Q4 2022 Kelly Services Inc Earnings Call
Yeah.
Good morning, and welcome to Kelly services fourth quarter full year 2022 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. If anyone has any objections you may disconnect at this time.
Our fourth quarter webcast presentation is also available on Kelly's website. This morning.
I would now like to turn the meeting over to your host Mr. Peter Quigley President and CEO . Please go ahead.
Thank you Qi, Li Hello, everyone and welcome to Kelly's fourth 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. Let me remind us that any comments made during these calls including the Q&A may include forward looking statements about our expectations.
<unk> for future performance actual results could differ materially from those suggested but yeah, we'll commence and we have no obligation to update the statements made on this is cool.
Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, during the call seven data will be discussed on a reported and on an adjusted basis discussion of items on an adjusted basis are non-GAAP financial.
What are the measures designed to give insight into certain trends you know operations.
References to organic growth in our discussion today excludes the results of our 2022 acquisitions look at power and Pts as well as the impact of the sale of our Russian operations. We have also provided a slide deck that we are using on today's call. Although a website and now back to you Peter.
Thanks, Olivier I'll start by sharing my perspective on the current economic and labor market dynamics to provide some context for Kelly's full year and fourth quarter results.
The mixed pattern of deceleration we saw in the third quarter persisted through the balance of the year amid heightened economic uncertainty in the high Tech sector layoffs continued as more firms moved to bring costs in line with slowing growth following a long period of expansion and aggressive hiring.
Workforce reductions spread to the financial services sector amid market volatility and decreased consumer spending driven by rising interest rates.
Manufacturers also cut jobs as economic activity in this sector began to contract after 29 consecutive months of growth.
In the other sectors not broadly impacted by layoffs, a growing number of employers scaled back or slowed hiring in anticipation of greater headwinds in 2023.
Notwithstanding these dynamics the labor market remains tight the economy continued to add jobs in the fourth quarter, albeit at a slightly slower pace to end the year.
Services industries health care and retail accounted for the bulk of the gains as employers in these sectors continue to recover from the pandemic.
Unemployment remains at historically low levels.
I can see is our steady and the labor force participation rate is relatively unchanged despite elevated wage growth.
And that result job openings continue to be difficult to fill in most sectors.
Even as economic headwinds emerged in the second half of the year Kelly remained laser focused on executing our specialty strategy achieving solid growth in 2022.
We increased revenue year over year, driven by topline gains in our set education and OCG businesses and rapid growth in our outcome based solutions.
Every business unit expanded its gross profit margin lift in Kelly's gross profit margin above 20% for the first time in more than 25 years, a significant milestone in our pursuit of higher margin higher value business.
And we improved adjusted earnings from operations by 30% year over year, demonstrating our ability to effectively translate gross margin expansion to earnings growth.
Together these achievements signal that our specialty strategy is paying off.
2022 also marked a year of bold action as we accelerated our strategic transformation streamlined our portfolio and creating additional value for all our stakeholders.
We ended the cross ownership arrangement between Kelly and Pearsall and reduced our ownership interests in our personnel are Kelly joint venture unlocking $235 million of liquidity, while repurchasing our common shares held by personal for $27 million in the process.
We redeployed a portion of the net proceeds from those transactions to advance our inorganic growth strategy, while preserving the remaining capital to pursue additional high margin high growth acquisitions in the future.
We monetize noncore real estate holdings unlocking more capital to invest in growth initiatives and we acted decisively to transfer ownership of our Russian operations to a Russian company.
And finally, we increased our dividend to its pre pandemic level and authorized a $50 million repurchase of outstanding class a common shares.
These moves are indicative of a new Kelly Kelly that acts with urgency in pursuit of profitable growth.
Yet the year wasn't without its challenges the impact of heightened economic uncertainty I mentioned earlier became more visible in parts of kellys portfolio, especially in the fourth quarter.
The combination of mixed deceleration and labor market tightness contributed to lower revenue in the quarter from our staffing products in P&I and set. This contrast with growth in our higher margin outcome based solutions in these segments, which demonstrated greater resilience and performed well.
Among other areas of resilience is our education segment, which continued to grow at a fast pace across all specialties on a year over year basis. We remain pleased with the performance of Greenwood Asher and Pts our recent acquisition in the pediatric therapeutic space.
These higher margin businesses, both achieved revenue growth this quarter on increased demand.
In OCG ongoing headwinds in the high Tech sector continued to impact demand for the services of rocket power. Our recent acquisition in the ERP space.
This resulted in a goodwill impairment charge in the fourth quarter about what you Olivier will provide more details now.
Notwithstanding these challenges we made measurable progress toward realizing more expected value from this acquisition were accelerating integration efforts to leverage the combined strength of Kelly's customer relationships and rocket powers delivery model, where diversity Joseph diversifying rocket powers customer base with a new.
Business outside the high tech sector and to help mitigate top line declines in the near term, we're taking steps to adjust SG&A.
Beyond racket power, we're stepping up our focus on SG&A management across Kelly in response to a decrease in leverage that we experienced in the fourth quarter. We took swift action to manage costs in the near term temporarily pausing hiring and reducing travel.
The macro economic situation involves evolves in 2023, we're committed to ensuring our cost base reflects our operating environment, our strategic priorities and our performance.
Longer term, we are reviewing our growth and efficiency objectives as we approach the three year anniversary of our operating model. This includes continuing our work to assign expenses as it as precisely as possible to each of our five business segments, providing us with the visibility necessary to convert.
More gross profit into earnings for more details on Kelly's Q4 performance and our full year results I'll turn the call over to Olivier. Thank you Peter before I dig deeper into our Q4 results, which as Peter mentioned I've been impacted by economic headwinds some comments on our performance.
First.
Fully revenue was up one 1% on a reported basis and sweet 0.2% on a constant currency basis.
This reflects excellent revenue growth in our education business unit as we capture additional growth opportunities and effectively manage talent supply challenges.
C. G N international excluding Russia also delivered solid constant currency revenue growth consistent with the actions taken in alignment with our specialty strategy GP rate improved 170 basis points on a year over year basis.
The Ohio GP rate combined with increasing revenue resulted in a 12, 1% increase in gross margin dollar in constant currency and then well GPO eight improved in all abuse.
Finally, excluding the impairment charges were able to convert the higher gross profit dollars to improve.
As Peter mentioned.
Earnings from operations were up 30% and adjusted EBITDA margin was two 1% up 40 basis points from a year ago.
Now looking at the fourth quarter of 2022, and multi day's revenue totaled $1 2 billion down one 3% from the from the Pi year over year, including 200 basis points of unfavorable currency impact.
Revenues were up <unk>, 7% on a constant currency basis.
Included in that increase of a 150 basis points of favorable impact from our acquisitions of rocket power in TTS as well as a 270 basis points unfavorable impact, resulting from the sale of our Russian operations. So our revenue was up one.
One 9% all on a non-GAAP organic constant currency basis.
As we look at revenue in the first quarter by segment.
<unk> segment revenue was up one 7% demand has continued to be strong for rail with our telecommunication specialty and many of our outcome based solutions.
Growth in the other specialties was negatively impacted in the quarter, but as the current economic headwinds.
In our education segment year over year revenue growth continues to be strong up 53% as reported and 43% on an organic basis or excluding the impact of our may acquisition of Dts.
Our revenue growth in the education business reflects robust demand from existing customers and new wins in 2022.
This level of growth is consistent with Q1 to Q3 trends and demonstrates the really the resiliency of the education business, even as the broader economic trends softened.
<unk> fees, primarily higher education, the executive search with Green Dude Asher were up 67 persons.
Our OCG segment delivered another quarter of year over year revenue growth with revenue up 3.5% overlap.
OCG results include the impact of our March acquisition of Ruckus power.
<unk> constant currency revenues were flat declines in GPU upside the continued growth in our high margin MSP and <unk> projects I will provide more context on this situation. We look at power later in my comments.
Revenue in our professional and then just real segment declined 11, 8% in the quarter.
Revenue from our staffing products declined 17% in the quarter.
Celebration from Q3, as he couldnt make headwinds as Easter equally more impact on the segment early in the cycle.
The segment's outcome based business delivered solid revenue growth of 9% and even with continued contraction in the yield of a yield demand from our call center specialty growth in other outcome based specialties west home.
Revenue in our international segment declined 16% on a reported basis and was down 8% on a constant currency basis.
Excluding the impact of the sale of our Russian operations living you improved by 5% on an organic constant currency basis permanent placement fees were also resilient and we're up 72% on an organic basis.
Overall gross profit was up one 7% as reported or up three.
<unk>, 7% on a constant currency basis, our gross profit rate was 23% compared to 19, 7% in the first quarter of the pie you on your full year over year improvement of 60 basis points.
The primary driver continued to be favorable organic business mix, which contributed approximately 100 basis points for the quarter.
Our 2022 acquisitions also positively impacting impacted our total GP rate by about 20 basis points.
As both Pts and rocket power will generate higher margins than kidneys average. These improvements were partially offset by higher employee related costs and also lower perm fees.
I'll set OCG and international businesses delivered the most significant year over year improvement in business mix and improved year over year G D rates.
G&A expenses were up two 4% year over year on a reported basis and up 4% on a constant currency basis included in our 2021 results are approximately 4 million in restructuring charges.
And I walked 2022 results are impacted by the intangible amortization and other expenses of our recent acquisitions as well as a favorable impact of the sale of our Russian operations. So on an organic constant currency basis first quarter 2020, do expenses grew by four point sweepers.
Year over year.
This is a reduction in the SG&A growth trends from earlier this year and it doesn't reflect the continued focus on cost management will continue to take steps to ensure that we are prepared for uncertain economic conditions, while continuing to fund investments in technology improvements that will position us for long term success.
During the fourth quarter, we did we bought an additional $10 3 million goodwill impairment charge related to rugged power.
As we have discussed previously rocket power provides after yourself she's primary to customers in the high tech vertical or.
Beginning earlier this year and accelerating in Q4, there has been a reduction in hiring activity in December three vertical, which we now believe will be deeper and will last through much of 2020 sweep.
The impairment charge is a noncash item and does not impact our plans for rocket power, including as Peter mentioned, our focus on customer diversification and opportunities for synergies, which will allow us to maximize the value of our investment in the future.
Our reported earnings from operations in the fourth quarter were $4 6 million compared to $15 3 million in Q4 of 2021.
Included in Q4 of 2022 is a goodwill impairment challenge and in Q4 'twenty 'twenty. One is approximately 4 million of restructuring charges and so on and then there's just and then adjusted basis Q4, 'twenty to 2022 earnings from operation of 14 million declined 28%.
Year over year.
As Peter mentioned, we monetized, our investment holdings and most of the pursuit kidney APAC joint venture in the first quarter of 2022, so as it will be no further P&L impact from those investments, but the comparable period year will include gains and losses related to those investments until we anniversary.
A series of collections.
In the fourth quarter of 2021, we recognized a 50 million pre tax gain on our personal holdings common stock also also reported below earnings from operations in the fourth quarter of 2021, we realized a 19 million one time gain related to cash proceeds received from the settlement of a claim.
On the representation and warranties insurance boutiques, especially in connection with the acquisition of so forth.
Income tax expense for the fourth quarter was $5 2 million compared with our 2021 income tax expense of $16 1 million.
I always say keeps tax rate for the quarter was more than 100 person and was impacted by non deductible losses on the cash surrender value of company owned life insurance and.
And finally reported loss per share for the fourth quarter of 2022 was <unk> <unk> per share compared to earnings per share of $1 80 in 2021.
Loss per share in 2022 included the impact of the goodwill impairment charge net of tax partially offset by a gain on sale of real estate properties net of tax.
Earnings per share in 2021 were favorably impacted by gains on vessel shares and the gain on insurance settlement and partially upset by a restructuring charge all net of tax so all in on an adjusted basis Q4, 2022, EPS was 18 cents compared to 65.
<unk> per share in Q4 of 2021.
Now moving to the balance sheet as of year end cash totaled 154 million compared to one around 13 million a year ago that was nearly zero consistent with year end 2021, and when combining our strong balance sheet with our existing borrowing capacity, we still have and continue to have an umbrella.
Capital available to fund, our organic and inorganic strategy as well as navigating an uncertain macroeconomic environment.
At year end accounts receivable was $1 5 billion and increased 5% year over year, reflecting our year over year increase in revenue as well as billings to MSP customers reported on a net basis.
Global DSO was 61 days, an increase of one day over year end of 2021.
For the year, we used 88 million of free cash flow free cash flows. In 2022 include the final repayment of approximately 87 million of federal payroll tax balances, which were deferred in 2020 under the care Act as well as 48 million of income taxes due.
In Japan, following the sale of so Paulo investment in <unk> common stock.
And during the fourth quarter, we have started executing against our 50 million share repurchase plan that we announced in November by approximately 475000 shares for a value of $7 8 million.
As Peter mentioned, the global economy has grown increasingly uncertain as a result, we are not going to provide a formal outlook for 2023 at this stage. However, I will share the following of salvation.
Through the execution of our specialty strategy kidney has continued to transform it seems the last significant economic disruption caused by the COVID-19 pandemic in 2020.
We have remixed our portfolio towards higher margin products and specialty and we have demonstrated the ability to act with urgency to proactively manage costs to protect the bottom line and preserve capital when necessary.
Our current view for the first half of 2020 sweep reflect that the economic uncertainty will constrain top line growth in several of our business units.
We expect that our structural GP rate improvement will continue but likely at a slower pace than in 2022, and finally that will contain our SG&A to levels similar to Q4 of 2022, even while continuing to invest in our technology initiatives and in our people.
You stop line trends don't align with our current expectations.
We are prepared to take action and you shouldnt actions to align our cost structure as we move forward and with now all of that back to you Peter.
Thanks for those insights Olivier it's difficult to know how the macroeconomic situation will unfold as we move forward in 2023.
What is certain is that we all focus on what we can control and stay the course and our aggressive pursuit of profitable growth in.
In each of our chosen specialties will continue to shift toward a business mix characterized not only by higher margins in value, but greater resiliency amid market pressures will drive inorganic growth using the ample capital available to us on our balance sheet to pursue additional high quality.
Acquisitions in education set in OCG.
And we'll continue to invest in technology, and new products that will improve the talent and customer experience enable organic growth and increase efficiency.
I have great confidence in our team's ability to meet the moment and deliver on these priorities.
This has been a defining characteristic of Kelly people since our founding more than 75 years ago and it has contributed in no small way to the longevity of our company.
With our team laser focused on executing our specialty strategy and guided by our noble purpose I look forward to building on the positive momentum we generated in 2022.
Together, we will create long term value for all our stakeholders, helping our talent and customers thrive and rewarding our shareholders for their patients since we embarked on this transformation, we're grateful to all of them and to our board of directors for their unwavering support as we move forward on our journey to unleash the full.
The potential of this great company.
Kelly you can now open the call to questions.
Thank you and ladies and gentlemen, if you wish to ask a question. Please press one and then zero on your Touchtone phone.
You will hear an acknowledgment that you've been placed into Q and you can't remove yourself from queue at any time by repeating the one zero command.
If you're on a speakerphone please pick up your handset before pressing the numbers once again for questions. Please press one zero at this time.
Well go to the line of Joe Gomes with noble capital.
Good morning, Peter and Olivier Thanks for taking the questions good morning, Johnny.
So just kind of wanted to start off here.
You know a week on the P&I business, if we look at that it looked like.
Revenues kind of accelerated.
On a negative and in the quarter.
It was higher in the fourth quarter the revenue decline in the other quarters in a year maybe.
Maybe you can just give us a little more color as to what is going on in the in the P&I segment.
Yes, Joe.
Think it's a reflection of what's going on in the.
Parts of the economy that we have exposure to the.
The P&I business has considerable exposure to manufacturing light industrial distribution and those businesses in particular were impacted by the headwinds.
Headwinds that we saw to some extent in Q3, but really accelerating in Q4.
And.
That's the story behind the P&I also mentioned that we still have yet to anniversary the loss of a major customer we had.
That will anniversary in April of 2023.
On the flip side I would say and we did mention that I did mention in our PPO business.
Still growing.
Despite the fact that our call center businesses.
When the kind of challenging.
Comparables.
But overall, we grew these businesses will be about 9% in Q4.
Which I think is an improvement versus what we have seen even in Q3, where it was about swim to half a percent. So.
I wouldn't say that is offsetting staffing, but it is something we.
Assumed to be resilient for the near future.
Okay. Thank you for that.
He came over to Europe .
You call out a number of different countries.
Countries. There are break that out in your table then I'm looking at it obviously, we know what happened in Russia with the sale, but all the other countries that you identify outside of Portugal or down on a revenue basis.
You know, maybe you could talk a little bit as to what you're seeing in some of those.
Entrees.
That would show the sequential decline are the quarterly decline in revenue.
Yeah, I would say of course, you need to put them aside two things right. One is of course, a exchange rate, which is of course as we did mention again impacting our P&L in our in our international and of course, Russia until we anniversary basically the collection.
Got it up in early July of 2022. So if you put these two things on the side to ask you growing at about 5%, where it's a little bit lower than what we have seen in Q3 Q3 will be aware of.
<unk>, 7%, so we see a decline, but not I would say a pretty.
Put a normal decline.
We didn't see a lot of growth in Portugal, and you can see on our 8-K, so the 30% plus we have seen that in Q1 Q2 Q3.
As well as Q4 of 2022.
We have seen some slowdown in Switzerland, and France and in Italy.
Because of market conditions, but I would say it.
It is more challenging than before but I wouldn't call. It as you know a complete change in trend, we slept bright spots in Germany that is mentioned in other and he's one of the main reason why other is teed up by 14%.
In Germany also in revenue is not big so it's a business where the margin on the gross margin is pretty encouraging because of the business mix and we continued to make huge progress over there. So we have also a couple of other countries, where we continue to see very good traction and of course, we don't disclose them because.
Are they are pretty small, especially on the revenue, but some of them like including Germany.
Creating very interesting traction.
Probably more than anybody in GP and bottom line.
Okay. Thanks Olivier on that end.
Pardon me, yes.
Mentioned on the last call.
Talking about the tech layoffs about how that might.
Provide a better pipeline of candidates for some of the other verticals.
Maybe you could talk are you seeing that.
And you know what what else are you needing to do I know this is kind of an ongoing an unfolding situation to attract workers to fill positions that are open.
Yeah, the demand for the talent that are involved in a lot of the publicize layoffs in the tech sector are.
Uh huh.
Skills and capabilities that are in demand outside of the high tech sector.
The lag time between moving those people to other industries is measured.
By geography by pressures that are in all industries customers are making hiring decisions slower are taking a little bit more time, but clearly that the demand for those skill sets is evident and we're seeing it it's just that the <unk>.
Grow economic conditions.
Doesn't translate immediately into our you know moving people from you know from Friday to Monday to a new position and it takes a little bit longer than we expect to see the benefits of that increase in AR.
<unk> technology talent and skill sets.
Throughout 2023.
Okay, and then one more if I may on rocket power again in the last call. When you when you were talking about it.
Our firm you mentioned about identifying synergies with the rest of Kelly.
Accelerating the integration diversifying the portfolio maybe.
Maybe could you provide a little more detail on you know where are you where you see yourself progressing.
And those goals for rocket power.
Yeah, we're very we're very encouraged by where we are on those two issues, but also Joe are part of the investment thesis for rocket power was being able to take advantage of there.
Our Latin American delivery model and we're encouraged by the ability not only to continue to use that for rocket power customers, but also to take advantage of that for either legacy Kelly RP O customers and also use it as par.
Our sales efforts for new RP O customers and we are seeing.
Seeing signs of that.
Part of the investment thesis is paying off with our customers. We're talking to in terms of where they are looking to see.
See a lower cost delivery and we're able to.
Provide that through that Latin American delivery model that was part of rocket power.
Okay, great. Thanks for taking my questions guys I appreciate it alright, thanks, Joe Thank you Joe.
We'll go next to the line of Kevin Steinke of Barrington Research.
Good morning, good morning good.
Good morning, Kevin.
Good morning.
I wanted to.
First ask about the the science engineering and technology segments.
You noted.
Continued.
Good demand in the telecom area, although that.
You mentioned also that the other areas within the segment are being impacted by the economy. So can you maybe just expand on.
The areas being impacted by the economy.
And you know maybe.
Maybe how material this slowdown has been there.
Yeah. Thanks, Kevin.
So as Olivier mentioned.
To call out.
The P. P O our outcome based business and as that continues to see nice growth and I think it speaks to the strategy that we have moved.
Moving business to.
That delivery model, so that's where I would start telecom is enjoying very significant growth. Both in terms of traditional staff AGA as well as a statement of work business and we.
We see that continuing as a company whose.
Work to deploy next generation networks.
The areas that.
Or a little more challenged are probably science.
In engineering.
Because in science there is a lot of companies that are catching their breath after coming out of Covid and.
I'm trying to reestablish what there going forward strategy is so we've seen some slowdown in hiring.
Taking customers taking longer.
And engineering as we continue to see some.
Headwinds from a macroeconomic standpoint technology.
Is reflective of I think the high tech sector overall, but.
But we don't see that as a.
A permanent.
Probably a temporary lull in terms of demand companies still need.
App developers and network.
Architects and cyber security experts.
Data analysts and we see when there.
Economic conditions become more certain we expect that to come back quite quickly.
Okay.
Okay. Thanks, that's helpful color.
Yeah.
You were talking earlier about.
How some of the layoffs in the.
Hi Tech sector you could.
Sure.
You, so most people and their skills to build demand in other areas and I guess just more broadly as some.
Some of the softening in the labor market.
Improved your ability to fill orders.
More generally across the company you know I know you referenced there's still a.
Good number of job openings and the labor market is still fairly tight so this kind.
Kind of wondering if that's maybe enables you to fill some other orders.
Better that maybe were sitting open due to greater wave of Mark.
Tightness.
Yes.
The demand has slowed in certain sectors.
I would.
I'll point out that our fill rates have improved and in education.
Which is likely a sign of PS.
People coming off the sidelines could be retirees that are.
Concerned about inflation, but we've seen occur.
Across the regions improvement in fill rates, which is very encouraging because of the demand continues to.
It'd be very strong in education.
Insert our fill rates have.
Pretty much maintained demand as slack slack and a little bit but.
We continue to.
Fine talent and put them to work at our at our customers and our bill rates have improved and P&I, although the the demand has.
Soften considerably as I mentioned two in response to Joe's question. Another way to look at it is about that will own the wage inflation, we see.
Is there a single insert is still elevated at around 8% to 9%, which is what we have seen for a long time now it is moving down a little bit in P&I, which might be a sign that the supply of talent side, you're seeing a little bit our wage inflation fault P&I in Q4 was about two and a half.
That's us something like 7% in Q3 education is slightly down, but still very elevated at about nine persons issues 14, or 13 to 14 person before.
Okay. Yeah. That's that's good helpful color.
Color so.
Maybe just drilling down a little bit more into education and.
Does the business pipeline there continues to be strong.
And you know specifically what are you seeing with.
Demand in your ability to leverage the.
Pediatric therapeutic services acquisition.
Very encouraged by the.
Early signs of synergy between our traditional pre K to 12 education business in Pts.
Both ways frankly, so PPS, introducing our traditional K 12.
Business to that school districts as support and RK.
Our K 12.
School districts being introduced the Pts So we think there is.
Significant synergistic opportunity there.
We're seeing.
Growth in the traditional business both in terms of existing customers.
Customers as well as our existing school districts as well as the pipeline continues to be very strong in school district struggle with.
Thanks.
Frankly, it chronic teacher shortage and as they focus on their full time hiring and curriculum.
More and more school districts are likely to be outsourcing the management of their substitute teacher population and.
We're.
Going to be the beneficiary of that because we win more than our fair share when we're <unk>.
Competing for business.
Excellent.
The retention rate among our existing customers an excellent win ratio when we compete for business I would also add that the higher Ed.
<unk>.
A portion of the education system is very dynamic, which leads to a lot of turnover, which means that our Greenwood Asher executive search practice is seeing very significant volume of.
Searches for universities and community colleges and even some superintendents and our K 12 space.
So we're very encouraged by that because it's a very not a huge business, but a very.
Very profitable business.
Great. Thank you I just also wanted to ask about.
The outlook for the first half of 2023 as you noted you expect revenue will.
<unk> continued to be constrained by economic uncertainty.
And also acknowledging that as you mentioned it's difficult to.
Ascertain exactly how the Mac rock macroeconomic situation will evolve, but as it currently stands would you expect.
Economic headwinds that to pick up in the first half or.
Trying to kind of stay as is kind of what what's the pipeline look like in <unk>.
Your expectation for how.
Severe or how much of a change you could see in terms of the economic headwinds in the first half.
Yeah, probably what I'm going to do is to reflect a little bit of what we have seen so far especially in Denver for revenue.
Early in 2023, as we speak so back to what Peter was talking about education, we continue to trend very well in order practices, including tickets.
<unk> of what we have seen again for the whole of 2022, we continue to make progress in improving our fill rate.
And we expect I mean solid growth and a continuation of the solid growth.
For you to know that of course, we are going to deal with higher Comparables because were already growing at.
40% to 50% in 2022, but very solid start of the year.
When I look at the OCG not seen any significant changes in trends so far this year.
What we have seen in Q.
Q4 2022.
I believe at some stage, we would expect some pressure on <unk> because of the market.
We have not seen that yet for set P&I and international.
What I would say he's staffs.
Staffing continued to slow down, especially in P&I.
She is very very volatile we have one good week, one more challenging week difficult to know.
How he is going to trend in the future I would say a high volatility outcome base. So far what we have seen is a Porsche mission of.
Resilience, whether it's in DNI or insight.
Alright, well, thank you for that insight I will turn it over.
Thanks for taking the questions.
Thanks, Kevin.
<unk>.
We'll go next to the line of Kartik Mehta.
Northcoast research.
Good morning, everyone. This is Jack Boyle speaking on behalf of Kartik Mehta, just a couple of questions to get US started here. So you just spoke a little bit about what we can expect early I. Appreciate that so can you speak a little bit more about the maybe the competitive environment, what you're seeing.
As I understand demand has come down but.
What kind of competitive environment are you guys seeing now and is there a certain point that you guys are competing on whether it be price or capability.
I think the competitive landscape hasn't changed significantly in terms of.
The the.
Vendors and suppliers that we compete against we've been very disciplined about maintaining.
Our pricing and our margin and to some extent in some cases trading off and.
And not chasing revenue for purposes of of.
Topline.
I think we haven't seen a lot of I would say wholesale wholesale.
Margin pressure coming from.
Our principal competitors.
And regional companies well at time to Chase business.
But as I said, we're being disciplined about it we're focusing on finding.
Higher margin jobs and job categories that we know we can fill in and compete and win.
We're pleased with the number of customer acquisitions that we've had in the past couple of quarters.
Those take a while to show up because you have to transition.
<unk> from other companies.
But I would say on the whole there's not a significant change in the competitive landscape.
Alright, and then just one more.
In terms of a little more color around some of the SG&A savings strategy you discussed the pause in hiring is that across all of your businesses and how long do you foresee that lasting.
Well we.
It's across all businesses subject to wreck.
If we have a customer facing revenue GP generating position.
We're we're filling those roles.
But we.
Doing it after a review to make sure that it's necessary, but all of the the other I would call them non customer facing non revenue generating roles.
Are we.
We've put a hiring freeze on and will continue that until we see some some signs of certainty in the macroeconomic conditions and.
Don't see any deterioration in demand in our in our businesses. The one exception Jack might be education, where the demand is so significant that we've got to add.
People because the.
The opportunity is so significant and.
We're not going to miss the.
Great work that the education team has done to acquire new skills school districts and.
Generate additional revenue and GP through improving our fill rates.
Great. Thanks for the additional detail.
Thanks, Jack Thank you.
We'll go next to the line of Mitra Graham go Paul with Sidoti.
Yes. Good morning, Thanks for taking the questions Hi, good morning.
Just following up a little on the last question on the SG&A.
In terms of how comfortable you feel you'll be able to.
Keep SG&A levels, you'd like especially in light of the revenue uncertainty and how far along are you in terms of the investments in technology initiatives and should.
We continue to see elevated investment.
So on the on.
On the SG&A question, we've done a lot of work starting in the third quarter of last year to identify.
Certain metrics that we're following very closely that will.
Trigger additional.
Todd moved.
Okay.
And I think we're better prepared to respond to macroeconomic conditions than we have been before.
So I'm very comfortable that.
We're.
Have the levers that we need to pull.
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Technology is a very critical area of investment for us, we're investing not only in the.
[noise] ways to improve the productivity of our frontline teams, but we're also investing in the talent experience. We recently launched a new Mike Kelly portal.
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Talent that we deal with every day with a better user experience and we think that's going to.
It creates some opportunities to maintain relationships with.
The great people that we put to work every day.
And used.
Use that as a differentiator in terms of selling to our customers. So the technology investments.
We will continue judiciously, but we need to make investments for the long term and that will be and continue to be a priority in terms of our organic.
Investments.
Okay, that's great.
And then on the inorganic.
Syed.
I know, it's something you always keep an eye on given the balance sheet. You have you can certainly be aggressive there, but in light of the economic uncertainty you spoke to.
If maybe you can give us some color into how youre thinking about inorganic opportunities.
Do you feel confident you'll be able to get something done maybe this year and pipeline and valuations you're seeing.
Well candidly Mitra the.
Quality and the quantity of properties in the market right now is less than it was a year ago and that's I think just a reflection of not only the macroeconomic conditions, but also the interest rate environment.
And that's likely to continue for the first quarter and probably into the first half.
My expectation is that when the interest rate environment becomes a little bit clearer in terms of.
The ceiling and companies have line of sight to more certainty in the economy, we're going to see a lot of companies that were on the sidelines.
Yeah.
Being a part of conversations and we're.
We're not waiting for that we're actively.
Proactively.
Pursuing in identifying high quality high margin high growth assets that we would.
Yes.
Like to add to the portfolio, but it's a it's a fairly constrained environment right now, but we will we will be ready and as I said, we're not sitting on our heels. During this period of time, we are continuing to to.
To proactively look for those kinds of properties and with our level of liquidity, which is now over 450 million I mean, we we can really.
Go fast and aggressive, especially.
In the second half of the year not necessarily waiting for a much better economic environment, because with our balance sheet, we can do it.
Stage of any potential recovery this through the current environment.
Okay, No that's great. Thanks, again for taking the questions.
Thanks Mitra thank you.
Thank you we have a follow up from the line of Kevin Steinke with Barrington Research.
Hi, just really quick follow up in terms of what we should expect for.
<unk> tax rate.
As we move into 2023.
Yes.
That's a difficult equation I would say.
I'm still on the you know.
Mid teens, plus that would be where I would position it.
Although you might have seen that there is a lot of volatility because of several items I think today when I was talking about tax.
The example of that but.
You know high mid teens would be would be probably the way I would position it for the moment.
Okay. That's fair thank you very much.
Thank you thanks, Kevin.
Once again for questions from the phone it's one.
Zero.
Yeah.
Okay.
Oh.
And speakers, allowing a few moments there are no further questions in queue.
Okay. Kelly I think we can we can wrap it up then thank you very much for your help thank you.
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