Q3 2023 Kelly Services Inc Earnings Call

November 9, 2023

Okay.

Yeah.

Operator 2: Good morning, welcome to Kelly Services' Q3 earnings conference call. All parties will be on a 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. A webcast presentation is also available on Kelly's website for this morning's call. I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO. Please go ahead.

Good morning and welcome to Kelly Services third quarter earnings conference call. All parties will be on a listen only until the question and answer portion of the presentation. Today's call is being recorded at the request

Good morning, and welcome to Kelly Services third 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.

If anyone has any objections, you may disconnect at this time.

Anyone has any objections you may disconnect at this time.

A webcast presentation is also available on Kelly's website for this morning's call.

I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO . Please go ahead.

I would now like to turn the meeting over to your host Mr. Peter Quigley President and CEO. Please go ahead.

Peter Quigley: Thank you, Keely. Hello, everyone, and welcome to Kelly's Q3 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 these 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 an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.

Thank you Kelly Hello, everyone and welcome to Kellys third quarter Conference call.

Thank you, Kaylee. Hello, everyone, and welcome to Kelly's third quarter conference call.

Before we begin, I'll walk you through our Safe Harbor language, which can be found in our presentation material.

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.

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 these suggested by our comments. We have no obligation to update the statements made on this call.

Actual results could differ materially from these suggested by our comments.

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 an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operation.

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 insight into certain trends in our operations.

Peter Quigley: Finally, the slide deck that we're using on today's call is available on our website. We have a lot to cover today. Let's get started. Before we turn to Kelly's Q3 results, I'd like to cover our recent announcement regarding another transformative and bold step in our specialty growth journey. On 2 November, Kelly entered into a definitive agreement to sell our European staffing business to GI Group for EUR 100 million, with EUR 30 million of additional earn-out potentials. Under the terms of the agreement, we'll transfer the European staffing business within Kelly's international operating segment to GI Group while retaining our MSP, RPO, and FSP business with customers in the EMEA region.

Finally, the slide deck that we're using on today's call is available on our website.

We have a lot to cover today, so let's get started. Before we turn to Kelly's third quarter results, I'd like to cover a recent announcement regarding another transformative and bold step in our specialty growth journey.

We have a lot to cover today, so let's get started before we turn to Kelly's third quarter results I'd like to cover our recent announcement regarding another transformative and bold step in our specialty growth journey.

On November 2nd Kelly entered into a definitive agreement to sell our European staffing business to GI group for 100 million Euro with 30 million euro or additional earn out potential.

On November 2, Kelly entered into a definitive agreement to sell our European staffing business to GI Group for 100 million euro with 30 million euro of additional earn out potential.

Under the terms of the agreement we will transfer the European staffing business within Kelly's International operating segment, the Gi group, while retaining our MSP or P O and FSP business with customers in the EMEA region.

Under the terms of the agreement, we'll transfer the European staffing business within Kelly's international operating segment to GI Group while retaining our MSP, RPO and FSP business with customers in the EMEA region.

Peter Quigley: We expect the transaction to close in Q1 2024, after which Kelly will maintain its global footprint and continue to provide MSP and RPO solutions to customers in the EMEA region through KellyOCG and our fast-growing FSP solutions through Kelly CEP. This transaction will unlock significant capital to pursue organic and inorganic investments in our chosen specialties. Furthermore, it sharpens our focus on our higher margin, higher growth MSP and RPO solutions globally and specialty outcome-based and staffing services in North America. Together, we expect these outcomes will accelerate our transformation efforts to significantly improve Kelly's net margin. I am joined today by Olivier Giraud, our Chief Financial Officer, who will share more details about our expectations later in the call. Turning to the Q3, we continued to make progress on the business transformation initiative we launched earlier this year.

We expect the transaction to close in the first quarter of 2024, after which Kelly will maintain its global footprint and continued to provide MSP and <unk> solutions to customers in the EMEA region through Kelly OCG.

We expect the transaction to close in the first quarter of 2024, after which Kelly will maintain its global footprint and continue to provide MSP and RPO solutions to customers in the EMEA region through Kelly OCG and our fast-growing FSP solutions through Kelly SET. This transaction will unlock significant capital to pursue organic and inorganic investments in our chosen specialties.

And our fast growing FSP solutions through Kelly said this.

This transaction will unlock significant capital to pursue organic and inorganic investments in our chosen specialties.

Furthermore, it sharpens our focus on our higher margin, higher growth MSP and RPO solutions globally and specialty outcome based and staffing services in North America.

Furthermore, it sharpens, our focus on our higher margin higher growth MSP, and <unk> solutions globally, and specialty outcome based and staffing services in North America.

Together, we expect these outcomes will accelerate our transformation efforts to significantly improve Kelly's net margin.

I'm joined today by Olivier Giroux, our Chief Financial Officer, who will share more details about our expectations later in the call.

I'm joined today by Olivier J row, our Chief Financial Officer, who will share more details about our expectations later in the call.

Turning to the third quarter, we continue to make progress on the business transformation initiative we launched earlier this year.

Turning to the third quarter, we continued to make progress on the business transformation initiative, we launched earlier this year.

Peter Quigley: Following the implementation of strategic restructuring activities at the outset of the quarter, we remained laser-focused on sustaining these structural improvements across the enterprise. Our continued emphasis on organizational efficiency and effectiveness throughout the quarter resulted in a 9.1% decrease in SG&A on an adjusted basis, a substantial year-over-year improvement. With the efficiency phase of our transformation on track and delivering results, our expectation of an adjusted EBITDA margin around 3% exiting 2023 is within sight. As we shared in August, our expectation assumed no change to the market conditions we faced in Q2. In fact, macroeconomic headwinds in Q3 proved to be more pronounced than anticipated. Amid a more challenging operating environment, we remain focused on what we can control, achieving significant improvements on an adjusted basis to EBITDA margin and earnings.

Following the implementation of strategic restructuring activities at the outset of the quarter, we remained laser focused on sustaining these structural improvements across the enterprise. Our continued emphasis on organizational efficiency and effectiveness throughout the quarter resulted in a 9.1% decrease in SG&A on an adjusted basis.

Following the implementation of strategic restructuring activities at the outset of the quarter. We remained laser focused on sustaining these structural improvements across the enterprise our continued emphasis on organizational efficiency and effectiveness throughout the quarter resulted in a nine 1% decrease in <unk>.

G&A on an adjusted basis, a substantial year over year improvement with the efficiency phase of our transformation on track and delivering results our expectation of an adjusted EBITDA margin around 3% exiting 2023 is within sight.

a substantial year-over-year improvement. With the efficiency phase of our transformation on track and delivering results, our expectation of an adjusted EBITDA margin around 3% exiting 2023 is within sight.

As we shared in August , our expectation assumed no change to the market conditions we faced in the second quarter. In fact, macroeconomic headwinds in the third quarter proved to be more pronounced than anticipated.

As we shared in August our expectation assumes no change to the market conditions, we faced in the second quarter in fact macroeconomic headwinds in the third quarter proved to be more pronounced than anticipated.

Amid a more challenging operating environment, we remain focused on what we can control achieving significant improvements on an adjusted basis to EBITDA margin and earnings.

Amid a more challenging operating environment, we remain focused on what we can control, achieving significant improvements on an adjusted basis to EBITDA margin and earnings.

Peter Quigley: As market conditions begin to improve, we're confident that the structural changes we've made across the enterprise will continue to deliver significant improvement to Kelly's bottom line. Notwithstanding persistent headwinds, we're keeping our sights trained on the horizon. As I shared with you in August, we've undertaken several strategic initiatives that are positioning Kelly to accelerate profitable growth over the long term. We've made progress since then, which I'm pleased to share with you today. At the enterprise level, we've developed a comprehensive strategy to deliver the full suite of Kelly offerings to our largest enterprise customers. This strategy is transforming the culture, capabilities, and technology across our segments to serve critical accounts more efficiently and effectively. We've begun to operationalize this approach within our large enterprise account teams, and I'm pleased by the way they have embraced the change.

As market conditions begin to improve, we're confident that the structural changes we've made across the enterprise will continue to deliver significant improvement to Kelly's bottom line.

As market conditions begin to improve we're confident that the structural changes we've made across the enterprise will continue to deliver significant improvement to Kelly's bottomline.

Notwithstanding persistent headwinds, we're keeping our sights trained on the horizon. As I shared with you in August , we've undertaken several strategic initiatives that are positioning Kelly to accelerate profitable growth over the long term.

Notwithstanding persistent headwinds we were keeping our sites trained on the horizon as I shared with you in August we've undertaken several strategic initiatives that are positioning Kelly to accelerate profitable growth over the long term.

We've made progress since then, which I'm pleased to share with you today. At the enterprise level, we've developed a comprehensive strategy to deliver the full suite of Kelly offerings to our largest enterprise customers.

We've made progress since then which I am pleased to share with you today.

At the enterprise level, we have developed a comprehensive strategy to deliver the full suite of Kelly offerings to our largest enterprise customers.

This strategy is transforming the culture, capabilities, and technology across our segments to serve critical accounts more efficiently and effectively. We've begun to operationalize this approach within our large enterprise account teams, and I'm pleased by the way they have embraced the change.

This strategy is transforming the culture capabilities and technology across our segments to serve critical accounts more efficiently and effectively we've begun to operationalize. This approach within our large enterprise account teams and I'm pleased by the way they have embraced the change.

Peter Quigley: By successfully implementing this strategy, we'll accelerate our progress on increasing our share of wallet, improving our business mix, and optimizing expenses over a large subset of our business. In our professional and industrial segment, we're enhancing service delivery to industrial and commercial staffing customers and building our new business pipeline by enhancing our localized delivery model. At the heart of this model is a network of branch locations enabled by new technology through which our teams are meeting customers and talent closer to where they are. Our approach is designed to yield several benefits, accelerated responsiveness to customer and talent needs, deeper insights into local market dynamics, and greater collaboration, empowerment, and accountability among branch team members. In Q3, we completed a successful pilot of this delivery model in branches in select markets across the US. The outcome validated our assumptions.

By successfully implementing this strategy, we'll accelerate our progress on increasing our share of wallet, improving our business mix, and optimizing expenses over a large subset of our business.

By successfully implementing this strategy will accelerate our progress on increasing our share of wallet, improving our business mix and optimizing expenses over a large subset of our business.

In our professional and industrial segment, we're enhancing service delivery to industrial and commercial staffing customers and building, our new business pipeline by enhancing our localized delivery model at.

In our professional and industrial segment, we're enhancing service delivery to industrial and commercial staffing customers and building our new business pipeline by enhancing our localized delivery model.

at the heart of this model is a network of branch locations enabled by new technology through which our teams are meeting customers and talent closer to where they are.

At the heart of this model is a network of branch locations enabled by new technology through which our teams are meeting customers and talent closer to where they are.

Our approach is designed to yield several benefits, accelerated responsiveness to customer and talent needs, deeper insights into local market dynamics, and greater collaboration, empowerment, and accountability among branch team members.

Our approach is designed to yield several benefits accelerated responsiveness to customer and talent needs deeper insights into local market dynamics and greater collaboration empowerment and accountability among branch team members.

In the third quarter, we completed a successful pilot of this delivery model in branches in select markets across the U.S. The outcome validated our assumptions. Our pilot markets delivered both top and bottom line improvements, along with a healthy pipeline of new business opportunities. Feedback from customers and talent was positive as well. Based on this success, we're moving swiftly to implement this strategy in additional U.S. markets, and early results continue to be encouraging.

In the third quarter, we completed a successful pilot of this delivery model and branches in select markets across the U S. The outcome validated our assumptions our pilot markets delivered both top and Bottomline improvements along with a healthy pipeline of new business opportunities feedback from customers and talent was positive.

Peter Quigley: Our pilot markets delivered both top and bottom-line improvements, along with a healthy pipeline of new business opportunities. Feedback from customers and talent was positive as well. Based on this success, we're moving swiftly to implement this strategy in additional US markets. Early results continue to be encouraging. We're also aligning our capital allocation priorities to support our growth ambitions. In Q3, we completed our $50 million share repurchase program, which returned considerable value to our shareholders. While we're pleased with the outcome, we're confident that the best way to create value in the current environment is by reinvesting in our business. We continue to have ample capital available to deploy toward organic and inorganic growth initiatives with improved free cash flow driven by the efficiency phase of our transformation, further strengthening our position.

As well.

Based on this success, we're moving swiftly to implement this strategy and additional U S markets and early results continue to be encouraging.

We're also aligning our capital allocation priorities to support our growth ambitions. In the third quarter, we completed our $50 million share repurchase program, which returned considerable value to our shareholders. While we're pleased with the outcome, we're confident that the best way to create value in the current environment is by reinvesting in our business.

We're also aligning our capital allocation priorities to support our growth ambitions in the third quarter, we completed our $50 million share repurchase program, which returned considerable value to our shareholders. While we're pleased with the outcome. We're confident that the best way to create value in the current environment is by reinvesting in our biz.

We continue to have ample capital available to deploy toward organic and inorganic growth initiatives with improved free cash flow driven by the efficiency phase of our transformation, further strengthening our position. And as I mentioned previously, the sale of our European staffing business will add more than €100 million of liquidity when the transaction closes in the first quarter of 2024. And as I mentioned previously, the sale of our European staffing business will add more than €100 million of liquidity when the transaction closes in the first quarter of 2024. And as I mentioned previously, the sale of our European staffing business will add more than €100 million of liquidity when the transaction closes in the first quarter of

Peter Quigley: As I mentioned previously, the sale of our European staffing business will add more than €100 million of liquidity when the transaction closes in Q1 of 2024. As such, we're continuing our efforts to identify high margin, high growth, and inorganic opportunities. We remain focused on pursuing additional acquisitions in our SET and Education segments, and more opportunistically, OCG. With a strong balance sheet, a disciplined approach to evaluating opportunities, and clear board-approved inorganic priorities, Kelly is positioned to pursue deals notwithstanding the macroeconomic environment. We're also investing in technology, having developed a comprehensive roadmap to transform our business processes, tools, data, and the way technology is delivered to our people. Our vision is to leverage technology to both enable growth by improving efficiency and generate growth through innovative offerings that create value for customers and talent.

100 million euro of liquidity when the transaction closes in the first quarter of 2024.

As such, we're continuing our efforts to identify high-margin, high-growth inorganic opportunities. We remain focused on pursuing additional acquisitions in our set and education segments, and more opportunistically OCG. With a strong balance sheet, a disciplined approach to evaluating opportunities, and clear board-approved inorganic priority, Kelly is positioned to pursue deals notwithstanding the macroeconomic environment.

As such we're continuing our efforts to identify high margin high growth inorganic opportunities, we remain focused on pursuing additional acquisitions and our set and education segments and more opportunistically OCG with a strong balance sheet, a disciplined approach to evaluating opportunities and clearer.

Board approved inorganic priority Kelly is positioned to pursue deals notwithstanding the macroeconomic environment.

We're also investing in technology, having developed a comprehensive roadmap to transform our business processes, tools, data, and the way technology is delivered to our people. Our vision is to leverage technology to both enable growth by improving efficiency and generate growth through innovative offerings that create value for customers and talent.

We're also investing in technology, having developed a comprehensive roadmap to transform our business processes tools data and the way technology is delivered to our people. Our vision is to leverage technology to both enable growth by improving efficiency and generate growth through innovative offerings that create value for customers and <unk>.

Talent.

Peter Quigley: With our roadmap focused on maximizing business impact at each step, we're committed to a disciplined approach to evolving our technology infrastructure, prioritizing opportunities through which there is greater potential for Kelly to differentiate itself in the market. I look forward to sharing more about our expectations for growth in 2024 on our Q4 earnings call in February. With that, I'll turn the call over to Olivier to provide details on our financial results for the Q3.

With our roadmap focused on maximizing business impact at each step we're committed to a disciplined approach to evolving our technology infrastructure prioritizing opportunities through which there is greater potential for Kelly to differentiate itself in the market.

With our roadmap focused on maximizing business impact at each step, we're committed to a disciplined approach to evolving our technology infrastructure, prioritizing opportunities through which there is greater potential for Kelly to differentiate itself in the market.

I look forward to sharing more about our expectation expectations for growth in 2024 on our fourth quarter earnings call in February with that I'll turn the call over to Olivier to provide details on our financial results for the third quarter. Thank you Peter and good morning, everybody.

I look forward to sharing more about our expectation for growth in 2024 on our fourth quarter earnings call in February . With that, I'll turn the call over to Olivier to provide details on our financial results for the third quarter. Thank you, Peter, and good morning, everybody.

Olivier Giraud: Thank you, Peter. Good morning, everybody. For Q3 2023, revenue totaled $1.1 billion, down 4.3% from the prior year, including 150 basis points of favorable currency impact. Revenues for the quarter were down 5.8% in constant currency. As we look at Q3 revenue by segment, our Education segment continues to report significant year-over-year growth, up 23% due to our improved fill rate, strong demand from existing customers, and net new customer wins. Overall, continued double-digit revenue growth demonstrate that our Education business, including our market-leading pre-K-12 and PTS therapy solutions, is a significant growth engine, even as broader staffing market trends remain challenging. In the SET segment, revenue was down by 8%. During Q3, we saw continuation of the deceleration of demand for our staffing specialties, as well as lower revenue trends in our outcome-based business.

For the third quarter of 2023, revenue total $1.1 billion, down 4.3% from the prior year, including 150 base points of favorable currency.

For the third quarter of 2023 revenue totaled $1 1 billion down four 3% from the prior year, including 150 basis points of favorable currency impact.

So revenues for the quarter wavelength five 8% in constant currency.

So revenues for the quarter were around 5.8% in constant currency.

As you look at third quarter revenue by segment. Our education segment continues to rebuild significant year over year growth of 20 sweep of them.

As we look at third-quarter revenue by segment, our education segment continues to report significant year-over-year growth, up 23%.

due to our improved feed rate, strong demand from existing customers, and net new customer.

Due to our improved <unk> strong demand from existing customers and net new customer wins overall.

Overall, continued double-digit revenue growth demonstrates that our education business, including our market-leading pre-K-12 and PTS therapy solutions, is a significant growth engine even as broader staffing market trends remain challenged.

Overall continued double digit revenue growth demonstrates that our education business, including our market, leading pre K 12, and Pts therapy solutions is a significant growth engine, even as broader staffing market trends remain challenging.

In the state segment revenue was down by 8% the means of the third quarter, we saw continuation of the deceleration of the demand for our staffing specialties as well as lower revenue trends in our outcome based business.

In the third segment, revenue was down by 8%.

During the third quarter, we saw a continuation of the deceleration of demand for our staffing specialties as well as lower revenue trends in our outcome-based business.

Olivier Giraud: Permanent placement fees were also impacted by a continued deceleration in market demand and declined 39%. In our OCG segment, year-over-year revenue declined 4% on a reported and constant currency basis. Year-over-year declines in RPO continued as slower hiring in certain markets, sectors has had a disproportionate impact. MSP revenue declined year-over-year in the quarter but was flat sequentially, and PPO year-over-year revenues improved. Revenue in our Professional & Industrial segment declined 11% year-over-year in the quarter. Revenue from our staffing product declined by 15%, reflecting the impact of economic headwinds, which are more noticeable in this segment. The segment's outcome-based business revenue grew by 3% year-over-year, which is a moderation of the trend we have seen in the past few quarters. Excluding our contact center specialty, where demand for certain customers has decelerated, the segment's other outcome-based revenues have continued to grow at a double-digit pace.

Permanent placement fees were also impacted by a continued deceleration in market demand and declined 39%.

In our OCG segment, Kirovye's revenue declined 4% on a reported and constant currency basis.

In our OCG segment year over year revenue declined 4% on a reported ankles and currency basis.

Year-over-year declines in RPO continued as slower hiring in certain markets. Sectors have had a disproportionate impact.

Year over year declines in a few continued as slower hiring in certain markets. <unk> has had a disproportionate impact <unk> revenue decline year over year in the quarter, but was flat sequentially and <unk> year over year revenues improved.

MSP revenue declined year-over-year in the quarter but was flat sequentially and PPO year-over-year revenue

Revenue in our professional and industrial segment declined 11% year over year in the quarter.

Revenue in our professional and entourage segment declined 11% year-over-year in the quarter. Revenue from our staffing product declined by 15%, reflecting the impact of economic headwinds, which are more noticeable in this sector.

Revenue from our specialty products declined by 15%, reflecting the impact of Hakan <unk> headwinds, which are more on the table in these segments.

The segment's outcome-based business revenue grew by 3% year-over-year, which is a moderation of the trend we have seen in the past few quarters.

The segment's outcome based business, where revenue grew by 3% year over year, which is a moderation of the trend we have seen in the past few quarters.

Excluding our contract center specialty, where demand for certain customers has decelerated, the segment's other outcome-based revenues have continued to grow at a double-digit pace.

Excluding our contact center specialty where demand for certain customers as decelerated the segments. Other outcome base revenues have continued to grow at a double digit pace.

Olivier Giraud: Placement fees in P&I declined 50% and continue to be impacted by lower demand for full-time hiring. Revenue in our international segment increased 2% on a nominal currency basis and was down 6% on a constant currency basis. Performance varied depending on geography and product. For the quarter, we had good constant currency revenue growth in Mexico and Portugal that was more than offset by revenue declines in Switzerland, France, and Italy, as well as the impact of the sale of our Russian operations, which was completed in July of 2022. International placement fees were consistent with last year on a constant currency basis. Overall, gross profit was down 5.1% on a reported basis of 6.3% in constant currency. Our gross profit rate was 20.4% compared to 20.6% in Q3 of last year, a decrease of 20 basis points.

Placement fees in DNI declined, 60% and continued to be impacted by lower demand for full time hiring.

Placement fees in P&I declined 50% and continue to be impacted by lower demand for full-time hires.

Revenue in our international segment increased 2% on a nominal currency basis and was down 6% on a constant currency basis. Performance varied.

Revenue in our international segment increased 2% on a nominal currency basis and was up 6% on a constant currency basis.

Therefore months very conventional geography and product for the quarter with good constant currency revenue growth in Mexico, and Portugal, but that was more than offset by revenue declines in Switzerland, France, and Italy as well as the impact of the sale of our Russian operations, which was completed in July of 2022.

For the quarter, we had good constant currency revenue growth in Mexico and Portugal, but that was more than offset by revenue declines in Switzerland, France and Italy, as well as the impact of the sale of our Russian operations, which was completed in July of 2022. International placement fees were consistent with last year on the constant currency.

And to National placement fees were consistent with last year on a constant currency basis.

Overall gross profit was down 5.1% on a reported basis of 6.3% in concern currency. Our gross profit rate was

Overall gross profit was down five 1% on a reported basis or six 3% Ingalls hundreds.

Our gross profit rate was 24% compared to 26% in the third quarter of last year, a decrease of 20 basis points. The primary driver with 40 basis point of unfavorable impact from lower Perm fees, and 20 basis points of higher employee related costs.

compared to 20.6% in the third quarter of last year, a decrease of 20%--

Olivier Giraud: The primary driver was 40 basis points of unfavorable impact from lower perm fees and 20 basis points of higher employee-related costs. These impacts were partially offset by 40 basis points of continued improvement in structural business mix. SG&A expenses were down 1.2% year-over-year on a reported basis. Expenses for Q3 2023 include $15.4 million of charges related to our ongoing transformation efforts. On an adjusted constant currency basis, expenses declined by 9.1%, or $21 million in the quarter. The reduction reflects the positive impact of our transformation efforts, which are designed to reduce costs on a structural basis, as well as lower performance-based incentive compensation. For Q3, on a reported basis, we produced break-even earnings for operations. This compares to a loss of $21.4 million in Q3 2022.

The primary driver was 40 base points of unfavorable impact from lower PEM fees and 20 base points of higher employee-related impact.

These impacts were partially offset by 40 basis points of continued improvement in <unk> business mix.

These impacts were partially offset by 40 base points of continued improvement in structural business.

SG&A expenses were down one 2% year over year on a reported basis.

SG&E expenses were down 1.2% year-over-year on a reported basis.

Expenses for the third quarter of 2023 include 15.4 million of charges related to our ongoing transformation efforts.

<unk> expenses for the third quarter of 2023 include $15 4 million of charges related to our ongoing transformation efforts.

So on an adjusted constant currency basis, expenses declined by 9.1% or 21 million in the quarter.

So on an adjusted constant currency basis expenses declined by 99, 1% or $21 million in the quarter.

The reduction reflects the positive impacts of our transformation efforts, which are designed to reduce costs on a structural basis, as well as lower performance based incentive compensation.

So it <unk> reflect the positive impacts of our transformation efforts, which are designed to reduce cost on the structural bases as well as lower performance based incentive compensation.

For the third quarter on a reported basis, we produced breakeven earnings from operations. These compare.

For the third quarter, on a reported basis, we produced break-even earnings for operations. This compares to a loss of 21.4 million in the third quarter of 2022. As noted, our 2023 Q3 results include the 15.4 million of charges related to our transformation activities. So adjusted earnings for operations in Q3 of 2023 were 15.5 million.

<unk> to a loss of $21 4 million in the third quarter of 2022.

Olivier Giraud: As noted, our 2023 Q3 results include the $15.4 million of charges related to our transformation activities. Adjusted earnings for operations in Q3 of 2023 were $15.5 million. Our 2022 Q3 loss includes a $30.7 million goodwill impairment charge, resulting in adjusted earnings for operation in Q3 of 2022 of $9.5 million. On the like for like basis, Q3 2023 earnings for operation increased by 60%. Adjusted EBITDA margin for the quarter also improved at 2.3% compared to 1.6% a year ago, a 70 basis point improvement. Income tax benefit for Q3 was $4.9 million, consistent with our 2022 income tax benefit of $5 million. Finally, reported earnings per share for Q3 of 2023 was $0.18 per share, compared to a loss per share of $0.43 in 2022.

As noted our.

2020 suite Q3 results include the $10 4 million of charges related to our transformation activities. So adjusted earnings from operations in Q3 of 2023 were $15 5 million.

Our 2022 Q3 loss includes a $30.7 million goodwill impairment charge, resulting in adjusted earnings for operations in Q3 of 2022 of $9.5 million.

Our 2022 Qs we loss includes a $30 7 million goodwill impairment charge, resulting in adjusted earnings from operations in Q3 of 2022 of $9 5 billion.

So on a like-for-like basis, Q3 2023 earnings for operations increased by 60%.

So on a like for like basis, Q3, 2000, Twenty's, we earnings from operation increased by 60 buses adjust.

Adjusted EBDI margin for the quarter also improved at 2.3% compared to 1.6% a year ago, a 70 basis point improvement.

Adjusted EBITDA margin for the quarter also improved at two 3% compared to one 6% a year ago, a 70 basis point improvement.

Income tax benefit for the third quarter was $4 9 million.

income tax benefit for the third quarter was $4.9 million, consistent with our 2022 income tax benefit of $5.9 million.

Consistent with our 2022 income tax benefit of $5 million.

And finally, reported earnings per share for the 3rd quarter of 2023 was $0.18 per share, compared to a loss per share of $0.43 in 2022. Adjusted EPS for the 3rd quarter of 2023, excluding the transformation-related charges net of tax, was $0.56.

And finally reported earnings per share for the third quarter of 2023 was <unk> 18 per share compared to a loss per share of <unk> 43 in 2022.

Olivier Giraud: Adjusted EPS for Q3 2023, excluding the transformation related charges net of tax, was $0.50. After adjusting for the 2022 goodwill impairment charge net of tax, Q3 2022 EPS was $0.25. On a like for like basis, EPS in Q3 2023 doubled from the prior year. Moving to the balance sheet as of the end of Q3. At the end of Q3, cash total $117 million compared to $154 million at the end of 2022, and we ended Q3 2023 with no debt, consistent with substantially no debt at the end of 2022. With our $300 million in available capacity on our credit facilities and our cash balances as well as the outcome of our EMEA transaction, we continue to have ample capital available to deploy in the near future.

Adjusted EPS for the third quarter of 2023, excluding the Clos formation related charges net of tax was 50.

And after adjusting for the 2022 Goodwill Impairment Charge net of tax, Q3 2022 EPS was $0.25. So on a lack-for-like basis, EPS in Q3 of 2023 doubled from the prior year.

And after adjusting for the 2000 22 billion impairment charge net of tax Q3, 2022, EPS was <unk> 25.

So on a like for like basis EPS in Q3 of 2023 doubled from the prior year.

Now moving to the balance sheet, as of the end of Q3.

Now moving.

To the balance sheet.

As of the end of Q3.

At the end of Q3, cash total $117 million, compared to $154 million at the end of 2022. And we ended the third quarter of 2023 with no debt, consistent with substantially no debt. At the end of 2022, with our $300 million in available capacity on our credit facility.

At the end of Q3 cash flows at $117 million compared to $154 million at the end of 2022, and we ended the third quarter of 2023 with no debt.

Systems, we substantially no debt at the end of 2022.

Our $300 million and available capacity on our credit.

Facilities, and our cash balances as well as the outcome of our EMEA collection, we continue to have ample capital available to deploy in the near future.

and our cash balances, as well as the outcome of our EMEA transaction, we continue to have ample capital available to deploy in the near future.

Olivier Giraud: As of the end of Q3, accounts receivable was $1.4 billion and decreased 9% year over year, reflecting a year over year decrease in revenue as well as a decrease in DSO. Global DSO was 63 days, up to date from year end 2022, due primarily to the impact of seasonality in our Education business. DSO is 1 day lower than the same period in 2022. For Q3 2023, we generated $7 million of free cash flow, and year to date free cash flow now totals $21 million. For the quarter, we have continued to maintain lower accounts receivable balances in line with our revenue trends and DSO improvement. A portion of those receivables are related to our MSP programs and are funded with supplier payables. The lower net position has a limited impact on free cash flow generation.

As of the end of Q3 accounts receivable was $1 4 billion and decreased 9% year over year, reflecting a year over year decrease in revenue as well as a decrease in DSO.

As of the end of Q3, accounts receivable was $1.4 billion and decreased 9% year-over-year, reflecting a year-over-year decrease in revenue as well as a decrease in DSP.

Global DSO was 63 days up two days from year end 2022, due primarily to the impact of seasonality in our education business DSO is one day lower than the same period in 2020.

Global DSO was 63 days, up two days from year-end 2022, due primarily to the impact of seasonality in our education business.

The ESO is one day lower than the same period in 2020.

For the second quarter of 2023, we generated $7 million of free cash flow and year to date free cash flow now totals $21 million.

For the third quarter of 2023, we generated $7 million of free cash flow and year-to-date free cash flow now totals $21 million. For the quarter, we have continued to maintain lower accounts receivable balances in line with our revenue trends and the ESO improvement. A portion of those receivables are related to our MSP programs and are funded with supplier payables, so the lower net position has a limited impact on free cash flow generation.

For the quarter, we have continued to maintain lower accounts receivable balances in line with our revenue trends in DSO improvement a portion of those receivables are related to our MSP programs and are funded with supplier payables. So the lower net position has a limited impact on free cash flow generation.

Olivier Giraud: In the quarter, we completed the $50 million share repurchase program that we announced in November of last year, buying approximately 3 million shares during the program. I will move on to our expectation for the rest of 2023. We assume a continuation of the current market conditions, which as Peter noted, are more challenging than we had anticipated a quarter ago. We now expect Q4 nominal revenue to be down 50 to 150 basis points year over year. We expect our Q4 GP rate will be down 50 basis points year over year to about 19.8% as continued softness in demand for full-time hiring compresses permanent placement fees. The lower Q4 GP rate also reflects the normal sequential trend due to the seasonality of our Education business and continuation of the structural business mix improvement that is expected to keep our full year GP rate above 20%.

In the quarter, we completed the 50 million share repurchase program that we announced in November of last year, buying approximately 3 million shares during the program.

In the quarter, we completed the 50 million share repurchase program that we announced in November of last year by approximately 3 million shale during the program.

Now I will move on to our expectation.

Now I will move on to our expectation for the rest of 2023.

For the rest of 2020 suite.

We assume a continuation of the current market conditions, which, as Peter noted, are more challenging than we had anticipated a quarter of a century ago.

We assume a continuation of the current market conditions, which as Peter noted is more China are more challenging than we had anticipated a quarter ago.

We now expect 4th quarter nominal revenue to be down 50 to 150 BPY.

We now expect fourth quarter net revenue to be down 50 to 150 basis points year over year.

We expect our Q4 GP rate will be down 50 base points year-over-year to about 19.8%, as continued softness in demand for full-time hiring compresses permanent placement.

We expect our Q4 GP rate will be down 60 basis points year over year to about 19, 8% as continued softness in demand for full time hiring compresses permanent placement fees.

The lower Q4 GP rate also reflects a normal sequential trend due to the seasonality of our education business and continuation of the structural business mix improvement that is expected to keep our full year GP rate above 20%.

The lower Q4 GP rate also reflects the normal sequential trend due to the seasonality of our education business and continuation of the structural business mix improvement that is expected to keep our full year GP rate above 20%.

Olivier Giraud: We expect Q4 adjusted SG&A to be about 9% lower than the same period last year, consistent with Q3 and better than our expectations that we shared a quarter ago. We reacted to the more challenging top line trends and accelerated our transformation efficiency actions. As a result, we expect adjusted EBITDA margin in Q4 to be between 2.8% to 3%, reflecting the more challenging market conditions. For additional perspective, with the benefit of full year of expected transformation related savings, the impact of the sale of our European staffing business and our current top line expectations, we would expect to reach a normalized adjusted EBITDA margin in the range of 3.3% to 3.5% as discussed three months ago. That is more than 100 basis points of improvement from our historical levels of adjusted EBITDA margin, all since we began the transformation journey earlier this year.

We expect fourth quarter, adjusted G&A to be about 9% lower than the same period last year, consistent with Q3 and better than our expectations that we shared a quarter ago.

We expect fourth quarter adjusted SGNA to be about 9% lower than the same period last year, consistent with Q3, and better than our expectations that we shared a quarter

We reacted to the more challenging top-line trends and accelerated our transformation efficiency action.

We reacted to the more challenging topline trends and accelerated our transformation efficiency actions as a result, we expect adjusted EBITDA margin in the fourth quarter to be between two 8% to 3%, reflecting the more challenging market conditions.

As a result, we expect adjusted EBDM margin in the fourth quarter to be between 2.8-3%, reflecting the more challenging market conditions.

For additional perspective with the benefit of full year LOE is expected transformation related savings.

For additional perspective, with the benefit of a full year of expected transformation-related savings...

the impact of the sale of our European staffing business, and our current top-line expectations. We would expect to reach a normalized adjusted EBDI margin in the range of 3.3 to 3.5 percent as discussed three months ago.

The impact of the sale of our European staffing business and our current top line expectations, we would expect to reach a normalized adjusted EBITDA margin in the range of $3 three to three 5%.

As discussed three months ago.

That is more than 100 basic points of improvement from our historical levels of adjusted ABD margin, all since we began the transformation journey earlier this year. And I will turn it back over to Peter for additional comments.

That is more than 100 basis points of improvement from our historical levels of adjusted EBITDA margin. All since we began the transformation journey earlier this year and then ill turn it back over to Peter for additional comments. Thanks.

Olivier Giraud: Now I turn it back over to Peter for additional comments.

Peter Quigley: Thanks for those insights, Olivier. Change at this scale and speed is never easy, but together Team Kelly is proving that it is achievable. When I announced this transformation in May, I committed to you that we would optimize our business and functional operations in a sustainable manner, that we would unlock additional value creating opportunities, and most importantly, that we would find new avenues of growth. Six months into our journey, I can confidently say that we are delivering on our commitments. The measures we implemented in July to further optimize the company's operating model have taken root, catalyzing a significant improvement in our EBITDA margin with additional runway ahead. We've further strengthened our balance sheet, and with significant capital available to us, recommitted to unlocking value through organic and inorganic growth.

Thanks for those insights Olivier.

Change at this scale and speed is never easy, but together, Team Kelly is proving that it is achievable. When I announced this transformation in May, I committed to you that we would optimize our business and functional operations in a sustainable manner, that we would unlock additional value-creating opportunities, and most importantly, that we would find new avenues of growth.

Change at this scale and speed is never easy, but together team Kelly is proving that it is achievable when I announced this transformation in May I committed to you that we would optimize our business and functional operations in a sustainable manner that we would unlock additional value creating opportunities and most.

<unk> that we would find new avenues of growth.

six months into our journey, I can confidently say that we are delivering on our commitment.

Six months into our journey I can confidently say that we are delivering on our commitments. The measures we implemented in July to further optimize the company's operating model have taken root catalyzing a significant improvement in our EBITDA margin with additional runway ahead.

The measures we implemented in July to further optimize the company's operating model have taken root, catalyzing a significant improvement in our EBITDA margin with additional runway ahead.

We've further strengthened our balance sheet and with significant capital available to us recommitted to unlocking value through organic and inorganic growth.

Further strength strengthened our balance sheet and with significant capital available to us recommitted to unlocking value through organic and inorganic growth.

Peter Quigley: Through our large enterprise account strategy, we formulated a comprehensive approach to sales and delivery across business segments that will unleash the full revenue-generating potential of our blue-chip customer base and accelerate profitable growth over the long term. Through these efforts, we're closer than ever to realizing our collective ambitions for this great company. I'm grateful for the work of each and every member of Team Kelly for embracing this moment and acting with urgency and agility to deliver on our commitments. With our team moving forward together, united by our noble purpose, I'm confident that Kelly's best days are ahead of it. Kaylee, you can now open the call to questions.

And through our large enterprise account strategy, we formulated a comprehensive approach to sales and delivery across business segments that will unleash the full revenue generating potential of our blue chip customer base and accelerate profitable growth over the long term.

and through our large enterprise account strategy, we formulated a comprehensive approach to sales and delivery across business segments that will unleash the full revenue generating potential of our blue chip customer base and accelerate profitable growth over the long term.

Through these efforts, we're closer than ever to realizing our collective ambitions for this great company. I'm grateful for the work of each and every member of Team Kelly, for embracing this moment and acting with urgency and agility to deliver on our commitments. With our team moving forward together, united by our noble purpose, I'm confident that Kelly's best days are ahead of it. Kaylee, you can now open the call to questions.

Through these efforts, we're closer than ever to realizing our collective ambition for this great company I'm grateful for the work of each and every member of team Kelly for embracing this moment and acting with urgency and agility to deliver on our commitments with our team moving forward together United by our noble purpose I'm confident that.

<unk> Best days are ahead of it Kelly you can now open the call to questions.

Operator 2: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press one then zero on your touch-tone phone. You will hear an acknowledgment that you have been placed into queue, and you can 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 and then zero at this time. We will go to the line of Kevin Steinke with Barrington Research.

Thank you and ladies and gentlemen, if you'd like to ask a question. Please press one.

Thank you. And ladies and gentlemen, if you'd like to ask a question, please press 1 then 0 on your touchtone phone. You will hear an acknowledgement that you've been placed into queue and you can remove yourself from queue at any time by repeating the 1-0 command.

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 1 and then 0 at this time.

If you're on a speakerphone please pick up your handset before pressing the numbers once again for questions. Please press one and then zero at this time.

We'll go to the line of Kevin Thank you.

We'll go to the line of Kevin Stanky with Barrington Research. Good morning, Kevin.

With Barrington research.

Peter Quigley: Good morning, Kevin.

Peter Quigley: Good morning. Good morning, Kevin. Good morning. I wanted to start off by asking about the growth initiatives that are part of the transformation. You mentioned driving early results or favorable early results. I think you touched on the local branch initiative. I guess, is that part of the transformation and maybe any others that you'd want to highlight?

Good morning, Kevin Good morning, Kevin Good morning.

Um, I wanted to start off by asking about, um.

I wanted to start off by asking about.

Yes.

growth initiatives that are part of the transformation. You mentioned driving early results or favorable early results.

Growth initiatives that are part of the transformation.

Mentioned driving early results are favorable early results.

You touched on the local branch initiative.

you touched on the local branch initiative. I guess is that part of the transformation and maybe any others that you'd want to highlight? Yeah Kevin

That part of the transformation and maybe any others that.

You'd want to highlight.

Peter Quigley: Yeah, Kevin, thanks for the question. Yes, that is a significant part of the transformation. As I mentioned, we are revitalizing and re-engaging our local branch network, adding resources to local markets, the high-growth local markets, adding new technology, and essentially creating our resources or putting our resources closer to the talent and customers, as opposed to supporting them in a more centralized manner. We've seen successful results in the pilot markets, and that's why we're moving quickly and aggressively to roll it out in more US markets as we speak.

Yes, Kevin Thanks for the question, yes that is.

Yes, that is a significant part of the transformation. As I mentioned, we are revitalizing and reengaging our local branch network, adding resources to.

A significant part of the transformation as I mentioned.

We are revitalizing and.

Re engaging.

Our local branch network.

Adding resources to <unk>.

local markets, the high-growth local markets, adding new technology.

Local markets the high growth local markets, adding new technology.

And essentially creating.

and essentially creating our resources or putting our resources closer to the talent and customers as opposed to supporting them in a more centralized manner. And we've seen successful results in the pilot markets and that's why we're moving quickly and aggressively to roll it out in more U.S. markets as we speak.

Our resources are putting our resources closer to the talent and customers as opposed to.

Supporting them in a more centralized manner.

And we.

Seeing successful results in the pilot markets and Thats, why we are moving quickly and aggressively to <unk>.

To roll it out in more U S markets as we speak.

Kevin Steinke: Okay. Yeah. I was going to ask about that, if this signals a de-emphasis of the centralized staffing model or how meaningful that will continue to be going forward.

Okay, Yeah that was.

Okay, yeah, that I was going to ask about that if this signal

Can I ask about that if this signals.

you know, the emphasis of the centralized staffing model or, you know, how meaningful that will continue to be going forward.

The emphasis of the centralized staffing model or how meaningful that will continue to be going forward.

Peter Quigley: We will continue to deliver large enterprise customers through a centralized model where it makes sense. In markets where they have very large locations, a single location or a few locations, but where large enterprise customers have distributed facilities, we found that the local delivery is more efficient and effective, and we have a higher customer and talent satisfaction. We're going to optimize both models, and we will continue to look for ways to do that and expect to see the significant benefits when the macroeconomic conditions improve.

It will continue. We will continue to deliver large enterprise customers through a centralized model where it makes sense, you know, in markets where they have very large locations, a single location or a few locations, but where large enterprise customers have distributed.

We'll continue we will continue to deliver.

Sure.

Large enterprise customers through a centralized model, where it makes sense.

In markets, where.

They have.

Very large locations in single location or a few locations, but where large enterprise customers have distributed.

facilities, we found that the local delivery is more efficient and effective, and we have a higher customer and talent satisfaction. So we're going to optimize both models, and we will continue to look for ways to do that.

Facilities, we found that the local delivery is more efficient and effective and we have a higher customer and talent satisfaction.

So we're going to optimize both models and we will continue to look for ways to do that and expect to see the significant benefits when the.

and expect to see the significant benefits when the macroeconomic conditions improve.

Macroeconomic conditions improve.

Kevin Steinke: Okay, great. Can you touch also on the macro headwinds? I guess they were more pronounced in Q3. Maybe what you've seen in the environment and what maybe kind of changed since you reported Q2 results.

Okay great.

Can I just can you touch also on the.

Can I just, can you touch also on the.

macro headwinds. I guess they were more pronounced in the third quarter. Maybe what you know what you've seen in the environment and what maybe kind of changed since you reported second quarter results.

The macro headwinds I guess, there were more pronounced in the third quarter.

Maybe what.

What you've seen in the environment.

What maybe you kind of changed since you.

Reported second quarter results.

Peter Quigley: Well, we typically, as you know, Kevin, in our industry, typically see an improvement in Q3 and then in Q4 in terms of demand, and that just hasn't materialized this year. I don't think there's a significant change. It's just a continuation of customers being more cautious. They're uncertain about their own economic outlook, so they're taking longer to make decisions. They're dialing back on permanent hiring and being very judicious about how they spend their dollars. Again, we don't expect any significant change relative to what we've seen in the last few months.

Well, we typically, as you know, Kevin, in our industry typically see an improvement in Q3 and then in Q4, in terms of demand, and that just hasn't materialized this year. I don't think there's a significant

We typically as you know, Kevin and our industry typically see.

An improvement in Q3, and then in Q4.

In terms of demand and that just hasnt materialized. This year I don't think there is a significant.

Change, it's just a continuation of.

Change, it's just a continuation of customers being more cautious. They're uncertain about their own economic outlook. So they're taking longer to make decisions. They're dialing back on permanent hiring and being very judicious about how they spend their dollars. So again, we don't expect any significant change.

Customers being more cautious they are uncertain about their own economic outlook. So they are taking longer to make decisions, they're dialing back on permanent hiring and.

Being very judicious about how they spend their dollars. So again, we don't expect.

Any significant change.

<unk>.

uh... relative to uh... you know what we've seen in the last few months

Relative to.

What we've seen in the last few months.

Kevin Steinke: Okay. Wanted to dive down into a couple of the segments here. Really, when I look at Education, the operating leverage you're getting there on SG&A has been impressive in terms of improving operating margin over time. It doesn't look like you really took cost out there related to the transformation, but maybe just speak to the operating leverage you've been seeing there and the opportunity for further leverage going forward in Education.

Okay.

Sure.

Yes.

I wanted to dive down into a couple of the segments here. Really, you know, when I look at education...

And to dive down into a couple of the segments here.

Really when I look at education.

The operating leverage you're getting there on SG&A has been impressive.

The operating leverage you're getting there on SG&A has been impressive in terms of improving operating margin over time. It doesn't look like

In terms of improving operating margin over time.

It doesn't look like.

You really took cost out there related to the transformation, but maybe just speak to.

the operating leverage you've been seeing there and the opportunity for further leverage going forward in education.

The operating leverage you've been seeing there and the opportunity for <unk>.

Further leverage going forward in education.

Peter Quigley: Yeah. Thanks, Kevin. I'll turn it over to Olivier to provide some details, but

Yeah, thanks, Kevin. I'll turn it over to Olivia to provide some details.

Thanks, Kevin I'll turn it over to Olivia to provide some some details but.

Peter Quigley: We're very pleased with the impressive growth we've seen in Kelly Education. Not only with existing accounts and customers, but with new school districts that we're winning. Pipeline looks strong. The fact is that our business is growing at a pace that we need more people to support the school districts, the new wins, and standing up some of these big programs. The Kelly Education business unit did participate in the transformation review and analysis and, in fact, took a number of optimizing steps that will continue to, in order to benefit of their overall results.

You know, we're very pleased with the impressive growth we've seen in education, not only with existing accounts and customers, but with new school districts that we're winning. A pipeline looks strong. The fact is that we've, our business is growing at a pace that we need more people to support the school districts, the new wins, and standing up some of these big programs.

We're very pleased with the impressive growth we've seen in education.

Not only with existing accounts and customers, but with new.

<unk> districts that were winning our pipeline looks strong.

The fact is that we have.

Our business is growing.

At a pace that.

We need more people to support the school districts, the new wins and standing up some of these big programs.

But the education business unit did participate in the transformation review and analysis and in fact created a number of

But the.

Education business unit did participate in the transformation.

<unk> review and analysis and in fact.

Created a number of.

took a number of optimizing steps that will continue to in order the benefit of their overall results. Yeah, we continue to see the top line growing despite of a growing base. Key Lead 22-23% growth in revenue in Q3. On the leverage, I would say, yeah.

Took a number of optimizing steps that we will continue to in order to the benefit of their overall results.

Olivier Giraud: Yeah. We continue to see the top line growing despite a growing base. Still at 22% to 23% growth in revenue in Q3. On the leverage, I would say yeah. We continue to leverage, and one of the key KPI we use, the incremental conversion rate, is still very, very good. We expect that to continue in the near future. On the transformation, I agree with Peter. It's a high-growth business. We have done some transformation initiatives, but it was more streamlining, simplifying the structure, and continue to invest in growth in our people because of the top line that is continuing to grow at a very fast pace.

We continued to see the topline growing despite of the growing base.

He led 'twenty, two 'twenty, 3%, losing revenue.

In Q3.

On the on the leverage I would say, yes, I mean, we.

We continued to leverage and one of the key Kpis, we use the incremental conversion rate. It's still very very good we expect that to continue.

We continue to leverage, and one of the key KPI we use is incremental conversion rate. It's still very, very good. We expect that to continue in the near future.

Future.

And on the transformation I agree we split our revenue it's a high growth business, we have done some transformation initiatives, but it was more streamlining central San Francis yet simplifying the structure and continued to invest in growth.

And on the transformation, I agree with Peter, I mean, it's a high-growth business. We have done some transformation initiatives, but it was more streamlining, simplifying the structure and continue to invest in growth in our people because of the top line that is continuing to grow at a very fast rate.

In our people.

Because of the topline that just continues to grow at a very fast pace.

Yes.

Kevin Steinke: Okay, great. Thank you. I also wanted to ask about the KellyOCG segments. That continues to generate strong gross margins, about 36%. Although the SG&A expenses as a percent of revenue, kind of in the low 30s, and that's always been meaningfully higher as a percent of revenue than some of the other segments. It looked like you took a small charge there, transformation-related charge in the quarter. Can you just refresh me on just the SG&A expense base there, and is there opportunity to get that lower over time and really get more profitability out of that high gross margin, those gross profit dollars, than you currently are?

Okay, great. Thank you I also wanted to ask about the OCG.

Okay, great. Thank you. I also wanted to ask about the OCG segment.

Segments.

That continues to generate strong gross margins about 36%.

That continues to generate strong gross margins, about 36%.

Although, the SG&A expenses is a percent of revenue, kind of in the low 30s, and that's always been meaningfully higher as a percent of revenue than some of the other segments.

Although SG&A expenses as a percent of revenue.

Kind of in the low thirties.

That's always been meaningfully higher as a percent of revenue in some of the other the other segments.

It looked like you took a small charge there, transformation related charge in the quarter, but.

It looks like you took a small.

Charge, there transferring relate transformation related charge in the quarter, but.

Can you just refresh me on just the SG&A expense base there, and is there opportunity to get that lower over time?

Can you just refresh me on just the SG&A expense base, there and is there opportunity to get that.

Lower over time.

<unk>.

Get more profitability out of those high gross margin those gross profit dollars than you currently are yes.

get more profitability out of that high gross margin, those gross profit dollars than you currently are.

Olivier Giraud: Definitely, yes. In terms of the efficiency side of our transformation, you are going to see it in a more visible way in KellyOCG in Q4. That's going to continue in the near future in terms of optimizing our delivery model in various locations and various products. That's something that is more a timing point than anything else. You're going to see more of that in Q4 and later on. Now, having said that, it's a high-margin business, especially around RPO and MSP. Of course, the cost to deliver, especially MSP, is also the cost of our footprint outside of the US. We are still confident that we can continue to leverage this business in the future. Our pipeline is very good in KellyOCG, as it is in most of our segments.

Yeah, definitely, yes. I mean, in terms of the efficiency side of our transformation, you are going to see it in a more visible way in OCG in Canada.

Yes, <unk>, yes, I mean in terms of the efficiency side of our transformation.

You are going to seat in a more visible way in OCG and in Q4.

And that's going to continue in the near future in terms of optimizing our delivery model in various locations and various products. So that's something that is more a timing point than anything else. You're going to see more of that in Q4 and later on. Now, having said that, it's a high...

And thats going to continue in the near future and demo optimizing our delivery model in values locations and values products. So that's something that is.

More timing points, and then you guys youre going to see more of that in Q4 and later on.

Now whether you can say that it's a high margin business.

especially around RPO and MSP. Of course, the cost to deliver, especially MSP, is also the cost of our footprint outside of the U.S.

Especially around <unk> MSP.

Of course, who close to deliver especially MSP.

<unk> is also the cost of our footprint outside of the U S. But we are still confident that we can continue to leverage each business in the future our pipeline is very good.

but we are still confident that we can continue to leverage this business in the future. Our pipeline is very good in OCG as it is in most of our segments and I believe we are going to start to see some additional traction in the next coming months.

<unk> as it is in most of our segments.

Olivier Giraud: I believe we are going to start to see some additional traction in the next coming months on the top line as well.

And I believe we are going to start to see some additional traction in the next coming months on the top line as well.

Kevin Steinke: Okay, great. That's good color. Just lastly, just from a reporting perspective going forward, once the sale of the European staffing business is closed, does the international segment just completely go away? I know you still have Mexico in there.

Okay great.

Okay, great. That's good color. Just lastly, just from a reporting perspective, going forward once say all the European staffing businesses close, does the international segment just

Good good color on.

This lastly, just from a reporting perspective going forward once the <unk>.

Sale of the European staffing businesses closed the international segment.

Lately go away I know you still have Mexico in there just wondering.

completely go away. I know you still have Mexico in there, just wondering what happens there. Yeah, if you think about it, basically...

Olivier Giraud: Yeah

Kevin Steinke: what happens there.

What happens there.

Olivier Giraud: Yeah. If you think about it, basically, if you want to look at some of the numbers and figure out a little bit the scope of what we are selling to GI, it is basically the total international segment excluding Mexico. Just to give you an idea on revenue, if you extrapolate our international business, the revenue is at about $880 million. I would say Mexico is around $70 million. You can see that on our 8-K. What basically we are transferring to GI or selling to GI is about $810 million to $820 million of revenue. The Mexican business basically is going to move to P&I, so the international segment will no longer exist.

Where are you seeing about it basically.

She wanted to look at some of the numbers and figure out a little bit the scope of what.

If you want to look at some of the numbers and figure out a little bit the scope of what may be possible.

We are saving to GI is basically the total international segment, excluding Mexico.

we are selling to GI. It's basically the total international segment, excluding Mexico. Just to give you an idea on revenue, if you extrapolate our international business, the revenue is at about 880 million, I would say.

Just to give you an idea on revenue if you extrapolate our international business revenue is at about 800 then.

<unk> Union.

I would say.

Mexico is around $70 million. You can see that on our 8K. So what basically we are transferring to GI or selling to GI is about $810 to $820 million of revenue. The Mexican business basically is going to move to P&I. So the international segment will no longer

Mexico is around $70 million you can see that on our 8-K, so what basically we are.

Covering two Gi youll sitting to Gi is about $810 million to $820 million of revenue.

The Mexican business basically is going to move to P&I. So the international segment will no longer exist.

Peter Quigley: We'll have four.

We will have four.

Olivier Giraud: Okay, perfect.

We'll have four business units. So the big change is going to be P&I is going to include Mexico because that's where it is best suited for the future in terms of synergies and continue to accelerate growth. Our Mexican business now is very successful. We go at a very fast pace and we expect that to continue.

Kevin Steinke: Yeah.

Kevin Steinke: Four business units. The big change is going to be P&I is going to include Mexico because that's where it is best fitted for the future in terms of synergies and continue to accelerate growth. Our Mexican business now is very successful. We grow at a very fast pace, and we expect that to continue.

And the follow up.

And so the <unk> is going to be P&I is going to include Mexico, because thats, where it is best for the future in terms of synergies and continued to accelerate growth.

Our Mexican business that was very successful we grew at a very fast pace.

Our base and we expect that to continue.

Kevin Steinke: Okay, perfect. Thank you. I'll turn it back over. Appreciate the.

Okay perfect. Thank you I'll turn it back over to Kevin and Thank you Kevin.

Okay, perfect. Thank you. I'll turn it back over. Appreciate the Kevin. Thank you, Kevin.

Olivier Giraud: Thank you, Kevin

Kevin Steinke: answer.

Kevin Steinke: Thank you, Kevin.

Operator 2: Thank you. We'll go next to the line of Kartik Mehta with Northcoast Research.

Thank you we'll go next to the line of.

Thank you. We'll go next to the line of Karthik Mehta with North Coast Research. Good morning, Karthik.

Kartik Mehta with Northcoast research.

Peter Quigley: Morning, Kartik.

Peter Quigley: Good morning.

Good morning Kartik.

<unk>.

Okay.

Operator 2: Mr. Mehta, your line is open.

Mr. Mehta Your line is open.

Kartik Mehta: Can you hear me?

Can you hear me.

Can you hear me? We're having. Yeah, now we're, yeah. Yeah, now. Morning. Sorry, morning. Sorry about that. No, congratulations on the sale of the European business. And I'm wondering, as you look to deploy that money, are there opportunities in the marketplace which would enhance maybe the revenue growth, the margin profile of the company, and is the pricing at the current time something that makes sense, or is it something that you would wait on considering what's available out there?

Olivier Giraud: Yeah, now we can.

Yes.

Kartik Mehta: Yeah. Sorry. It's morning. Sorry about that. No, congratulations on the sale of the European business. I'm wondering, as you look to deploy that money, are there opportunities in the marketplace, which would enhance maybe the revenue growth, the margin profile of the company? Is the pricing at the current time something that makes sense, or is it something that you would wait on considering what's available out there?

Sorry, this morning, sorry about that congratulations on the sale of the European business and I'm wondering as you look to deploy that money are there opportunities in the marketplace.

Which would enhance maybe the revenue growth the margin profile of the company and is the pricing at the current time.

That makes sense or.

Is it something that you would wait on considering what's available out there.

Peter Quigley: Kartik, as I said in my comments, we're unlocking significant capital with the deal that we've signed with the Gi Group, in addition to our very strong balance sheet. We think there are opportunities to enhance our portfolio, high margin, high growth businesses, and we're aggressively seeking to identify those properties. The pipeline for properties is less robust than it has been, say, 18 months ago. We expect that to turn around as greater visibility into the future economic conditions and companies come off the sidelines. There are still quality properties that are interested in a combination or a sale to a company like Kelly, and we're actively pursuing those, as I said, to add to our portfolio, particularly in our science, engineering, and technology and telecom business, as well as education, and opportunistically in KellyOCG.

Cardic, we're, as I said in my comments, we're unlocking significant capital with the

Kartik, we're as I said in my.

My comments were.

Unlocking significant capital with the.

deal that we've signed with the GI group, in addition to our very strong balance sheet. We think there are opportunities to enhance our portfolio, high margin, high growth businesses, and we're aggressively...

Deal that we've signed with the Gi group.

In addition to our.

Very strong balance sheet.

We think there are opportunities to.

To enhance our portfolio of high margin high growth businesses.

And we're aggressively.

seeking to identify those properties. The market right now is, the pipeline for properties is,

Seeking to identify those those properties.

The market right now is the pipeline for.

Properties is less.

Less.

robust than it has been, say, 18 months ago, but we expect that to turn around as

Robust than it has been say 18 months ago.

But we expect that to turn around us.

greater visibility into the future economic conditions and...

Greater visibility into the.

Future economic conditions.

Companies come off the sidelines.

companies come off the sidelines. But there are still quality properties that are

But there are still quality properties that are.

Interested in a combination or a sale to a company like Kelly and we're actively pursuing those.

interested in a combination or a sale to a company like Kelly, and we're actively pursuing those.

Two as I said to add to our portfolio.

to, as I said, to add to our portfolio, particularly in our science, engineering, and technology and telecom business, as well as education, and opportunistically in OCJ.

Particularly in our science engineering, and technology, and telecom business as well as education.

And Opportunistically in OCG.

Kartik Mehta: As you look at the trends throughout the quarter and into October, any changes, are they getting better or worse, the same?

And then as you look at the trends throughout the quarter and into October , any changes, are they getting better or worse, the same?

And then as you look at the trends throughout the quarter and into October any changes are they getting better worse the same.

Olivier Giraud: I would say when you look at our September exit rate, we are in constant currency, basically at -2.4, which is basically the midpoint of our guidance. If you move it from nominal currency to a constant currency, we expect about 140 basis point of favorable FX. This is where we have ended the quarter. One of the point to consider, of course, for September but also Q4, is basically the education seasonality that we have started to see again in September that is going to continue to get us some good traction on the top line. Apart from that, when you really look at without education or excluding education, we have not seen a lot of changes between total Q3 revenue-wise by segment versus September exit rates.

I would say when.

I would say, when you look at our September exit rate,

When you look at our September exit rate.

<unk>.

We are in constant currency, basically at minus 2.4, which is basically the midpoint of our guidance. If you move it from nominal currency to a constant currency, we expect about 140 base points of favorable effect.

We are in constant currency basically at minus two four which is basically the midpoint of our guidance as you move it from nominal currency constant currency, we expect about 140 basis points of favorable FX. So these where we have ended the quarter.

One other point to consider of course.

For September but also Q4 is basically the education seasonality that we have started to see you again in September that he's going to continue.

September , but also Q4, is basically the education seasonality that we have started to see again in September that is going to continue to...

Get us some good traction in the topline a platform that's when you really look at.

Please out educational excuse me an indication we have not seen a lot of changes between.

Q3 revenue wise by segment.

Through September <unk> XE trades.

Olivier Giraud: We have not seen, of course, improvement either, but not really something that will tell us that the trends are going to be significantly different in Q4. The main item is, of course, for Q4, high seasonality in Kelly Education. That, of course, with the same type of growth we have seen so far, would contribute more dollar-wise to the total revenue of Kelly, simply because of the fact that Q4 is high seasonality for Kelly Education.

We have not seen of course improvement easier, but not really something that would tell us that the trends are going to be significantly different in Q4, the main item.

that the trends are going to be significantly different in Q4. The main item is, of course, for Q4, high seasonality in education, that, of course, with the same type of growth we have seen so far, would contribute more dollar-wise to the total revenue, really, simply because of the fact that Q4 is high season, Q4 is

<unk> is of course for Q4 high seasonality in education that of course with the same type of growth. We have seen so far would contribute more dollar wise to the total revenue simply because of the fact that Q4 <unk>.

The litigation.

Kartik Mehta: Just one last question. Have you seen any change in competitive behavior, pricing or anything as the market continues to struggle a little bit?

And then just one last question have you seen any change in competitive behavior or pricing or anything that the market continues to struggle look bad.

And then just one last question, have you seen any change in competitive behavior, pricing or anything as the market continues to struggle a little bit?

Yes.

Peter Quigley: Well, we always see certain competitors that respond to a challenging macroeconomic environment by adjusting their pricing. We continue to maintain our price discipline and sell the value of working with Kelly. We will continue to do so. We haven't seen, I would say, wide scale changes among the largest players. It typically is smaller regional players that will try to compensate for slower demand by taking a price decrease for a period of time. We haven't seen it on a wide-scale basis.

Well, we always see, you know, certain competitors that respond to a challenging macroeconomic environment by adjusting their pricing. We continue to sell, maintain our price discipline and sell the value of working with Kelly. And we continue, we will continue to do so. We haven't seen, I would say, wide scale changes among the...

Well, we always see.

Certain competitors that respond to a challenging macroeconomic environment by.

Adjusting their pricing we continue to sell.

<unk> maintained our price discipline and sell the value of working with Kelly.

And we continue we will continue to do so.

We haven't seen I would say wide scale changes among the.

uh... the largest players it typically is smaller regional players that will try to uh...

The largest player as it typically is smaller regional players that will try to.

Compensate for slower slower demand by taking.

compensate for slower, slower demand by taking

A price decrease for a period of time.

a price decrease for a period of time and so we haven't we haven't seen it on a

We haven't.

We haven't seen it on a wide scale basis.

Kartik Mehta: Thank you very much. I really appreciate it.

Okay. Thank you very much I really appreciate it yeah. Thank you. Thank you.

Thank you very much. I really appreciate it. Yep. Thank you.

Peter Quigley: Yeah. Thank you.

Olivier Giraud: Thank you.

Operator 2: Thank you. We'll go next to the line of Joe Gomes with Noble Capital Markets.

Thank you we'll go next to the line of Joe Gomes with noble capital markets.

Thank you. We'll go next to the line of Joe Gomez with Noble Capital Marks.

Peter Quigley: Morning, Joe.

Olivier Giraud: Good morning.

Good morning, Joe Good morning.

Morning, Joe. Good morning. Morning. Yeah, this is actually Josh's phone. We're filling in for Joe. Oh, OK. Morning. So I just kind of want to get a quick start on.

[Analyst] (Noble Capital Markets): Morning, guys. This is actually Josh. I was fulfilling in for Joe.

Morning, guys. This is actually Josh fulfilling in for Joe Okay. Good morning.

Peter Quigley: Oh, okay. Morning.

[Analyst] (Noble Capital Markets): I just kind of wanted to get a quick start on seeing, just on looking at your segments here, everything seemed to be kind of neutral, or everything, sorry, seemed a little bit down. I just kind of want to get a basis on, like, what was going on in the quarter that led to that.

Yes.

So I just kind of wanted to get a quick start on them.

I'm seeing just on looking at your segments here, everything seems to be kind of neutral. Sorry, I just see you move a little bit down.

Things on looking at your segments here everything seems to be kind of neutral.

So you tend to see a little bit down.

I can only get it.

a basis on like what was going on in the quarter that led to that.

Basis, Unlike what was going on in the quarter that led to that.

Peter Quigley: Well, yeah, the big outlier is obviously Kelly Education, which we've discussed. The challenging macroeconomic conditions, because of our being in a cyclical business, we're impacted by that as customers reduce their permanent hiring, which shows up in the significant drop in our fee-based business. As I mentioned earlier, customers are cautious about the outlook or their own outlook, they're taking longer to make decisions. They're not adding shifts. They're just sort of maintaining their operations. That's what we're seeing in the results. We haven't, as Olivier mentioned and I mentioned, we haven't seen any significant change, and don't see on the horizon any significant change, and would expect that we will continue to pursue our growth initiatives to take share in this environment.

Okay.

Well, yes, the big Big.

Well, yeah, the big big outlier is obviously education, which we've discussed the the challenging macroeconomic conditions, because of our being in a cyclical business, we're impacted by that as as customers reduce their permanent hiring, which shows up in a significant drop in our fee based business.

Outlier is obviously education, which we've discussed.

The challenging macroeconomic conditions because of our being in a cyclical business were impacted by that.

Customers reduce their permanent hiring which shows up in a significant drop in.

Our fee based business.

As I mentioned earlier, customers are cautious about the outlook, or their own outlook, and so they're taking longer to make decisions, they're not adding shifts, they're just sort of maintaining their operations, and that's what we're seeing in the results. We haven't, as Olivier mentioned and I mentioned, we haven't

As I mentioned earlier customers are cautious about the outlook.

Are their own outlook and so they are taking longer to make decisions, they're not adding shifts there just.

Maintaining their operations.

That's what we're seeing in the in the results.

We haven't as Olivier mentioned and I mentioned, we haven't seen any significant.

seen any significant change, and don't see on the horizon any significant change.

Change.

And.

Don't see on the horizon any any significant change.

<unk>.

And would expect that.

and would expect that we will continue to pursue our growth initiatives to take share in this environment. And as I mentioned during my comments, we're encouraged by the early indications of some of the initiatives that we've started.

We will continue to.

Pursue our growth initiatives to take share in this environment and.

Peter Quigley: As I mentioned during my comments, we're encouraged by the early indications of some of the initiatives that we've started, whether it's at the enterprise account level or within our P&I business segment. We have initiatives underway in all of our business units to capture share during this relatively sluggish period of demand.

As I mentioned during my comments, we are encouraged by the early indications of some of the initiatives that we've started whether it's at the enterprise account level or within our P&I.

whether it's at the enterprise account level or within our P&I business segment. But we have initiatives underway in all of our businesses.

Business segment, but we have initiatives underway in all of our business.

units to capture share during this relatively sluggish period of demand.

Units too.

Capture share during this.

Relatively sluggish period of demand.

[Analyst] (Noble Capital Markets): Okay, great. Obviously, kind of shifting to the international staffing sale. I know you guys touched on it at least a little bit briefly, but how does that sale really impact Kelly in terms of revenue and EBITDA? What should we expect in 2024? Just any kind of additional color on that would be helpful.

Okay great.

And obviously kind of switching and shifting to the international.

And it's obviously kind of swift shipping to the international safety sale. It's kind of, I know you guys touched on it a little bit recently, but how does that sale really kind of impact Kelly in terms of revenue and what should we expect in 2024? Does any kind of additional color on that would be helpful? So you mean

I think so.

And kind of I know.

You touched on it makes it a little bit recently, but.

How does that sale really kind of impact Kelly in terms of revenue, but I can.

What should we expect in 2024 and is there any kind of.

Additional color on that would be helpful.

Olivier Giraud: You mean, just to clarify, the impact on the pro forma basis of basically getting international, with the exception of Mexico, being monetized, or?

So you mean just to clarify the.

impact on a pro-forma basis of basically getting international, with the exception of Mexico, being monetized? Yes, that's right.

Impact on a pro forma basis of basically getting.

And to national with exception of Mexico, being being monetize or.

[Analyst] (Noble Capital Markets): Yes, that's right.

Yes, that's right.

Olivier Giraud: Yeah. If you take the transaction and the perimeter of this transaction, and you apply it to 2023 to get a sort of pro forma, and you think about the impact, yes, there are going to be a visible impact on revenue, as I said a few minutes ago. That's going to reduce our revenue base by about $820 million. Now, thinking about that, it is going to improve our mid to long-term growth potential on the top line. It's going to reduce our FX exposure, because most of it is coming from this international business. It's going to improve our gross margin rate by about 100 basis points simply because the international business is doing a good job, but for market reason, their GP rate is lower than the average, so it should lead us to get a 100 basis point gross margin improvement.

Yes, if you issue.

If you.

Take the transaction and the perimeter of this transaction and you apply it to 2023 to get a sort of pro forma.

Take the collection in the perimeter of this transaction and you apply to 2020 suite together sort of pro forma.

and you think about the impact. Yes, there are going to be a visible impact on revenue. As I said a few minutes ago, that's going to reduce our revenue base by about $820 million. Now, thinking about that, it's...

And you think about the impact yesterday are going to be of EBIT impact on revenue as I say of human <unk>.

That's going to reduce our revenue base by about $820 million.

Now thinking about that.

It is going to improve our mid to long term growth potential in the topline.

It is going to improve our mid- to long-term growth potential on the top line, it's going to reduce our FX exposure because most of it is coming from this international business, it's going to improve our growth margin rate by about 100 basis points simply because the international business is doing a good job.

He is going to reduce our FX exposure because most of it is coming from <unk> International business.

<unk> is going to improve our gross margin rate by about 100 basis points simply because the international business is doing good job but for.

Market reason, there a GP rate is lower than the average so it should lead us to get to 100 basis point gross margin improvement.

market reason, their GP rate is lower than the average, so it should lead us to get a 100 base point gross margin improvement. And on the pure EBDA margin, as Peter and myself did share during our prepared remark, if you...

Olivier Giraud: On a pure EBITDA margin, as Peter and myself did share during our prepared remarks, if you just look at the current year and you exclude the perimeter of this EMEA staffing transaction, basically it has an impact, a positive impact, on our net margin by about 30 basis points. I would just add also an impact on DSO. Historically, and it's not Kelly, it's just Europe, DSO are usually on average higher than in North America. It should create a benefit of about 2 days of DSO, so improving our working capital and free cash flow generation.

And on the pure EBITDA mounting as Peter and myself detail during our prepared remarks.

Bema octaves, you should just.

Look at the current year on <unk>.

look at the current year and you exclude the perimeter of this EMEA staffing.

Exclude the perimeter of this.

EMEA staffing.

transaction, basically it has an impact, a positive impact, on our net margin by about 30 basis points. And it would just add also an impact on DSO historically, and it's not Kelly, it's just Europe , DSO are usually on average higher than in North America, so it should create a benefit of about two days of DSO, so improving our working capital and free cash flow generation.

Collection basically it has an impact a positive impact on our net margin by about 30 basis points and it will just add also an impact on DSO.

Historically, and it's not just Europe DSO are usually on average higher than in North America. So it should create a benefit of about two.

Two days of DSO, so improving our working capital and free cash flow generation.

[Analyst] (Noble Capital Markets): Okay, great. Just the last one from me, we'll get back in the queue. I didn't hear much about the kind of the digital workers program you guys put out earlier in the year. I kind of want to just get a handle on that. You guys get any additional interest since you last spoke about it? How's the pipeline kind of been looking for that program?

Okay great.

Okay, great. And then this is the last one from me. We're getting back into queue is that I didn't hear much about the kind of the digital workers program you guys put out earlier in the year. I kind of wanted to kind of get a handle on that. You guys getting additional interest and she last spoke about it. How's the pipeline kind of been looking for that program.

And then just last one from me bring it back into queue is them.

I didn't hear much about that.

The digital workers program, you guys put out earlier in the year.

I kind of wanted just kind of.

Get a handle on that you guys getting any additional interest since you last spoke about it how does the pipeline kind of been looking for that program.

Peter Quigley: Yeah. We're very encouraged by the, I would call it, the digital innovation and ability that we've demonstrated to bring technology and incorporate it in solutions to our customers. I mentioned we have technology we're deploying in our Professional & Industrial segment in the optimized local delivery. Kelly Helix, which is in our KellyOCG segment, continues to develop new tools and expanded solutions. The digital worker automation product that we launched earlier continues. A lot of customers are asking about it and trying to figure out how to capitalize on that. We announced Kelly ARC, which is a robotic process automation jobs platform, in the quarter. All of these are the culmination of a very intentional strategy to deploy technology, including generative AI, both in our processes but also in solutions that benefit our customers and also the talent that we place.

Yeah, we're, we're very encouraged by the, I would call it the, the digital innovation and ability that we've demonstrated to bring technology

We're very encouraged by the I would call it that the digital.

Innovation and <unk>.

Ability that we've demonstrated to bring technology.

And incorporate it in solutions to our customers I mentioned.

and incorporate it in solutions to our customers. I mentioned we have technology we're deploying in our professional industrial segment in the.

We have technology, we're deploying in our professional and industrial segment in the.

<unk>.

Optimized local delivery.

optimized local delivery. Kelly Helix continue, which is in our OCG segment, continues to develop new tools and expanded solutions. The digital worker automation product that we launched earlier continues. You know, a lot of customers are asking about it and

We Kelly helix.

Continue which is in our OCG segment continues to.

Develop.

New tools and.

Expanded solutions.

The digital worker automation product that we launched earlier continues a lot of customers are asking about it and.

trying to figure out how to capitalize on that. We announced a Kelly Arc, which is a robotic process automation jobs platform in the quarter. So all of these are the.

Trying to figure out how to <unk>.

Capitalize on that we announced a.

Kelly arc, which is.

Robotic process automation jobs platform in the quarter.

So all of these are the culmination of a very intentional strategy to deploy.

culmination of a very intentional strategy to deploy technology, including generative AI, both in our processes, but also in solutions that benefit our customers and also the talent that we place.

Technology, including generative AI, both in our processes, but also in solutions that benefit our customers and also the talent that we place.

[Analyst] (Noble Capital Markets): Okay, great, guys. Thanks for answering my question.

Okay, great guys. Thanks for asking the question.

Peter Quigley: Thanks, Josh.

Thanks, Josh.

Operator 2: Thank you. We'll go next to the line of Marc Riddick with Sidoti.

Thank you. We'll go next to the line of Mark Riddick with Sudoti.

Thank you we'll go next to the line of Marc Riddick with Sidoti.

Peter Quigley: Morning, Marc.

Olivier Giraud: Morning.

Good morning, Mark Good morning, good morning.

Marc Riddick: Morning.

Marc Riddick: It's certainly been a busy year for you. I wanted to just sort of touch a little bit on the growth initiatives and maybe what we're thinking about from an AI standpoint of sort of the rollout, implementation, and timeframe. Also, as those were developed, if you could talk a little bit about maybe sort of incremental investments needed either in personnel, technology spend, or the like that we should be thinking about and whether there's any lumpiness to that or any concentration in that.

So it's certainly been a busy year for you I wanted to just sort of touch a little bit on the growth initiatives and maybe what were thinking about from.

So it's certainly been a busy year for you. I wanted to just sort of touch a little bit on the growth initiatives and maybe what we're thinking about from.

a standpoint of sort of the rollout and implementation and time frame. And then also, as you, as those were developed and

A standpoint of sort of.

The rollout and implementation and timeframe and then also as you.

Were developed and if you could talk a little bit about maybe.

if you could talk a little bit about maybe sort of incremental investments needed either in personnel, technology spend, or the like that we should be thinking about, and whether there's any lumpiness to that.

So our incremental investments needed either personnel technology spend or the like that we should be thinking about and whether there's any lumpiness to that or any concentration of that.

Peter Quigley: Yeah. The transformation initiative that I announced in May, as I indicated then, really had two components, one, efficiency, and the second, growth. Just by way of the speed to execution, we focused on our efficiency objectives and now are in full swing, focused on the growth initiatives. There are initiatives, as I mentioned earlier, in each of our business segments. There are initiatives in our enterprise function to try to enable our business units to focus on growth. There are initiatives at the enterprise level, all of which are at different stages. We're mindful of needing to sequence our investments, consistent not only with our top-line results, but also with ensuring that we have a sort of consistent spending and don't overburden the enterprise in any particular way.

Yeah, so the the transformation initiative that I announced in May, as I indicated, then really had two components, one efficiency and the second growth and

Yes, so the.

Transformation initiative that I announced in May as I indicated then really had two components one.

Efficiency and the second growth.

<unk>.

Just by way of.

just by way of the speed to execution, we focused on our efficiency objectives and now are in full swing focused on the growth initiatives.

The speed to execution.

Focus on our efficiency objectives, and now are in full swing focussed on the growth initiatives.

And.

There are initiatives, as I mentioned earlier, in each of our business segments. There are initiatives.

There are.

Initiatives as I mentioned earlier in each of our business segments there are initiatives.

in our enterprise function to try to enable our business units to focus on growth. And then there are initiatives at the enterprise level, all of which are at different stages, and we're mindful of needing to sequence our investments consistent not only with our top one. And so we're mindful of that. We're mindful of that.

In our enterprise function.

To try to enable our business units too.

Focus on growth and then there are initiatives at the enterprise level all of which are at.

Current stages and we're mindful of.

Needing to sequence our investments.

Consistent not only with our.

<unk>.

Top line.

Results, but also ensuring that we have.

results, but also with ensuring that we have a sort of consistent.

Sort of consistent.

spending and don't overburden the enterprise in any particular way. But most of these initiatives are going to occur because of some of the efficiency initiatives that we took with reducing spans and layers.

Spending in <unk>.

Don't overburden the enterprise.

In a particular way, but most of these initiatives are going to occur because of some of the efficiency initiatives that we took with reducing spans and layers.

Peter Quigley: Most of these initiatives are going to occur because of some of the efficiency initiatives that we took with reducing spans and layers, putting more resources on the front line, enabled by technology. I don't expect there to be any significant, I think you used the word lumpiness, in terms of our investments in either technology or resources, with the possible exception of it's not necessarily lumpy because we have the top line to support the growth in education.

putting more resources on the front line, enabled by technology. So I don't expect there to be any significant, I think you used the word lumpiness.

Putting more resources.

The frontline enabled.

Enabled by technology.

No I don't.

Expect there to be any significant.

I think you used the word lumpiness.

in terms of our investments in either technology or resources, with the possible exception of, and it's not necessarily lumpy because we have the top line to support the growth in education.

In terms of.

Our investments in either technology or resources with the possible exception of and it's not necessarily lumpy because we have the top line to support the growth in education.

Marc Riddick: Okay, great. I was wondering if you touched on this a little bit, I just wanted to follow up on the potential acquisition pipeline. Congratulations on the sale in Europe with the cash flow you're going to be able to work with. I was wondering if you'd talk a little bit about, I understand that maybe the pipeline is not as good, I think your words were that it wasn't as attractive as maybe it was 18 months ago or so. Are there any particular pockets that you think can improve or target areas that you think that you kind of have an eye on that have the opportunity to improve over the next few months? Is it really more of a pricing ability issue or just availability of some attractive targets? Thank you.

Okay, great, and then I was wondering if you could, you touched on this a little bit, I just wanted to follow up on the potential acquisition pipeline, and congratulations on the sale in Europe and so, you know, with the cash flow you're going to be able to work with. I was wondering if you'd talk a little bit about maybe just

Okay, Great and then I was wondering if you could you touched on this a little bit I just wanted to follow up on.

The potential acquisition pipeline and congratulations on the.

On the sale in Europe and so.

Cash flows are you going to be able to work with.

I was wondering if you could talk a little bit about maybe just.

I understand that maybe the pipeline is not as good I guess, maybe I think your words were that it wasn't as attractive as maybe it was 18 months ago or so.

I understand that maybe the pipeline is not as good. I guess maybe, I think your words were that it wasn't as attractive as maybe it was 18 months ago or so. Are there any particular pockets that you think can improve or target areas that you think that you kind of have an eye on that have the opportunity to improve over the next few months? And is it really more of a pricing issue or just availability?

Are there any particular pockets that.

They can improve or target areas that you think.

Kind of have an eye on.

That have the opportunity to improve over the next few months or is it really more about pricing the ability issue or just availability of some attractive targets.

Peter Quigley: I would say on a reactive basis, companies that are bringing themselves to market, it's still a little bit tepid. I mean, the quantity is there, but the quality isn't there, and we're not gonna chase properties unless they are high growth, high margin quality, and that it would be a good fit for Kelly. About three years ago, when we set up our operating model, we recognized that we needed to be more proactive in generating a pipeline of acquisition targets, and we've been at work doing that. The areas that we're focused on are in technology and education, and SET in general, so science, engineering, technology, and telecom, and opportunistically in KellyOCG. We continue to plan on deploying our capital, which we have now added to or will be adding to in those areas.

I would say on a reactive basis, so companies that are bringing themselves to market, it's still a little bit tepid. We see a lot of... The quantity is there, but the quality isn't there, and we're not going to chase...

I'd say on a on a.

<unk>.

Reactive basis, so companies that are bringing themselves to market, it's still a little bit tepid.

I mean, we see a lot of.

The quantity is there, but the quality is in there and we're not going to we're not going to chase.

<unk>.

Properties, unless they are high growth high margin quality.

properties, unless they are high growth, high margin quality, and that would be a good fit for Kelly. But about

And that it would be a good fit for Kelly.

But about.

you know, three years ago when we set up our operating model, we recognized that we needed to be more proactive in generating a pipeline of acquisition targets, and we've been at work doing that and

Three years ago, when we set up our operating model, we recognize that we needed to be more proactive in generating a pipeline of.

Acquisition targets and we've been at work doing that and.

That's the areas that we're focused on our technology.

The areas that we're focused on are in technology and education.

And education.

And certain general So science engineering technology, and telecom and Opportunistically in OCG. So we continue to.

set in general, so science, engineering, technology, and telecom, and opportunistically in OCG. So we continue to

Plan on deploying our capital, which we have now.

plan on deploying our capital, which we have now added to or will be adding to in those areas, and we think that's going to accelerate the

Added to.

We'll be adding to in those areas and we think that's going to accelerate the.

Peter Quigley: We think that's going to accelerate the growth and net margin improvement that we have on an organic basis.

growth and net margin improvement that we have on an organic basis.

Growth in net margin improvement that we have on an organic basis.

Marc Riddick: I appreciate it. Thank you very much.

I appreciate it thank you very much.

Peter Quigley: Okay.

Olivier Giraud: Thank you.

Marc Riddick: Thanks.

Okay. Thank you thanks.

Operator 2: Thank you. Once again, for questions, please press one and then zero at this time. Presenters, there are no further questions in queue at this time.

Thank you. Once again, for questions, please press one and then zero at this time. And presenters.

Once again for questions. Please press, one and then zero at this time.

And presenters there are no further questions in queue at this time.

Peter Quigley: Okay, Keeley. Thanks. I think we can call it a day then. Thank you.

Okay. Kelly, Thanks, I think we can call it or <unk>.

Earlier today then thank you. Thank you.

Olivier Giraud: Thank you.

Operator 2: Thank you. Ladies and gentlemen, this conference is available for replay beginning at 11:30 AM Eastern Time today, running through 07 December at 12:00 AM. You may access the AT&T replay system by dialing 866-207-1041 and entering the access code of 7027637. International participants may dial 402-970-0847. Those numbers again are 866-207-1041 or 402-970-0847 with the access code of 7027637. That does conclude our conference for today. Thank you for your participation and for using AT&T event conferencing. You may now disconnect.

Thank you and ladies and gentlemen, this conference is available for replay beginning at 11 30 Eastern time today running through December 7th at Midnight, you May access the AT&T replay system by dialing 866 two.

Thank you. And ladies and gentlemen, this conference is available for replay beginning at 1130 Eastern Time today, running through December 7th at midnight.

You may access the AT&T Replay system by dialing 866-883-4222.

071041, and entering the access code of seven zero to seven 637.

207-1041 and entering the access code of 702-7637.

International participants may dial 402-970-0847. Those numbers again are 866-207-1041 or 402-970-0847 with the access code of 702-7637.

Our national participants May dial four zero to 90 700847, those numbers again are 8662071041 or four zero to 90 700847 with the access code of seven zero 70 <unk>.

$3 seven that does conclude our conference for today. Thank you for your participation and for using AT&T event conferencing you may now disconnect.

That does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now...

Operator 1: We're sorry, your conference is ending now. Please hang up.

We're sorry. Your conference is ending now. Please hang up.

We're sorry your conferences ending now please hang up.

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