Q2 2023 Kelly Services Inc Earnings Call
Okay.
Good morning, and welcome to Kelly services second quarter earnings Conference call.
All parties will be in a listen only mode until question and answer session of the call.
Today's call is being recorded at the request of Kelly services.
If anyone has any objections you may disconnect at this time.
Second quarter webcast presentation is also available on the Kelly 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.
Thank you Lois and Hello, everyone.
Welcome to Kellys second quarter conference call.
Before we begin I'll walk you through our safe Harbor language, which can be found in our presentation materials.
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 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 certain data will be discussed on a reported and on an adjusted basis.
Discussion of items on it.
Adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.
References to organic growth in our discussion today excludes the impact of the 2022 sale of our Russian operations.
Finally, the slide deck, we are using on today's call is available on our website.
We had a lot to cover today, so let's get started in a moment I'll invite Olivier T. Rowe, our chief financial officer to provide details on our financial results for the second quarter.
We'll spend the rest of our time, providing an update on the transformation initiatives announced in May that is designed to significantly improve Kelly's EBITDA margin and accelerate profitable growth.
Specifically, we'll review the aggressive actions, we've taken their immediate impact on our EBITDA margin and our expectations for margin improvement going forward.
With that I'll turn the call over to Olivier.
Thank you Peter and good morning, everybody.
For the second quarter of 2023 revenue totaled $1 2 billion down three 9% from the Pio or are you, including 60 basis points of favorable currency impact so revenues for the quarter, well done, Florida and have stuff and in constant currency.
Included in the decrease is a 230 basis points of favorable impact, resulting from the 22022 sale of our operations in Russia. So I will revenue overall was down 2.2% year over year on the noble get nique constant currency basis.
As we look at the second quarter revenue by segment. Our Education segment continues to report significant year over year growth of 33% due to our net new customer wins strong demand from existing customers and improved sito right.
It's also continues to perform well as we anniversaried the acquisition in the quarter.
Overall continued double digit revenue growth demonstrates that our education business is a significant growth engine, even as the broader economic trends Suffolk.
In the CIT segment revenue was down by 7%.
In the second quarter, we saw a continuation of the deceleration of demand for our specialty staffing.
As well as a slower revenue growth in some outcome base station.
Permanent placement fees were also impacted by a continued deceleration in market demand and declined 48%.
In our OCG segment year over year revenue declined 9% on a reported basis and 8% in constant currency.
The declines were primarily in a few on PQ, one MSP revenues were nearly flat.
Revenue in our professional and then just real segment declined 9% year over year in the quarter.
Revenue from our staffing product declined by 16%, reflecting the impact of economic headwinds, which are most noticeable in these segments.
Month outcome based business delivered again solid revenue growth of 18% as the market continues to be swung for these value added solutions placement fees declined 55% and was impacted by lower demand for full time hiring.
Whereas when you and I wanted to National and International segment declined 9% on the nominal currency basis and was down 13% on a constant currency basis, excluding the impact of the sale of our Russian operations revenue declined 1% on an organic constant currency.
Basis performance varied, depending on geography and product for the quarter. We had good constant currency revenue growth in Mexico, and Portugal, but that was more than offset by declines in the U K, Switzerland, and France International its permanent place placement fees were up 5%.
On an organic constant currency basis.
Overall gross profit was down eight 3% on a reported basis.
Or eight 5% in constant currency.
Our gross profit rate was 19, 8% compared to 27% in the second quarter of last year.
Our overall GP rate declined by 90 basis points.
Finally driver was 70 basis points unfavorable impact from lower Perm fees, and 40 basis points of higher employee related costs. These impacts were partially offset by 20 basis points of continued improvement in structural business mix.
<unk> expenses were down three 4% year over year on a reported basis.
Expenses for the second quarter of 2023 include $5 6 million of charges related to our ongoing transformation efforts, so on and that on an adjusted constant currency basis expenses declined by six 2% in the quarter.
Contributing to the decline was lower performance based incentive compensation related to our lower gross profit levels and we have also started to see the early positive impact of our pulse formation.
As we noted in our release in July we have taken additional transformation related actions in early Q3, and we will recognize additional restructuring costs in Q3.
Peter will provide more information on the transformation activities shortly today.
In conjunction with our comprehensive review of SG&A as part of our transformation efforts. We also recognized a $2 4 million noncash impairment charge related to an under utilized leased office space.
On a reported basis our earnings from operations for the second quarter was $6 2 million compared to $8 2 million in Q2 of 2022.
As noted.
2023, Q2 results include the 8 million of charges related to our transformation activities. So adjusted earnings from operations in Q2 of 2020 suites were $14 2 million and adjusted EBITDA margin was 2% similar to Q1.
And as a reminder, kidney Q2 2022 earnings from Operation also include the impact of the 2022 noncash charge related to the impairment of our Russian operations prior to their sale in July of 2022, as well as a $4 4 million gain on the sale of some.
Assets.
Income tax benefit for the second quarter was $1 9 million compared with our 2022 income tax expense of $4 9 million.
Our effective tax rate for the quarter was 32, 4% benefit.
And finally reported earnings per share for the second quarter of 2023 was 20 cents per share compared to six cents per share in 2022.
EPS for the second quarter of 2023, excluding the Tulsa automation related charges net of tax was 36 cents.
And after adjusting for the 2022 asset impairment charges and the gain on sale of assets net of tax Q2, 2022, EPS was <unk> 45 sets. So in the like for like basis EPS declined by 20%.
Now moving to the balance sheet as of the end of the second quarter.
At the end of Q2 cash totaled $125 million compared to 154 million at the end of 2022, and we ended the second quarter of 2023 with no debt consistent we substantially no debt at the end of 2022, with our 300 million and available capacity on our credit facilities and our cash balance.
We continue to have ample capital available to deploy.
As of the end of Q2 accounts receivable was $1 4 billion and decreased 5% year over year, reflecting a year over year decrease in DSO as well as a decrease in revenue.
Global DSO was 61 days untapped with U N 2022, and two days lower than the second quarter of 2022.
For the second quarter of 2023, we generated 32 million of free cash flow and year to date free cash flow now totaled $14 million.
For the quarter, we have continued to maintain lower accounts receivable balances primary as a result of favorable DSO trends.
A portion of those receivables are related to our MSP programs and are funded with supplier payables. So the lower net position as a limited impact on free cash flow generation.
We have also continued to execute against the 50 million share repurchase program that we announced in November of last year buying approximately 980000 of shares for 16, and a half million dollars in the quarter, bringing the total rebuilt <unk> to $42 6 million program to date.
And now back to you Peter.
Thanks for those details Olivier in a moment I'll enjoyed olivier to provide our outlook for the second half of 2023.
It's important to note that our second half expectations reflect the impact of aggressive actions, we've taken to date as part of our transformation.
These actions amount to more than a cost out exercise and they differ fundamentally from the cost management actions, we reported in the first quarter, which we implemented in response to near term demand trends.
The recent steps we've taken represent a structural shift to the work we do within Kelly and how we do it.
Marking a necessary step forward on our journey to accelerate profitable growth.
And they are already producing results.
For more details on our expectations for the balance of the year I'll turn it back to Olivier.
Thank you Peter our expectations for the rest of 2023, so the second half of the current year assume a continuation of current market conditions for the second half of 2023, we expect nominal revenue to be flat to up 50 basis points year over year.
We expect to maintain the GP rate above 20% because of the benefits of our sexual health business mix improvement, but continued softness in demand for full time hiring will continue to compress spelling in placement fees and ask you. All in we expect our second half 2020 through GP rate to be down by.
About 30 basis points to 21%.
We expect second half adjusted SG&A to be down 5% to 6% lower than the same period of last year.
These reflect the actions we have taken throughout the year to align expenses with topline trends the impact of Tulsa omission related workforce reduction actions taken in July and additional cost optimization actions, we expect to complete this year.
Given the timing of these actions, we expect adjusted EBITDA margin in the second half of the year to be two three to two 5%, reflecting a 2020, we exit rate of about 3%.
So additional perspective with the benefit of a full year of expected transformation related savings and our Q1 top line expectations. We would expect to reach a normalized adjusted EBITDA margin on a full year basis in the range of 3.3 to three 5%.
And I now will turn it back over to Peter for additional comments.
Thanks for those insights Olivier to put our expectations into context consider that Kelly's average EBITDA margin has been approximately 2% for a very long time.
And adjusted EBITDA margin improvement of 130 to 150 basis points at between three three and three 5% will mark a significant improvement in our ability to convert revenue and gross profit to earnings.
And as Olivier mentioned, our expectations assume no change to the current macro economic environment. They are driven entirely by the substantial progress we've made on multiple initiatives to drive sustained efficiency and accelerate profitable growth.
In July we announced strategic restructuring actions that further optimize the company's operating model to enhance organizational efficiency and effectiveness. These actions followed a comprehensive review of our business and functional operations led by Air transformation management office with support from our World class transfer.
<unk> consultant.
As part of the restructuring, we streamlined our organizational structure to reduce complexity and increase agility, we renegotiated supplier agreements and real estate contracts to secure terms that match our needs going forward, we revamped our performance management process to drive behaviors that will sustain these structural improvements.
And we made the difficult decision to implement a workforce reduction plan.
To align our resources with our new ways of working.
These actions among others are on track to deliver a 3% EBITDA margin exit rate in 2023.
We're committed to sustaining these efficiencies having established rigorous controls that provide clear visibility into resources and expenses across the enterprise. These measures are designed to ensure the longevity of the structural changes we've made and serve as the foundation for further EBITDA margin expand.
And going forward.
With our efficiency actions, creating the necessary financial headroom to invest in our future. We're quickly switching gears to the next phase of our transformation driving growth.
To that end, we've undertaken several initiatives that will accelerate profitable growth over the long term.
The scope of these initiatives encompasses our go to market strategy, the technology and systems that underpin our operations as well as organic and inorganic growth opportunities. Some examples include developing a comprehensive go to market strategy with innovative offerings to capture a greater share of wallet with large.
Enterprise accounts committing to our inorganic investments in identifying additional high margin high growth targets are.
Aligning incentive programs to these initiatives and their expected outcomes and sharpening our focus on DSO to drive free cash flow the.
The growth initiatives, we're undertaking will be additive to the structural changes we've made to drive efficiency, which are the basis for our expectations for EBITDA margin improvement together, they will unlock the potential of our specialty strategy and accelerate both top and bottom line growth.
I will share more details with you about our growth initiatives on our third quarter earnings conference call in November .
Reflecting on the past several months of work I can say with confidence that this transformation is fundamentally different than any other effort during the more than 20 years I've been with the company.
Different in terms of the depth of our analysis, the speed and precision with which we're executing and most importantly impact the change we set out to create within Kelly is no longer hypothetical this transformation is delivering results.
And while I am pleased with the progress we've achieved thus far our success will be determined by our ability to deliver on the important work that lies ahead.
I have every confidence that the collective strength and resilience of team Kelly will continue to propel us forward on our journey as it has over the last few months. Indeed, the past 76 years as we navigate this period of change together, our commitment to our talent and customers remains steadfast I am.
Grateful to them and to our board of directors and shareholders for recognizing the value creating potential of this company lowest so you can now open the call to questions.
Sure.
Thank you and ladies and gentlemen, if you wish to ask a question. Please first one and then zero on your Touchtone phone you will hear it Tony indicating that you've been placed in the queue and you may remove yourself from queue at any time by repeating the Mondeo command and if you're on a speakerphone. Please pick up your handset before pressing that number once again, if you have a question. Please.
One zero at this time.
Our first question is from attack.
From Northcoast research. Please go ahead.
He did.
Just on the transformation side.
I'd be interested just timing of normalized EBITDA margin.
When you would expect to achieve that I know you said the exit rate coming out at the end of this year will be three so are you assuming that you can achieve.
Normalized EBITDA margins by sometime in 2024, yeah.
Yes, I mean, its clearly 2024 and again to make it clear.
The improvement we have laid out.
Especially on a full year basis, three three to three five is assuming the current.
Topline trends.
On the current economic environment.
The GP rate, we are in now and the full year impact of this transformation.
So and it does not include anything about the phase two of these transformation, which is about growth.
It's really.
The pure impact of the efficiency.
Initiatives that Peter was talking about and that should be basically our starting point for 2024.
And then obviously you've talked about businesses that you'd like to accelerate growth, but are there any businesses that you might deemphasize.
As a result.
All these initiatives.
Well, we are continuously reviewing our portfolio to ensure that we're have opportunity to create value. There is no specific.
Business line that we've identified as a result of the transformation activities, but we have identified ways to improve the operational efficiency in each of our businesses and we expect to see the benefits of that starting immediately.
And then one last question Olivia.
Trends in July maybe.
What you saw kind of how they differ.
We're different than June if they work.
But I would say when I look at the.
Q2 exit for the 18th time of revenue and what is that.
To see in the beginning of Q3, I would say no real big change.
No improvement I would say, which is not a surprise because I've seen the market conditions are pretty similar to what they were in Q2. So I would say we have stuff in Q3.
<unk> situations.
Q2 <unk>.
With that I would like to mention is all about education seasonality.
You know that basically Q suite.
Basically Q3 is a low quarter because of the school year.
And that of course is something you need to consider when you look at Q3.
Because of the seasonality with of course, a high in the peak season again in Q4.
I apologize.
FX standpoint would you expect FX to be neutral in the second half of this year.
Well when I was talking about nominal revenue etch to flat to up <unk> five.
Expectation now based on.
What we have seen so far is a positive FX impact between let's say 100 120 basis points.
Thank you very much I appreciate it.
Thank you. Thank you.
Thank you and the next question is from Joe Comms from Novo capital. Please go ahead.
Good morning, John and Bonnie.
So I'm just trying to wrap my head around the whole program and I was looking in your.
Sure.
Excuse me pardon me.
Presentation from this morning.
Page 16, new gas.
Chart. There you know the operating model lines to be specialties.
Redesigned operating model to drive profitable growth in our chosen specialties and I went back and I'm looking at some of your older presentations in basically the same chart.
By the same graph.
Each one of the different segments in the revenues.
Everything exactly the same so I'm really trying to figure out.
What is really going to be different here.
Kind of Relatedly, you talked about doing more tech investment.
You've done a lot of tech investment.
Over the past two years or so what more tech investment needs to get done in order to really drive what you're looking to accomplish.
Well, Joe I would say.
While the structure hasn't changed in terms of the number of our business units the way in which we're both going to market, but also.
The changes we made as part of the transformation that we announced in.
I announced in May and then we effected in July .
We're structurally taking complexity out of the way, we work reducing spans and layers that slowed decision, making we have stopped.
Non core are nice to have.
Initiatives, and we've moved targeted resources and decision, making closer to the business.
So we not only achieve.
Substantial.
<unk> expense.
The expense savings, but we also have improved the or optimize the operating model. The technology is going to be an ongoing.
We have to continue to make investments in technology.
Whether it's AI driven digital tools.
Or other.
Other.
Advances that in order to not only stay competitive but to create market differentiation our helix.
Solution and our OCG practices has been game changing in terms of customers' reception.
We will continue to invest in.
<unk> state of the art solutions like that that require investment in technology.
Okay. Thanks for that.
Hello.
On the tech side again.
Hap.
Quarter, we talked about your.
New digital workers program, and you said that at that point Youre getting some positive feedback I was wondering you know maybe give a little quick update on how that program is unfolding.
I'd say, it's still early but the number of customers that have expressed interest in understanding.
How it would work in their operations continues to.
Increase and it's generating a lot of I would say ancillary benefit because we can help customers review, how theyre getting work done and that provides opportunities it's not a digital worker than it is potentially our outcome based business that could benefit from that.
Conversations with customers around the future of their work.
Okay, and then one last one for me if I may.
Your lifestyle.
Again on the buyback.
I think Olivier you said you were about 42 million now was a $50 million program.
The buyback.
Understand the board has to approve that stopped but how does that kind of fit and two to the new model is that something that you would.
Should continue or would you be looking at hey, maybe those dollars or better invested in.
Unfolding, our new model.
Yes, Joe I'll, let Olivier.
<unk>.
Where we are but the.
Share repurchase is part of.
Our capital deployment conversations with that.
We have at the board.
Regularly.
It's we're going to finish it.
The share repurchase program, we announced last November you know to the extent we're.
We're able to.
And.
We'll include it as part of our future conversations with the board yes.
Yes, I mean, when you think about where we are 43 million almost 43 million program to date.
I think when you look at that we are on track I think to compete these program.
As we Anniversaried this program in November .
If you combine it with.
What we have done in Q1 of last year.
First of all cross shareholding, we have both about $4 3 million of shares for a total amount of $70 million.
It adds a meaningful.
Impact on our EPS because of the reduction of the number of shares but as Peter was saying.
We are going to need to reflect a little bit on what are the next steps and this is something that as Peter mentioned, we are discussing these are both on a regular basis, but again 50 million out of.
Our overall capital allocation.
We always say that I think that's the reality that it does not impact you know our focus on growth, whether it's organic or inorganic.
Because it is.
$50 million is meaningful, but not something where we can say we do it in the teens detrimental to our core focus which is.
Putting our capital towards the goals.
Okay, Thanks for that and I'll get back in queue. Thank you.
Thank you Joe.
Thank you. Our next question is from Kevin Spanky Barrington Research. Please go ahead.
Hi, Kevin Good morning.
Morning.
Just wanted to get a sense.
Sure.
The revenue expectations for 2020 for as much as you can speak to it you talked about the three three to three <unk>.
5% EBITDA margin.
Goal for 2024, assuming.
Current economic conditions.
Directionally should we think about.
A slight or modest organic constant currency revenue declines in 2024 similar to that.
What you are expecting for the second half of 2023 are flattish.
Yes, Directionally what are you incorporating into that 2024 margin outlook.
Yes to make it clear that three three to three five is not a 2020 outlook, but it is more to say we can rent trends is no change.
Whether it's revenue or margin or gross margin. If you are seeing about the full year impact of our current transformation.
<unk> grew 433 to three five but again it is not an outlook for 2024. It is more of a assuming weather is decent environment continues and basically the current trend. We have the current revenue we have as well as the gross margin rate are similar in the future the full year impact of these homes.
Formation would lead us to move from 2% EBITDA margin to three <unk> suite to suite five.
Now thinking about 2024, it's probably too early to call on what is going to happen, where we are actively working is not just waiting for a better economic environment as Peter was saying we have.
Douglas efficiency, a lot of growth initiatives that should help us to gain market share.
Without assuming any specific change in the current economic and market environment.
Okay.
Okay.
I mean, presumably you know.
You'd have to beg some sort of revenue expectation and did it by region.
That's the only thing I was getting at but I understand your you arent biting us too severe.
Yes, yes.
To make it very clear I mean, the three three to three points.
Basically what we did was to take out.
Our expectation for the second half of the year.
2023 get it annualized keeping the GP mile Gina was talking about and then basically adjusting our SG&A based on the impact of the transformation.
Okay. Okay.
Is that the yard.
We didn't get the three three to three five.
Okay perfect. That's very helpful. Thank you.
And just.
Talking more about the transformation here.
Laying a foundation for future EBITDA margin expansion.
Yeah.
Is it.
Assume then that when.
Revenue does start growing again.
Expenses in the future.
So more slowly than they have in the past, thus being able to accelerate your trajectory of margin expansion.
Yes.
Specifically and what your slide on page 14 to talk about establishing controls to provide clear visibility in the resource and expenses. So I'm. Just wondering if something has changed with this transformation, where you are going to maybe control or monitor expenses more closely.
As revenue is growing and get more leverage out of that growth in the future.
Yes, definitely thats a primary outcome.
Outcome from the transformation initiatives and.
The work, we've done with our outside consultant to create a governance.
Our process to manage and control expenses going forward. It is a fundamental part of the transformation to ensure that.
Our growth in the future.
Is advantaged by the significant and aggressive actions we've made on the expense line in.
And ensuring that those expenses don't come back of course, we're in a business where when.
When we're growing quickly we need to add resources, we are adding resources for example in education, because it's growing.
Right now, but we are going to be managing.
Certainly any other kind of non revenue GP producing expenses very tightly.
<unk>.
Making sure that even with the other resources that we bring back.
We're doing so.
In a very disciplined with strong governance.
Just add back to <unk>.
Sustainable transformation.
One of the <unk>, we are going to continue to use and expect to improve significantly which is called incremental conjunction with.
How much of you.
<unk> GP glues, we can convert to revenue historically or conversion rate was about 15% cost of the transformation is to make sure that our incremental conversion rates in the future is significantly better than the 15 bills and we have seen in the past.
Okay great.
Very helpful.
Just.
Thinking about the current environment here.
In terms of the slowdown you've been seeing is it.
More weighted towards existing customers cutting back or if you're also seeing the new business pipeline slowdown.
Provide kind of that mix that youre seeing in terms of.
What's the demand trends.
Yeah, Kevin I would say in both cases, it's not necessarily.
A significant impact on.
Demand or the pipeline as much as it is.
Cautiousness in that.
Decision, making the.
The volume that.
People are.
Planning for.
<unk>.
The just the overall.
Cautiousness that.
Leads to.
Customers in the pipeline taking longer to develop and that's what we're seeing of course, you have fluctuations depending on industry among our customers in the pipeline, but I would just say overall there is a.
Some headwinds that people are feeling.
Reflect is reflected in their demand and hiring decisions.
Okay. Thank you just lastly.
Well I'll jump back in the queue.
Is there.
Yeah.
The cadence of the quarterly progression that we should think about in the second half.
In terms of just the growth in margin.
Would you expect them to be relatively similar in terms of the.
Growth rates and margins.
I think that the first gate at least initially speaking is going to be this exit rate of EBITDA margin that sweepers since leaving 2023.
As Peter was saying we are going to continue to inform you on the progress we are making beyond the outcome, which should be.
Significant and quick improvement of EBITDA margin.
And as Peter mentioned in November we are going to spend much more time on the growth part of this transformation.
Okay. So when you say exit rate for 3% does that imply like a 3%.
For fourth quarter, Yes, it's Q4 I would not use December to do it because December is a specific loans. So exit rate is going to be really for the entire Q4.
Alright, great. Thank you. Thank you. Thank you Kevin.
Thank you I wanted to get if you do have a question. Please press the one zero.
Question is from Mitra <unk> from Sidoti. Please go ahead.
Yes, hi, good morning, Thanks for taking the questions good morning Farzana.
Hi, Good morning, Olivier first a couple of questions for you I think in.
<unk> <unk> restructuring charge was about $8 million.
How should we think.
About it for the second half of the year. So Q3, four and do you expect even additional charges heading into 'twenty four.
You mean, the restructuring charges possible emission challenges.
Yes, I mean, the issues, but you know already because that's something we have disclosed in July that we have this event.
The front end of July .
At.
Create seven $5 million to $800 million of cost but of course.
<unk>.
As I said in my comments, we have further initiatives underway that would trigger additional restructuring costs of transformation cost in the course of Q3 and Q4 and potentially in the first half of next year, yes.
Okay. Thanks.
<unk>.
Yes.
In terms of the tax rate I know you had a tax benefit this quarter, but how.
How should we think about that for the remainder of the year yes.
Our tax rate effective tax rate is really.
I would say explainable, but sometimes a little bit.
Sure.
Difficult to.
Forecast.
I would say on a normalized basis, we are keen on.
Mid mid teens to high.
High teens.
And of course, we have a lot of events that are impacting our effective tax rate. If I take the example of Q2 why basically we've got.
Benefiting a charge and an effective tax rate of 32 and a half is basically because.
Our MSP MSP program, where we have basically.
Technically some investment.
Through some insurance program that are basically.
Optimal and when market conditions are good and the MFP program is providing some upside basically we've got a benefit on our income tax and that is the main reason why in Q2.
Our tax rate.
<unk>.
<unk> was basically a credit, but I would say on a more normalized basis.
Suggesting something between 15% to 19% effective tax rate.
Okay, No that's great.
And Peter you mentioned.
Inorganic opportunities something Youll continue to look at but is that more of a medium longer term.
Vision in light of the extensive transformation that youre doing in the near term.
Well, we'll continue to do.
Develop a pipeline.
The opportunities the market right now is.
And to use that term little cautious there's not as many.
High quality assets.
Companies on the market right now or that are willing to come off the sidelines based on proactive.
Inquiries, but we think that in the areas that we've identified inside our science engineering and technology business unit inside of education.
Inside OCG, we will continue to look for high quality high margin high growth.
Assets that we can add to the portfolio to complement the organic growth initiatives that we.
We're undertaking.
Okay. Thanks for taking the questions.
Thank you. Thank you.
And we do have a follow up question.
Kevin. Thank you. Please go ahead.
Yes. Thank you just one follow up.
Continuing on with the question about <unk>.
Yeah, Nick opportunities.
You mentioned that Youre working on strategic.
That issue as it relates to inorganic opportunities I mean as part of the transformation.
Do you expect to be even more aggressive in seeking acquisitions or is it more about the.
Types of businesses you are targeting.
As you think about what might've changed.
With this transformation initiative.
Well as Olivier commented, Kevin we have ample.
Capacity and.
I don't think I would describe it as more aggressive we're already.
<unk>.
Comparatively.
We are already acting more aggressively than we have.
In the past few years, we've acquired a number of companies and we're pleased with the progress we're continuing to look for.
<unk> that you will contribute again high margin high growth.
Kelly portfolio.
I don't but I don't.
We're acting with urgency and.
A great deal of excitement, but we're not going to overspend and we're not going to settle for.
Properties.
Properties that don't.
Satisfy the attributes that I mentioned.
Okay. That's perfect. Thank you very much.
Thanks, Kevin Thank you.
And at this time there are no further question. Thank you. Please continue.
Lowest if there are no further questions I think we can end the call.
Thank you and ladies and gentlemen that does conclude your conference for today. Thank you for your participation.
AT&T teleconference. You may now disconnect.