on to that dry power powder.
For potential <unk>.
Acquisitions.
Well were reviewing all of the options with respect to.
Capital allocation, Joe we do that regularly with the board, whether it's dividends or.
The possibility of share repurchase we do believe that the best use of the.
The majority of our capital is going to be to acquire.
High quality properties like we've demonstrated with software world and rocket power in Pts.
But up.
Nothing's off the table and more regularly considering how to create value for our shareholders.
That's it for me thank you.
Joe.
Yeah.
There are no further questions in queue at this time. Please continue Mr quickly.
Steve if there are no further questions I think we can.
We can call it a day.
Ladies and gentlemen, I would like to thank you for your participation in todays teleconference call, which will be available for replay from today at 11 30, a M until June 12 midnight of that day, you may access a replay by dialing 86620 step at 1041 and entering the access code.
6759661, and if you're dialing from an international location. Please use the dial in number of four zero to 97008 or seven and the same access code of 6759661 once again, we'd like to thank you for your participation.
In todays teleconference call and thank you for using our service have a wonderful day you may now disconnect one moment. Please.
Yeah.
Yeah.
Okay.
Okay.
Yeah.
Yeah.
Yeah.
Yeah.
Okay.
Yeah.
Yeah.
Okay.
Okay.
The conference recording has stopped.
Yeah.
We're sorry your conferences ending now please hang up.