Q4 2023 Kelly Services Inc Earnings Call

February 15, 2024

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

Fourth quarter webcast presentation is also available on Kelly's website for this mornings call I would now like to turn the meeting over to your host Mr. Peter Quigley President and CEO. Please go ahead.

Thank you Julie Hello, everyone and welcome to Kelly's fourth quarter Conference call.

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

As a reminder, any comments made during this call including the Q&A.

They include forward looking statements about our expectations for future performance actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call.

Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

In addition, during the call certain data will be discussed on a reported and on an adjusted basis discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.

Operator: Good morning, and welcome to Kelly Services' fourth quarter earnings conference call. All parties will be on a listen only until the question and answer portion of the presentation.

Good morning, and welcome to Kelly services fourth 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 of Kelly services. If anyone has any objections you may disconnect at this time.

Operator: Today's call is being recorded at the request of Kelly Services. If anyone has any objections, they may disconnect at this time. A fourth quarter 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.

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

With that let's get started.

In a moment ill invite our chief financial officer alleviate T Rowe to share our results for the fourth quarter.

I'll then share my reflections on what has been a transformative year defined by decisive action and rapid progress on our growth and efficiency objectives.

Thank you Kellie Hello, everyone and welcome to Kelly's fourth quarter Conference call.

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

Finally, we will provide our preliminary expectations for 2024 before taking your questions with that I'll turn the call over to Olivier.

Peter W. Quigley: As a reminder, any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. However, actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, during the call, certain data will be discussed on a reported and an adjusted basis. Schultz, and Dan H. The discussion of items on an adjusted basis is a non-GAAP financial measure designed to give insight into certain trends in our operation. Finally, the slide deck that we're using on today's call is available on our website. With that said, let's get started.

As a reminder, any comments made during this call, including the Q&A may include forward looking statements about our expectations for future performance actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call.

Thank you Peter and good morning, everybody.

Before I provide multi dates on our Q4 results. Some brief comments on our full year performance first.

Full year revenue was down two 6% as we posted a three 2% on a constant currency basis.

Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

This reflects the challenging staffing market conditions, we saw across a wide range of specialties and geographies.

Ah meet those challenges our education business.

Concentrated resilience and delivered another year of excellent revenue growth up 32% in 2023, achieving over 840 million in revenue almost doubling the level of revenue from the pre Covid 2019 period.

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

With that let's get started.

Yeah.

Peter W. Quigley: In a moment, I'll invite our Chief Financial Officer, Olivier Thirot, to share our results for the fourth quarter. I will then share my reflections on what has been a transformative year defined by decisive action and rapid progress on our growth and efficiency objectives. Finally, we'll provide our preliminary expectations for 2024 before taking your questions. With that, I'll turn the call over to Olivier.

In a moment I'll invite our chief financial officer Olivier to row to share our results for the fourth quarter.

Overall gross profit rate for 2020, Sui was 19, 9%.

I'll then share my reflections on what has been a transformative year defined by decisive action and rapid progress on our growth and efficiency objectives.

This is a 50 basis point decline from the prior year, driven primarily by lower film inland placement fees.

Our 2023 results also reflect the significant efforts made that as part of our transformation initiatives to lower our cost base and position us to benefit from our improved efficiency moving forward.

Finally, we will provide our preliminary expectations for 'twenty 'twenty four before taking your questions with that I'll turn the call over to Olivier.

Olivier Thirot: Thank you, Peter, and good morning, everybody. Before I provide more details on our Q4 results, I will make some brief comments on our full year performance first. Full-year revenue was down 2.6% as reported, or 3.2% on a constant currency basis. This reflects the challenging staffing market conditions we saw across a wide range of specialties and geographies. Amid those challenges, our education business demonstrated resilience and delivered another year of excellent revenue growth, up 32% in 2023, achieving over $840 million in revenue, almost doubling the level of revenue from the pre-COVID-19 period. Overall, the gross profit rate for 2023 was 19.9%. This is a 50 basis point decline from the prior year, driven primarily by lower permanent placement. Our 2023 results also reflect the significant efforts made as part of our transformation initiative to lower our cost base and position us to benefit from our improved efficiency moving forward. On an adjusted basis, we lowered our SG&E expenses by 5.4%, which allowed us to deliver adjusted earnings from operations of $69.1 million, consistent with 2022, in spite of difficult market conditions. And finally, our full-year 2023 adjusted ABDA margin rate improved by 20 basis points.

Thank you Peter and good morning, everybody.

Before I provide more details on our Q4 results. Some brief comments on our full year performance first.

On an adjusted basis, we lowered our SG&A expenses by five 4%.

Full year revenue was down two 6% as we bolted a three 2% on a constant currency basis.

That allowed us to deliver adjusted earnings from operations of $69 1 million consistent with 2022 in spite of difficult market conditions.

This reflects the challenging staffing market conditions, we saw across a wide range of specialties and geographies.

And finally, our full year 2023, adjusted EBITDA margin rate improved by 20 basis points.

Amid those challenges our education business.

Most rated resilience and delivered another year of excellent revenue growth up 32% in 2023, achieving over 840 million in revenue almost doubling the level of revenue from the pre Covid 2019 period.

Now looking at the fourth quarter of 2023 multi to aid revenue totaled $1 2 billion essentially flat with the prior year.

Including 120 basis points of favorable currency impact so revenues were down one 3% on a constant currency basis.

Overall gross profit rate for 2020, Sui was 19, 9%.

As we now look at revenue in the fourth quarter by segment.

He's a 50 basis point decline from the prior year over year, driven primarily by lower permanent placement fees.

As noted in nicely remarks, our education segments revenue growth continues to be strong up 27% year over year the.

Our 2023 results also reflect the significant efforts made thus far to fall transformation initiatives to lower our cost base and position us to benefit from our improved efficiency moving forward.

The continued double digit growth reflect both strong fee rate and demand from existing customers as well as net customer wins.

Overall, the education business delivered more than $50 million of year over year revenue growth in the quarter.

On an adjusted basis, we lowered our SG&A expenses by five 4%.

In the <unk> segment revenue was down 5%.

That allowed us to deliver adjusted earnings from operations of $69 1 million consistent with 2022 in spite of difficult market conditions.

In the fourth quarter, we continued to see the impact of challenging market conditions with year over year revenue down 6% in our staffing specialties as well as lower revenue trends in our outcome based business, which were flat year over year.

And finally, our full year 2023, adjusted EBITDA margin rate improved by 20 basis points.

Permanent placement fees in fact continued to be impacted by lower market demand and declined by 41%.

Olivier Thirot: Now looking at the fourth quarter of 2023 in more detail, revenue totaled $1.2 billion, essentially flat with the prior year, including 120 base points of favorable currency impact, so revenues were down 1.3% on a constant currency basis. As we now look at revenue in the fourth quarter by segment. As noted in my full year remarks, our education segment's revenue growth continues to be strong, up 27% year-over-year. The continued double-digit growth reflects both strong fill rates and demand from existing customers as well as net customer wins. Overall, the education business delivered more than $50 million of year-over-year revenue growth in the quarter. However, in the third segment, revenue was down 5%.

Now looking at the fourth quarter of 2023 in more detail revenue totaled $1 2 billion essentially flat with a pio or your.

In our OCG segment revenue declined 3% year over year declines in our view continued due to slower hiring in certain market sectors.

Including 120 basis points of favorable currency impact so revenues were down one 3% on a constant currency basis.

Year over year MSP revenues also declined while PTU year over year revenues improved.

As we now look at revenue in the fourth quarter by segment.

Revenue in our professional and industrial segment declined 11, 5% year over year in the quarter.

As noted in my remarks, our education segments revenue growth continues to be strong up 27% year over year.

Revenue from our staffing products declined 15%, reflecting continues challenging market conditions.

The continued double digit growth, which liked bus Tong hsing weight and demand from existing customers as well as net customer wins.

The segment's outcome base revenue was flat year over year in the quarter grew.

Overall, the education business delivered more than $50 million of year over year revenue growth in the quarter.

Growth across most of our outcome based efficiencies was offset by contraction in the year over year demand from our call Center specialty.

In the <unk> segment revenue was down 5%.

Olivier Thirot: During the fourth quarter, we continued to see the impact of challenging market conditions, with year-over-year revenue down 6% in our staffing specialty, as well as lower revenue trends in our outcome-based business, which were flat year-over-year. Permanent placement fees in SET continue to be impacted by lower market demand and declined by 41%. In our OCG segment, revenue declined 3%. Year-over-year declines in RPO continued due to slower hiring in certain market sectors; year-over-year MSP revenues also declined, while PPO year-over-year revenues improved. Revenue in our professional and industrial segment declined 11.5% year-over-year in the quarter.

We ended the fourth quarter, we continued to see the impact of challenging market conditions with year over year revenue down 6% in our staffing specialties as well as lower revenue trends in our outcome based business, which were flat year over year.

And finally revenue in our international segment improved 5% on a reported basis and was down 2% on a constant currency basis.

Overall gross profit was down four 7% as reported or five 7% on a constant currency basis.

Permanent placement fees in said continued to be impacted by lower market demand and declined by 41%.

Our gross profit rate was 19, 3% compared to.

23% in the fourth quarter of the prior year.

In our OCG segment revenue declined 3% year over year declines in our view of continued due to slower hiring in certain market sectors.

Lower Perm fees continued to unfavorably impact our GP rate by 60 basis points in Q4 and for the quarter. Our GP rate was also impacted by unfavorable business mix by about 60 basis points.

Year over year MSP revenues also declined while Pete deal year over year revenues improved.

Revenue in our professional and then just real segment declined 11, 5% year over year in the quarter.

This reflects growth in specialties with lower GP rates, including education, and CPU and lower GP rates set education, and the national due to product customer and country mix respectively.

Olivier Thirot: Revenue from our staffing product declined 15%, reflecting continuous challenging market conditions. The segment's outcome-based revenue was flat year-over-year in the quarter; growth across most of our outcome-based specialties was offset by contraction in year-over-year demand for our call center specialties. And finally, revenue in our international segment improved 5% on a reported basis but was down 2% on a constant currency basis. Overall gross profit was down 4.7% as reported or 5.7% on a constant currency basis.

Revenue from our staffing products declined 15%, reflecting continues challenging market conditions.

The segment's outcome base, where revenue was flat year over year in the quarter.

Partially offsetting those impacts were 20 basis points of lower employee related costs.

Growth across most of our outcome based specialties was upset by a contraction in the year over year demand from our call Center specialty.

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

Expenses for the fourth quarter of 2023 include $7 9 million of charges related to our ongoing transformation efforts as well as $6 9 million related to activities associated with the Q1 2020 for sale or for Europe, and the staffing operations.

And finally revenue in our international segment improved 5% on a reported basis and was down 2% on a constant currency basis.

Overall gross profit was down four 7% as reported or five 7% on a constant currency basis.

So on an adjusted basis constant currency basis expenses declined by nine 5% similar to Q3.

Our gross profit rate was 19, 3% compared to 23% in the fourth quarter of the prior year.

Olivier Thirot: Our gross profit rate was 19.3%, compared to 20.3%, in the fourth quarter of the Priory. Lower perm fees continue to unfathomably impact our GP rate by 60 basis points in Q4. And for the quarter, our GP rate was also impacted by unfavorable business, by about 60 basis points. This reflects growth in specialties with lower GP rates, including education and PPO, and lower GP rates in SET, education, and international due to product, customer, and country mix respectively. Partially offsetting those impacts were 20 basis points of lower employee related costs.

The reduction reflects the positive impact of our transformation efforts, which are designed to reduce cost on a structural basis.

Lower Perm fees continued to unfavorably impact our GP rate by 60 basis points in Q4.

Our reported earnings from operations in the fourth quarter was $7 3 million compared to $4 6 million in Q4 of 2022 as.

And for the quarter, our GP rate was also impacted by unfavorable business mix by about 60 basis points.

This reflects growth in specialties with lower GP rates, including education, and CPU and lower GP rights set education, and the national huge product customer and country mix respectively.

As noted our 2023 results include $7 9 million of charges related to our transformation activities and $6 9 million of charges related to the sale of our European staffing operations.

Partially offsetting those impacts were 20 basis points of lower employee related costs.

Our fourth quarter 2022 included $10 3 million goodwill impairment charge.

Sure.

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

On an adjusted basis Q4, 2023 earnings from operations were $22 1, million% to 59% improvement over the prior year and.

Olivier Thirot: SG&E expenses were down 2.2% year-over-year on a reported basis. Expenses for the fourth quarter of 2023 include $7.9 million of charges related to our ongoing transformation efforts as well as $6.9 million related to activities associated with the Q1 2024 sale of our European staffing operation. So on an adjusted basis, constant currency basis, expenses declined by 9.5%. Similar to Q's.

And adjusted EBITDA margin also improved 60 basis points to two 6%.

Income taxes for the fourth quarter were $86 5 million benefit compared with our 2020 to income tax expense.

So on an adjusted basis constant currency basis expenses declined by nine 5% similar to Q3.

$5 2 million.

Income taxes in 2023 included impact of nontaxable gains on the cash surrender value of company owned life insurance and the benefits of work opportunity tax credits, which are recurring.

The reduction reflects the positive impact of old House formation at fault, which are designed to reduce cost on a structural basis.

In addition, we recognized deferred tax valuation allowance adjustments the tax benefit from outside basis differences on the held for sale assets and other tax impact from the legal entity restructuring of our European subsidiaries and anticipate in anticipation of the Q1 2024.

Our reported earnings from operations in the fourth quarter was $7 3 million compared to $4 6 million in Q4 of 2022.

As noted our 2023 results include $7 9 million of charges related to our transformation activities and $6 9 million of charges related to the sale of our European staffing operations.

Olivier Thirot: The reduction reflects the positive impact of our transformation efforts, which are designed to reduce costs on a structural basis. Our reported earnings from operations in the fourth quarter were $7.3 million compared to $4.6 million in Q4 of 2022. As noted, our 2023 results include $7.9 million in charges related to our transformation activities and $6.9 million in charges related to the sale of our European staffing operation. Our fourth quarter 2022 included a $10.3 million Goodwill Impairment Charge.

Completion of the European staffing collection.

And finally reported earnings per share for the fourth quarter of 2023 with 31 per share compared to a loss per share of <unk> in 2022.

Our fourth quarter 2022 included the $10 3 million goodwill impairment charge so on them.

On an adjusted basis Q4, 2023 earnings from operations were $22 1, million% to 59% improvement over the prior year.

Earnings per share in 2023 include 46 cents of unfavorable tax adjustments transaction costs.

And an unrealized loss on our forward contract all net of tax and all related to the sale of our European staffing operations and 16.

And that adjusted EBITDA margin also improved 60 basis points to two 6%.

Income taxes for the fourth quarter were $86 5 million benefit.

Related to restructuring charges net of tax.

Paired with our 2020 to income tax expense of $5 2 million.

Loss per share in 2022 included the impact of goodwill impairment charge net of tax partially offset by a gain on sale of real property net of tax. So on an adjusted basis Q4, 2023, EPS was <unk> 93.

Income taxes in 2023 include the impact of non taxable gains on the cash surrender value of company owned life insurance and the benefits of walk up walking excavator.

Olivier Thirot: So on an adjusted basis, Q4 2023 earnings from operations were $22.1 million, a 59% improvement over the prior year. And I just said the BDA margin also improved 60 basis points to 2.6%; income taxes for the fourth quarter were a 6.5 million benefit compared with our 2022 income tax expense of 5.2 million; income taxes in 2023 include the impact of non-taxable gains on the cash-to-render value of company-owned life insurance and the benefits of the Work Opportunity Tax Credit, which are recurring. In addition, we recognize different tax valuation elements that just, The tax benefits from outside basis differences on health for sale assets and other tax impacts from the legal entity restructuring of our European subsidiaries in anticipation of the Q1 2024 completion of the European staffing transaction, and finally, reported earnings per share for the fourth quarter of 2023 were $0.31 per share compared to a loss per share of $0.02 in 2022. Earnings per share in 2023 include 46 cents of The losses per share in 2022 included the impact of a goodwill impairment charge, net of tax, partially offset by a gain on the sale of real property, net of tax.

Which are recurring.

In addition, we recognized a deferred tax valuation allowance adjustments the tax benefit from outside basis differences on the held for sale assets and other tax impact from the legal entity restructuring of our European subsidiaries.

Compared to <unk> 18 per share in Q4 of 2022.

This significant improvement is driven by year over year change in income taxes as well as business performance.

Now moving to the balance sheet.

Nancy patient of the Q1 2020 for completion of the European staffing collection.

As of year end 2020, our European staffing operations are now classified as held for sale and those assets and liabilities.

And finally reported earnings per share for the fourth quarter of 2023 with 31 cents per share compared to a loss per share of two cents in 2022.

Included on separate line items on our balance sheet.

At year end cash totaled $126 million and we have no debt outstanding of course discuss.

Earnings per share in 2023 include 46 cents of unfavorable tax adjustment transaction costs and.

Cash position does not include the more than $100 million of proceeds from the sale of our European staffing operations received early in 2024 or additional proceeds expected under the terms of the sales agreement in the third quarter of 2024.

And then the realized loss on our forward contract all net of tax and all related to the sale of our European staffing operations.

<unk> 16 cents related to restructuring charges net of tax.

When combining our strong balance sheet with our existing borrowing capacity. We continue to have a humble capital available to fund, our organic and inorganic strategy and navigate an uncertain market environment.

Loss per share in 2022 includes the impact of a goodwill impairment charge net of tax partially offset by a gain on sale of real property net of tax. So on an adjusted basis Q4, 2023, EPS was <unk> 93 cents.

At year end accounts receivable as reported totaled $1 2 billion and represents accounts receivable generated from our north American staffing and outcome based businesses as well as our global MSP and <unk> practices.

<unk> two <unk> <unk> cents per share in Q4 of 2022.

The significant improvement is driven by year over year change in income taxes as well as business performance.

Seasonable from our European staffing operations are now included in assets held for sale.

Now moving to the balance sheet.

As of yearend 2000, Twenty's Sui our European staffing operations are now classified as held for sale and those assets and liabilities are now included on separate line items on our balance sheet.

Our global DSO, which include all receivable, including those generated by our European staffing operations was 59 days.

This is down two days over year end 2022, and reflects continued efforts to manage our working capital investment and customer accounts receivable.

At yearend cashless tell whenever and $26 million and we have no debt outstanding of course discuss cash position doesn't include the more than 100 million of proceeds from the sale of our European setting operations received early in 2024 or additional proceeds expected under that.

Primarily in the U S.

For the year, we generated $61 million of free cash flow compared to using $88 million in free cash flows in 2022.

Given the one time items in the 2000 $22 billion, including the final repayment of approximately $87 million of federal payroll tax balances, which were deferred in 2020 under the cares Act and also $48 million of income taxes due in Japan following the sale of our investment.

Of the savings agreement in the third quarter of 2024.

So when combining our strong balance sheet with our existing borrowing capacity. We continue to have a humble capital available to fund, our organic and inorganic strategy and navigate an uncertain market environment.

Olivier Thirot: So on an adjusted basis, Kufo's 2023 EPS was 93 cents, compared to $0.18 per share in Q4 of 2022. The significant improvement is driven by year-over-year changes in income taxes, as well as business performance. Now moving to the bench.

In total common stock comparisons from year over year of challenging but on a like for like basis free cash flow did improve from careful management of working capital and now I'll turn it back over to Peter for additional comments. Thanks for those insights Olivier.

When we began 2023, we did so with a clear vision for the company's future.

Receivables from all Europeans testing operations are now included in assets held for sale.

Olivier Thirot: As of year-end 2023, our European staffing operations are now classified as health care, and those assets and liabilities are now included on separate line items on our balance sheet. Attorney Rand, cash total $126 million, and we have no debt outstanding. Of course, this cash position does not include the more than $100 million of proceeds from the sale of our European staffing operations received early in 2024 or additional proceeds expected under the terms of the sales agreement in the third quarter of 2024. So, when combining our strong balance sheet with our existing borrowing capacity, we continue to have ample capital available to fund our organic and inorganic strategy and navigate an uncertain market environment. At Iran, accounts receivable reported a total of 1.2 billion and represents accounts receivable generated from our North American staffing and outcome-based business, as well as our global MSP and RPO practice. Accounts receivable from our European staffing operations are now included in assets held for sale. Our global DSO, which includes all receivables, including those generated by our European staffing operations, was 59 days.

Future defined by significantly improved profitability sustainable growth and greater value creation for all our shareholders stakeholders.

Our global <unk>, which includes all receivable.

Generated by our European staffing operations was 59 days.

As the year progressed macroeconomic uncertainty persisted fueled by inflation higher interest rates and geopolitical volatility in general employers continue to proceed cautiously with hiring both full time and temporary workers, while taking a measured approach to work force reductions.

This is down two days over year end 2022, and reflects continued efforts to manage our working capital investment and customer accounts receivable primarily in the U S.

For the year, we generated 61 million of free cash flow compared to using $88 million in free cash flows in 2022.

While some signs of cooling emerge the labor market remained relatively relatively resilient and our supply of talent for open roles continue to be constrained.

Given the one time items in the 2000 22 billion, including the final repayment of approximately $87 million of federal payroll tax balances, which were deferred in 2020 under the cares Act and also 48 million of income taxes due in Japan following the sale of our investment.

Diverging from the trend our industry has typically experienced during periods of uncertainty.

Notwithstanding these unique dynamics, we focused on what we can control and executed on our vision with urgency and agility.

It also will come unstuck comparisons from year over year of challenging but on a like for like basis free cash flow did improve from careful management of working capital and now I'll turn it back over to Peter for additional comments. Thanks for those insights Olivier.

We set out to align our cost base with our strategic priorities operating environment and performance and we have swiftly implementing efficiency actions across the enterprise that have delivered and sustained a structural reduction to SG&A expenses.

When we began 2023, we did so with a clear vision for the company's future.

We said, we would significantly improve our net margin to create greater financial flexibility to invest in Kelly's future and we have delivering 60 basis points of adjusted net margin expansion in the second half of the year.

Future defined by significantly improved profitability sustainable growth and greater value creation for all our shareholders stakeholders.

As the year progressed macroeconomic uncertainty persisted fueled by inflation higher interest rates and geopolitical volatility.

We committed to finding new avenues of growth and we have refreshing our go to market strategy with innovative offerings to meet the evolving needs of both customers and talent.

In general employers continue to proceed cautiously with hiring both full time and temporary workers, while taking a measured approach to work force reductions.

This includes a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers to capture a greater share of wallet.

While some signs of cooling emerged the labor market remained relatively relatively resilient in the supply of talent for open roles continued to be constrained.

Olivier Thirot: This is down two days over year-end 2022 and reflects continued efforts to manage our working capital investment in customer accounts receivable primarily in the U.S. For the year, we generated $61 million of free cash flow compared to using $88 million in free cash flows in 2022. Given the one-time items in the 2022 period, including the final repayment of approximately 87 million of federal payroll tax balances, which we deferred in 2020 But on a like-for-like basis, free cash flow did improve from careful management of working capital. And now I'll turn it back over to Peter for additional.

As of January we are now executing on this strategy with an initial set of focus accounts that represent a meaningful portion of kellys revenue base.

Diverging from the trend our industry has typically experienced during periods of uncertainty.

Of course, we remain committed to providing the highest quality of service to all our customers regardless of spend or size.

Notwithstanding these unique dynamics, we focused on what we can control and executed on our vision with urgency and agility.

In our P&I segment, our enhanced localized delivery model continues to generate positive momentum with both clients and talent benefiting further from our Kelly now mobile App. The App is now live nationwide and actively serving up Taylor job opportunities in commercial enlightened us real to thousands.

Of highly qualified candidates.

With an I trained on the future, we continue to drive growth and value in the near term as well.

We remain focused on capturing demand in more resilient markets, including higher margin higher growth outcome based business as well as in education, which as Olivier mentioned continues to be a high performing growth engine within our portfolio.

We committed to finding new avenues of growth and we have refreshing our go to market strategy with innovative offerings to meet the evolving needs of both customers and talent.

We unlocked additional value, creating opportunities entering an agreement to sell our European staffing business and unlocking more than $100 million in capital to redeploy in pursuit of organic and inorganic growth.

This includes a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers to capture a greater share of wallet.

Peter W. Quigley: Thanks for those insights, Olivier. When we began 2023, we did so with a clear vision for the company's future. We have a future defined by significantly improved profitability, sustainable growth, and greater value creation for all our shareholders and stakeholders. As the year progressed, macroeconomic uncertainty persisted, fueled by inflation, higher interest rates, and geopolitical volatility. In general, employers continue to proceed cautiously with hiring both full-time and temporary workers while taking a measured approach to workforce reduction.

As of January we are now executing on this strategy with an initial set of focus accounts that represent a meaningful portion of kellys revenue base.

And we successfully completed a $50 million share repurchase program in the third quarter returning value directly to Kelly shareholders.

Of course, we remain committed to providing the highest quality of service to all our customers regardless of spend or size.

Taken together these accomplishments form a strong foundation upon which we will continue to build we enter 2020 for a more efficient profitable and focused enterprise and with further streamlined operating model now comprising four business units with market leading positions in North America staff.

<unk> and global MSP and <unk> solutions.

We will continue to realize more of the benefits from these changes throughout the year.

<unk> of highly qualified candidates.

With an I trained on the future, we continue to drive growth and value in the near term as well.

For more details on our expectations for 2024, I'll turn the call back over to Olivier. Thank you Peter as Peter mentioned, the staffing market in the underlying economic trends.

Peter W. Quigley: While some signs of cooling emerged, the labor market remained relatively resilient, and the supply of talent for open roles continued to be constrained, diverging from the trend our industry has typically experienced during periods of uncertainty. Notwithstanding these unique dynamics, we focused on what we could control and executed on our vision with urgency and agility. We set out to align our cost base with our strategic priorities, operating environment, and performance, and we have, swiftly implementing efficiency actions across the enterprise that have delivered and sustained a structural reduction in SG&A expenses.

It moved in the same patterns, we have seen in other economic cycles and that has made it more difficult to know how quickly the staffing market will improve as we move into 2024.

As a result, we'll share our outlook for the first half of 2024 only.

<unk>, where we believe that Stephanie market conditions will remain relatively consistent with what we have experienced over the past several quarters.

And we successfully completed a $50 million share repurchase program in the third quarter returning value directly to Kelly shareholders.

But before I dive into 2024, I will give you some color on the impact of the sale of our European staffing operations.

Taken together these accomplishments form a strong foundation upon which we will continue to build we entered 2020 for a more efficient profitable and focused enterprise and with further streamlined operating model now comprising four business units with market leading positions in North America staffing.

Our historical results.

For clarity, we have retained our Mexico operations, which were included in.

In our international rebuilt reportable segment through 2023.

Revenue for Mexico has been revoked separating the revenue tables of our earnings release is so you can get more information, including quarterly revenue impact from our historical filings.

<unk> and global MSP and <unk> solutions.

We will continue to realize more of the benefits from these changes throughout the year.

For more details on our expectations for 2024, I'll turn the call back over to Olivier. Thank you Peter as Peter mentioned the staffing market.

For the full year of 2023, our European staffing operations generated approximately $810 million of revenue.

Economic trends.

$120 million in gross profit and add $119 million in SG&A expenses.

Moving in the same patterns, we have seen in other economic cycles and that has made it more difficult to know how quickly the staffing market will improve as we move into 2024.

So reported revenue should be approximately 17% lower as we move into 2024 on a like for like Macy's GP rate should improve by 100 basis points and our EBITDA margin should improve by 40 basis points.

As a result, we'll share our outlook for the first half of 2024 only.

Where we believe that Stephanie market conditions will remain relatively consistent with what we have experienced over the past several quarters.

Result of the state.

The remainder of my comments on our outlook for 2024 will exclude the European staffing operations from the 2023 base.

But before I dive into 2024, I will give you some color on the impact of the sale of our European staffing operations.

Peter W. Quigley: As of January, we are now executing on this strategy with an initial set of focus accounts that represent a meaningful portion of Kelly's revenue base. Of course, we remain committed to providing the highest quality of service to all our customers regardless of spend or size. In our P&I segment, our enhanced localized delivery model continues to generate positive momentum with both clients and talent, benefiting further from our KellyNow mobile app. The app is now live nationwide and actively serving up tailored job opportunities in commercial and light industrial to thousands of highly qualified candidates. With an eye trained on the future, we continue to drive growth and value in the near term as well.

Our historical results and.

For the first half of 2024 on a like for like basis, we expect non <unk> net revenue to be flat to up <unk>, 5% with no significant FX impact impact.

For clarity, we have retained our Mexico operations, which were included in our international rebuilt the reportable segment through 2023.

Revenue for Mexico has been rebuilt separating the revenue tables of our earnings release. So you can get more information, including quarterly revenue impact from our historical filings.

Resulting in a midpoint revenue expectation of $2 9 billion.

Our outlook reflects an expectation that Q1 revenue trends will be consistent with Q4 of 2023 and then the transformation related growth initiatives that Peter has mentioned start to gain traction as we moved into Q2.

For the full year of 2023.

Our European staffing operations generated approximately $810 million of revenue.

$120 million in gross profit and add $119 million in SG&A expenses.

We expect our GP rate to be 25% to 27% on a like for like basis. These are 30 basis point decline in the mid point of our range, reflecting the change in our business mix, primarily because of our education.

So reported revenue should be approximately 17% lower as we move into 2024 on a like for like Macy's GP rate should improve by 100 basis points and then while the EBITDA margin should improve by 40 basis points.

This is expected to continue to deliver significant revenue growth.

As of this date.

Also we expect to see a continued improvement in efficiency.

The reminder of my my comments on our outlook for 2024.

Peter W. Quigley: We remained focused on capturing demand in more resilient markets, including higher margin, higher growth, outcome-based business, as well as in education, which, as Olivier mentioned, continues to be a high-performing growth engine within our portfolio. We unlocked additional value-creating opportunities, entering an agreement to sell our European staffing business and unlocking more than $100 million in capital to redeploy in pursuit of organic and inorganic growth. And we successfully completed a $50 million share repurchase program in the third quarter, returning value directly to Kelly's shareholders.

The impact of our transformation related actions continue.

We will exclude the European staffing operations from the 2023 base.

On a like for like basis, we expect adjusted SG&A expenses to be down 5% to 6% for the first half of 2024.

For the first half of 2024.

Like for like basis, we expect net revenue to be flat to up <unk>, 5% with no significant FX impact impact.

At the midpoint of our outlook, that's an expected run rate of about $190 million per quarter for the first time for the year.

Resulting in a midpoint revenue expectation of $2 9 billion.

Overall, we expect adjusted EBITDA margin in the range of $3 three to three 5%.

In addition to the 60 basis point improvement, we made in our cost structure in the second half of 2023, and a 40 basis point favorable impact from the sale of our European staffing operations. We expect an additional 30 to 50 basis points of net margin improvement in the first half of 2024.

We expect our GP rate to be 25% to 27% on a like for like basis. These are 30 basis point decline in the midpoint of our range, reflecting the change in our business mix, primarily because of our education.

Peter W. Quigley: Taken together, these accomplishments form a strong foundation upon which we will continue to build. We will enter 2024 as a more efficient, profitable, and focused enterprise. And with further streamlined operating model, now comprising four business units with market-leading positions in North America staffing and global MSP and RPO solutions, will continue to realize more of the benefits from these changes throughout the year. For more details on our expectations for 2024, I'll turn the call back over to Olivier. Thank you, Peter.

And we believe that went to the staffing market recovers.

We'll be well positioned to take further advantage of our improved efficiency.

Finally, as we move into 2024, beginning with our first quarter results. We'll report the operating results of our segments utilizing revised segment earnings from operations and EBITDA margin measures will allocate a greater share of the costs. We have previously reported.

This is expected to continue to deliver significant revenue growth.

Also we expect to see a continued improvement in efficiency.

The impact of our transformation related actions continue.

On a like for like basis, we expect adjusted SG&A expenses to be down 5% to 6% for the first half of 2024.

Corporate cost.

Our business units.

This aligns with feedback from investors and others that they would value greater transparency on the financial results each business unique generates and how does it contribute to <unk> overall performance.

At the midpoint of our outlook, that's unexpected run rate of about 190 million per quarter for the first time for the year.

Olivier Thirot: As Peter mentioned, the staffing market and underlying economic trends have not moved in the same patterns we have seen in other economic cycles, and that has made it more difficult to know how quickly the staffing market will improve as we move into 2024. As a result, we'll share our outlook for the first half of 2024 only, a period during which we believe that staffing market conditions will remain relatively consistent with what we have experienced over the past several quarters. But before I dive into 2024, I will give you some color on the impact of the sale of our European staffing operation on our historical weather. And for clarity, we have retained our Mexico operations, which will be included in our international reportable segment through 2023. Revenue for Mexico has been reported separately in the revenue tables of our earnings releases, so you can get more information, including quarterly revenue impacts, from our historical filings.

Overall, we expect our adjusted EBITDA margin in the range of $3 three to three 5%.

And now back to you Peter Thanks Olivier.

The decisive action and rapid progress our team delivered in 2023, we have laid the groundwork for 2024 to be an inflection point and Kelly 77 year history.

In addition to the 60 basis point improvement, we made in our cost structure in the second half of 2023.

And the 40 basis point favorable impact from the sale of our European staffing operations. We expect an additional 30 to 50 basis points of net margin improvement in the first half of 2024.

Our efficiency measures are delivering sustained results our growth initiatives are now in the implementation phase and we entered the year with an adjusted EBITDA margin of 3% a step change from our historical net margin average of around 2%.

And we believe that one of the staffing market recovers.

We'll be well positioned to take further advantage of our improved efficiency.

As Olivier shared the stage is set for the company to achieve our previously disclosed expectation for net margin of three three to three 5%.

Finally, as we move into 2024, beginning with our first quarter results. We'll report the operating results of our segments utilizing revised segment earnings from operations and the EBITDA margin measures will allocate a greater share of the cost we have previously reported.

With these structural improvements in place I am confident that Kelly is well positioned to capture increased customer demand when the macroeconomic environment improves and convert a greater share of topline gains to bottom line growth.

Corporate cost.

Our business units.

I'm very proud of the way our team has kept their sights set on dual horizon definitely steering Kelly through a challenging external environment and delivering results in the near term all while embracing the change that's necessary to position the company for the future.

And now back to you Peter Thanks Olivier.

Finally, I am grateful to our customers Tallinn and shareholders, who have been with US on this journey, placing their trust and Kelly to deliver on our commitments and create value over the long term.

Olivier Thirot: For the full year of 2023, our European staffing operation generated approximately $810 million of revenue, $120 million in gross profit, and added $119 million in ASEAN expenses. So reported revenue should be approximately 17% lower as we move into 2024 on a like-for-like basis. GP rates should improve by 100 basis points, and our APD margin should improve by 40 basis points as a result of the sale. The reminder of my comments on our outlook for 2024 will exclude European staffing operations from the 2023 base.

The decisive action and rapid progress our team delivered in 2023, we have laid the groundwork for 2024 to be an inflection point and Kelly 77 year history.

While there is work to be done I'm confident that 2024 is a start of a new era of growth for Kelly a year in which we'll begin to reap the full benefits of the work we've done to transform this company and reward all our stakeholders Gili you can now open the call to questions.

Our efficiency measures are delivering sustained results our growth initiatives are now in the implementation phase and we entered the year with an adjusted EBITDA margin of 3%.

<unk> change from our historical net margin average of around 2%.

Thank you.

As Olivier shared the stage is set for the company to achieve our previously disclosed expectation for net margin of three three to three 5%.

With these structural improvements in place I'm confident that Kelly is well positioned to capture increased customer demand when the macroeconomic environment improves and convert a greater share of topline gains to the bottom line growth.

You are 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.

Olivier Thirot: For the first half of 2024, on a like-for-like basis, we expect nominal revenue to be flat to up 0.5%, with no significant FX impact, resulting in a midpoint revenue expectation of $2.09 billion. Our outlook reflects an expectation that Q1 revenue trends will be consistent with Q4 of 2023, and then the transformation-related growth initiatives that Peter has mentioned start to gain traction as we move into Q2. We expect our GP rate to be 20.5% to 20.7% on a like for like basis.

Our first question will come from the line of Joe Gomes with noble capital.

I'm very proud of the way our team has kept their sights set on dual horizons definitely steering Kelly through a challenging external environment and delivering results in the near term all while embracing the change that's necessary to position the company for the future.

Good morning, Joe Good morning, Good morning, Good morning, Thanks for taking my questions.

So.

Peter just kind of wanted to start off.

You guys are doing everything you can.

Finally, I'm grateful to our customers Tallinn and shareholders, who have been with US on this journey, placing their trust and Kelly to deliver on our commitments and create value over the long term.

What else can we do to try and attract more candidates in order to be able to fill whatever opportunities. There are I mean, what is there any more levers there that you can pull.

While there is work to be done I'm confident that 2024 is a start of a new era of growth for Kelly a year in which we'll begin to reap the full benefits of the work we've done to transform this company and reward all of our stakeholders Gili you can now open the call to questions.

Yes, Joe we are continuously.

Finding new ways to reach talent.

Social media is obviously, a key component of that but not the only one.

Sure.

Revised geo structure that we've announced for our P&I segment is designed to establish a greater personal connection for those individuals that want to.

Thank you.

Ladies and gentlemen, if you wish to ask a question. Please press one and then zero on your Touchtone phone you will hear an acknowledgment that you've been placed into queue and you may remove yourself from queue at any time by repeating the ones. They're all command. If you are on a speakerphone. Please pick up your handset before pressing the numbers once again for your question.

Olivier Thirot: This is a 30 base point decline in the midpoint of our run, reflecting the change in our business, primary because of our education, which is expected to continue to deliver significant revenue growth. Also, we expect to see a continued improvement in efficiency, as the impact of our transformation-related actions continues. On a LACRON-like basis, we expect adjusted SDN expenses to be down 5 to 6% for the first half of 2024. At the midpoint of our outlook, that's an expected run rate of about $190 million per quarter for the first half of the year. Overall, we expect an adjusted EBDM margin in the range of 3.3 to 3.5%.

Contact with a person in our Kelly now App is designed to connect with more people over a broader geographic area for those people that prefer to do something electronically. So.

Please press one and then zero at this time.

We are continuously exploring new ways in all of our businesses and I think.

Our first question will come from the line of Joe Gomes with noble capital.

The improvement in fill rates in our education segment is a great example of how we've been successful.

Good morning, Joe Good morning, Good morning, Good morning, Thanks for taking my questions.

Okay. Thank you for that.

So.

Peter just kind of wanted to start off.

Just.

Quick technical question here Olivier.

You guys are doing everything you can.

What else can we do to try and attract more candidates in order to be able to fill whatever opportunities. There are I mean, what is there any more levers there that you can pull.

So yep glancing at the balance sheet, you've got assets held for sale at year end of $291 million.

You sold your international got let's call. It 100 plus million for that what else is included in that assets.

Yes, Joe we're continuously.

Olivier Thirot: In addition to the 60 basis point improvement we made in our cost structure in the second half of 2023 and the 40 basis point favourable impact from the sale of our European staffing operation, we expect an additional 30 to 50 basis points of net margin improvement in the first half of 2024. And we believe that when the staffing market recovers, we'll be well positioned to take further advantage of our improved efficiency. Finally, as we move into 2024, beginning with our first quarter results, we'll report the operating results of our segment, utilizing revised segment earnings from operations and EBDA margin measures, and allocate a greater share of the costs we have previously reported as corporate costs to our business units. This aligns with feedback from investors and others that they would value greater transparency on the financial results each business unit generates and how they contribute to Kelly's overall performance. And now, back to you, Peter.

Held for sale.

Finding new ways to reach talent.

Or is there something else there on the accounting side that suggest maybe we're going to see a write down at some point this year.

Social media is obviously, a key component of that but not the only one.

Our.

No I think when you look at the held for sale you have about $290 million of.

Revised geo structure that we've announced for our P&I segment is designed to establish a greater personal connection for those individuals that want to <unk>.

Assets $170 million of liabilities with a net book value is about 120.

Contact with a person in our Kelly now App is designed to connect with more people over a broader geographic area for those people that prefer to do something electronically so well.

Of course as you know.

We did receive the proceeds.

At least the first tranche.

$110 6 million on January the third.

We are continuously exploring new ways in all of our businesses and I think.

Of this year.

But they are still pending points that.

The improvement in fill rates in our education segment is a great example of how we've been successful.

I would like to mention.

Collections should be cash free debt free.

With a normalized level of working capital and there is also an earn out so all of that is under review.

Okay. Thank you for that.

Just.

Quick technical question here Olivier.

And we expect to get.

So yep.

Additional proceeds likely from all these items in.

Looking at the balance sheet, you've got assets held for sale at year end of 291 million you.

In the course of probably late Q2 early Q3.

You sold the international got let's call. It 100 plus million for that what else is included in that assets.

And that is going to be in addition to basically a $110 6 million.

Our equivalent we did receive at the time of the signings or early January.

Held for sale.

Or is there something else there on the accounting side that suggest maybe we're going to see a write down and at some point this year.

Okay, great. Thanks, Thanks for clarity.

More if I may.

Kind of more big picture here Peter.

Peter W. Quigley: Thanks, Olivier. With the decisive action and rapid progress our team delivered in 2023, we have laid the groundwork for 2024 to be an inflection point in Kelly's 77-year history. Our efficiency measures are delivering sustained results. Our growth initiatives are now in the implementation phase, and we enter the year with an adjusted EBITDA margin of 3%, a step change from our historical net margin average of around 2%. As Olivier shared, the stage is set for the company to achieve our previously disclosed expectation for net margin of 3.3 to 3.5 percent. With these structural improvements in place, I'm confident that Kelly is well positioned to capture increased customer demand when the macroeconomic environment improves and convert a greater share of top-line gains to bottom-line growth.

No I think when you look at the held for sale you have about $290 million of.

So you've been CEO.

Since October 2019, I believe kind of dealt tough hand immediately having to deal with Covid and then.

It's $170 million of liabilities with a net book value is about 2020.

Of course as you know.

Sachin and inflation.

We did receive the proceeds.

This uncertain economic environment, but <unk>.

Actually the first tranche of about.

In that timeframe, you've monetized assets.

$110 6 million on January <unk>.

Done M&A, the transformation and restructuring efforts.

Of this year.

But they are still pending points that.

And yet the stock really as below from when you took over.

I would like to mention that.

Collections should be cash free debt free.

And just trying to get an idea of what else do you see can you. Other can you do that would attract investors and to help drive the stock higher.

With a normalized level of working capital and there is also an earn out so all of that is under review.

And we expect to get.

<unk> is the fact that we have to share class just an impediment.

Additional proceeds likely from all of these items.

<unk> more investors and more eyeball.

In the course of probably late Q2 or early Q3.

The <unk> story.

And that is going to be in addition to basically the $110 6 million or equivalent we did receive at the time of the signings or early January.

Yes, Joe so.

In prior conversations I have avoided trying to get into the head of perspective.

Investors so.

But what I would say is I think based on our conversations with investors and potential investors. The improvements that we made last year.

Okay, great. Thanks, Thanks for that clarity.

Peter W. Quigley: I'm very proud of the way our team has kept their sights set on dual horizons, deftly steering Kelly through a challenging external environment and delivering results in the near term, all while embracing the change that's necessary to position the company for the future. Finally, I'm grateful to our customers, talent, and shareholders who have been with us on this journey, placing their trust in Kelly to deliver on our commitments and create value over the long term. While there is work to be done, I'm confident that 2024 is the start of a new era of growth for Kelly, a year in which we'll begin to reap the full benefits of the work we've done to transform this company and reward all our stakeholders. Healy, you can now open the call to questions. Thank you. And, ladies and gentlemen, if you wish to ask a question, please press one and then zero on your touchtone phone. You will hear an acknowledgement that you've been placed in queue, and you may remove yourself from queue at any time by repeating the one zero command.

More if I may.

Kind of more big picture here Peter.

So you've been CEO.

Going to be a wakeup call that were on a different trajectory.

Since October 2019, I believe kind of dealt tough hand immediately having to deal with Covid and then.

And then we have been for the past 20 years, obviously, we have to deliver those results, but entering the year to 3%.

Sachin and inflation.

This uncertain economic environment, but you've.

Net margin versus our past 20 year average of about 2% I think is a major step in that direction.

In that timeframe, you've monetized assets.

Done M&A, the transformation and restructuring efforts.

I think our focus on growth are.

And yet the stock really as below from when you took over.

Growth in the past.

All years, even longer than that has been relatively flat.

And just trying to get an idea of what else do you see can you. Other can you do that would attract investors and to help drive the stock higher.

So it's a combination of net margin improvement and topline growth that is behind the transformation that we initiated last year.

<unk> is the fact that we have the two share class just an impediment.

And I think that the.

Fact that were now a more disciplined focused company given the portfolio.

<unk> more investors and more eyeball.

Revisions that we've made will be.

The <unk> story.

I'll be a simpler to understand business for many investors and I think as we deliver the financial results, we will begin to attract.

Yes, Joe so.

Think in prior conversations I have avoided trying to get into the head of perspective.

Investors so.

But what I would say is I think based on our conversations with investors and potential investors. The improvements that we made last year.

Operator: If you are 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. Our first question will come from the line of Joe Gomes with Noble Capital. Good morning, Joe.

More attention and engage more.

Potential shareholders in interest in being along on our journey I would add probably inorganic.

Going to be a wakeup call that were on a different trajectory.

You know, it's a big focus and Peter discuss about it several times.

And then we have been for the past 20 years, obviously, we have to deliver those results, but entering the year to 3%.

Know that both.

EMEA staffing transaction.

Joe Gomes: Good morning. Good morning. Good morning.

We are going to have.

Cash in excess of $200 million, probably more in the 25% to 30, we have $300 million of available capacities.

Joe Gomes: Thanks for taking my questions. So, Peter, just kind of wanted to start off, you guys are doing everything you can. What else can we do to try and attract more candidates in order to be able to fill whatever opportunity we have? There are I mean, are there any more levers there that you can pull?

Net margin versus our past 20 year average of about 2% I think is a major step in that direction.

A very strong balance sheet.

I think our focus on growth are.

We are continuing to actively looking at properties.

Growth in the past.

All years, even longer than that has been relatively flat.

As we lead in the past.

But I think in terms of capabilities and our financial capabilities, we can basically.

So it's a combination of net margin improvement and topline growth that is behind the transformation that we initiated last year.

Peter W. Quigley: Yeah, Joe, we're continuously finding new ways to reach talent. Social media is obviously a key component of that, but not the only one. Our revised geostructure that we've announced for our P&I segment is designed to establish a greater personal connection for those individuals that want to contact a person. And our Kelly Now app is designed to connect with more people over a broader geographic area for those people that prefer to do something electronically. So we're continuously exploring new ways in all of our businesses, and I think the improvement in fill rates in our education segment is a great example of how we've been successful. Frank.

Look at properties that probably were not affordable for us even a couple of years ago.

And I think that the.

Fact that were now a more disciplined focused company given the portfolio.

Great.

The math is I appreciate that and really look forward to seeing how 2024 unfolds. Thanks for taking the questions.

Revisions that we've made will be.

I'll be a simpler to understand business for many investors and I think as we deliver the financial results, we will begin to attract.

Thank you. Thank you Joe.

We'll go next to the line of Kevin Steinke with Barrington Research.

Morning, Kevin Good morning.

More attention and engage more.

Good morning, Peter and Olivier Thanks for taking the question so.

Potential shareholders in interest in being along on our journey I would add probably inorganic.

Just wanted to circle back on the gross margin outlook you discussed for the first half of 2024.

You know, it's a big focus and Peter discuss about it several times.

And Olivier you've talked about the mix shift to education, there and the expected impact but.

Know that both.

EMEA staffing transaction.

We are going to have.

What are you thinking.

Cash in excess of $200 million, probably more in the 25% to 30, we have $300 million of available capacities.

Peter W. Quigley: Thank you for that. Just a quick kind of technical question here, Olivier. So glancing at the balance sheet, you've got assets held for sale at year end of $291 million. Goldstein, Profile Investment Services, Ltd., or Israel National News.

Factoring in in terms of the Perm placement outlook or is that.

A meaningful part.

A very strong balance sheet.

As you think about how gross margin will trend in the first half.

We are continuing to actively looking at properties.

So given the first thing you need to think about it is mechanical improvement of 101 hundred basis points right. So when.

As we lead in the past.

But I think in terms of capabilities and our financial capabilities, we can basically.

Olivier Thirot: Readers should consult with a professional financial advisor before making any financial decisions. For that reason, what else is included in that asset? Helme for sale, or is there something else there in the accounting side that suggests maybe we're going to see a write-down at some point in the future? No, I think when you look at the health care for sale, you have about $290 million of assets, $170 million of liabilities, so the net book value is about $120 million. Of course, as you know, we did receive the proceeds, at least the first tranche, of about $110.6 million on January 3rd of this year, but there are still, you know, pending points that I would like to mention. The transaction should be cash-free, debt-free, with a normalized level of working capital, and there is also an earn-out, so all that is under review, and we expect to get, you know, additional And that's going to be in addition to basically the $110.6 million equivalent we did receive at the time of the signing, so early January. Great, thanks for that, Clare.

We guided 25 to.

Look at properties that probably were not affordable for us even a couple of years ago.

27.

Basically each.

Yeah.

Kind of like for like pro forma comparison right. The second thing is if you think about our expectations for fee business.

Great.

The math is I appreciate that and really look forward to seeing how 2024 unfolds. Thanks for taking the questions.

I would say the first half of this.

Thank you. Thank you Joe.

It's what I would call new stabilization, so more of an improvement.

We'll go next to the line of Kevin Steinke with Barrington Research.

A link to a lower base of Comparables.

Good morning, Kevin Good morning.

Good morning, Peter and Olivier Thanks for taking the question so.

So something that I would say is kind of neutral.

Just wanted to circle back on the gross margin outlook you discussed for the first half of 2024.

The main factor we really.

Deep compute ease.

Mix that I was referring to especially related to the growth we have in education.

And Olivier you've talked about the mix shift to education, there and the expected impact but.

And basically the type of.

What are you thinking.

Overall pressure that it's putting on our GP rate not an hour GP dollar growth. So I would say no trial for fees mix.

Factoring in in terms of the Perm placement outlook or is it even higher.

Meaningful part.

As you think about how gross margin will trend in the first half.

Would be the biggest.

<unk>.

So given the first thing you need to think about disease mechanical improvement of 101 hundred basis points right. So when.

Sure.

Seeing that compresses, our margin, especially driven by education.

That's our assumption for the moment, which is what we have seen also in Q4 also in Q4, you know that we are also 60 basis point of the coming from the fee business, but now as the comps are much lower so I don't think that is going to have the impact we have seen all over 2023.

We guided 25 to.

27.

Basically each.

But kind of like for like pro forma comparison right. The second thing is if you think about our expectations for fee business.

I would say the first half of this.

Okay, Great that's helpful.

It's what I would call new stabilization, so more of an improvement.

Okay.

Obviously education continues to be.

A link to a lower base of Comparables.

Strong performer and really impressive growth there.

Joe Gomes: Kind of a bigger picture here, Peter. So you've been CEO since October of 2019, I believe you kind of dealt a tough hand immediately having to deal with COVID and then recession and inflation, you know, this uncertain economic environment, but you've, in that timeframe, monetized assets, done M&A, the transformation, and the restructuring effort. And yet, the stock really is below where it was when you took over. And just trying to get an idea of what else you see, can you do that would attract investors in to help drive the stock higher, or is the fact that we have the two share class just an impediment to attracting more investors and more eyes to the Kelly story? Yeah, Joe.

So something that I would say he's kind of neutral.

Maybe just talk about the continued runway or opportunities you see there.

The main factor, we really did.

Deep compute ease.

New customers penetration of existing customers et cetera.

Mix that I was referring to especially related to the growth we have in education.

How.

And basically the type of.

Sustainable the runway.

Overall pressure that it's putting on our GP rate not an hour GP dollar growth. So I would say no trial for fees mix.

Is that you see there in terms of the growth outlook.

Well clearly as Olivier was talking about comps the comps get more and more difficult for education, which has had a very good a very good run but the.

Would be the biggest.

<unk>.

The business is operating extremely well.

Seeing that compresses, our margin, especially driven by education.

<unk>.

Both with existing customers as well as generating interest from new school districts.

That's our assumption for the moment, which is what we have seen also in Q4 also in Q4, you know that we have also 60 basis point of the coming from the fee business, but now the comps are much lower so I don't see that is going to have the impact we have seen all over 2023.

Both large and small.

The we've seen a steady improvement in fill rates.

In.

In many of the school districts, which is very positive we've seen.

Peter W. Quigley: So I think in prior conversations, I've avoided trying to get into the heads of prospective investors, but what I would say is, based on our conversations with investors and potential investors, the improvements that we made last year are going to be a wake-up call that we're on a different trajectory than we have been for the past 20 years. Obviously, we have to deliver those results, but entering the year at a 3 percent net margin versus our past 20-year average of about 2 percent, I think is a major step in that direction. I think our focus on growth, our growth in the past several years, even longer than that, has been relatively flat.

Improvements in pay rates those last two items, the fill rates and pay rates do have a sort of a natural ceiling, but other than that the.

Okay, Great that's helpful.

And.

Education continues to be.

The fact is the business is responding to.

Strong performer.

Really impressive growth there.

A dynamic in the market or theres not enough instructors in classrooms and.

Maybe just talk about the continued runway of opportunity you see there.

We have demonstrated that we are the best in the business and filling those instructor positions. So we think the future is very bright for education.

For new customers penetration of existing customers et cetera.

How are you.

Sustainable the runway.

Okay great.

Is that you see there in terms of the growth outlook.

Also on education.

Fourth quarter.

Well clearly as Olivier was talking about comps the comps getting more and more difficult for education, which has had a very good ah.

Gross margin was a bit lower than we had.

<unk> historically over the last you know.

Several quarters I don't know if you have anything to call out there.

Very good run, but the you know.

The business is operating extremely well.

In terms of mix or something like that but just curious.

Both with existing customers as well as generating interest from new school districts.

Yes, probably hue hue things to call out.

Peter W. Quigley: So it's a combination of net margin improvement and top-line growth that is behind the transformation that we initiated last year. And I think that the fact that we are now a more disciplined, focused company, given the portfolio revisions that we've made, will be a simpler business for many investors. And I think, you know, as we deliver the financial results, we'll begin to attract more attention and engage more potential shareholders in interest in being along on our journey. I would add probably inorganic.

I would say.

Both large and small.

The little bit of a challenging quarter, but not.

We've seen steady improvement in fill rates.

More for <unk>.

In.

Saving reasons on our fee business.

In many of the school districts, which is very positive we've seen.

But we don't see that as.

A deceleration it's more that our shoe business in education.

Improvements in pay rates those last two items, the fill rates and pay rates do have a sort of a natural ceiling, but other than that the.

I'd like energy business going up going down we don't see that as a <unk>.

The fact is the business is responding to.

Pattern like what we have seen in the <unk> set top P&I.

A dynamic in the market or theres not enough instructors in classrooms and.

The second factor is a little bit of mix.

We have demonstrated that we are the best in the business that are drilling those instructor positions. So we think the future is very bright for education.

We don't see of US moving down there is a little bit of pressure, but it's more the mix, especially because very recently.

Olivier Thirot: You know, it's a big focus, and Peter discussed it several times. You know, that post the EMEA staffing transaction, we are going to have cash in excess of 200 million, probably more in the 25 to 30. We have 300 million in available capacity with a very strong balance sheet, and we are continuing to actively look at properties as we did in the past. But I think in terms of capabilities, now financial capabilities, we can basically look at properties that probably would not have been affordable for us even a couple of years ago. Great. Those are awesome answers,

We are welcome pretty big customers new wins.

Okay great.

And the mix is a little bit more challenging, but I don't see that as the as the kind of long term issue. So honestly looking at Q4, I see that more whether it's on the fee side on the <unk>.

Also on education.

Fourth quarter.

Gross margin was.

A bit lower than we had seen historically over the last you know.

Several quarters I don't know if you have anything to call out there.

<unk> side as something that is more temporary and the normal fluctuations, we see quarter over quarter.

In terms of mix or something like that but just curious.

Yes.

Shootings to call out.

Alright understood. That's helpful. Maybe just a couple more here.

<unk>.

I would say.

It was a little bit of a challenging quarter, but not.

So you talked about the revenue outlook for the first half of 2024 and first quarter expected to be pretty consistent with the trend you saw in the fourth quarter, but then.

More for sale.

Saving reasons on our fee business.

But we don't see that as a.

You mentioned.

A deceleration it's more that our shoe business in education.

Joe Gomes: I appreciate that and really look forward to seeing how 2024 unfolds. Thanks for taking the question. Thank you. Thank you, Joe. We'll go next to the line for Kevin Stanky with Barrington Research. Good morning, Kevin. Good morning.

You're looking for an improvement.

Revenue trends in the second quarter and you linked that to your <unk>.

You'd like energy business going up going down we don't see that as a.

Transformational growth initiatives, so maybe just give us an update on.

As a pattern like what we have seen in the <unk> set top P&I.

The traction you expect there in the various initiatives that.

The second factor is a little bit of mix.

That you see contributing to that.

We don't see of US moving down there is a little bit of pressure, but it's more the mix, especially because very recently.

Traction in the second quarter.

Well as as we've discussed Kevin.

In 2023, we delivered significant improvements in our SG&A.

Kevin Stanky: Good morning, Peter and Olivier. Thanks for taking the time to answer my question. So, I just wanted to circle back on the gross margin outlook you discussed for the first half of 2024. You talked about the mixed shift to education there and the expected impact, but what are you thinking or factoring in in terms of the PERM placement outlook, or is that even a meaningful part as you think about how gross margin will trend in the first half? So Kevin, the first thing you need to think about is this mechanical improvement of 100 basis points, right? So when we guide 20.5 to 20.7, basically, it's a kind of light for pro forma comparison, right?

We are well come pretty big customers new wins.

And the mix is a little bit more challenging, but I don't see that as a as a kind of long term issue. So honestly looking at Q4, I see that more whether it's on the fee side on the <unk>.

Through efficiency gains and.

Pivoted.

To focus on growth later in 2023.

The <unk>.

Time, it takes for those to materialize and show up as a little bit longer than the SG&A.

The <unk> side as something that is more temporary and the normal fluctuation, we see quarter over quarter.

Benefits that we saw.

We're.

We.

Alright understood. That's helpful. Maybe just a couple more here.

<unk> that sometime in the second quarter the.

<unk>.

So you talked about the revenue outlook for the first half of 2024 and first quarter expected to be pretty consistent with the trend you saw in the fourth quarter, but then.

The steps that we've taken to grow our market share within our large enterprise customers will begin to.

Take hold and.

We're approaching a very significant portion of our revenue through that program and.

You mentioned.

We're looking for an improvement.

Revenue trends in the second quarter and you linked that to your.

We think theres opportunity for revenue growth again, starting sometime in the second quarter.

Transformational growth initiatives, so maybe just give us an update on.

Okay, well that's great.

The traction you expect there in the various initiatives that.

Right.

Olivier Thirot: The second thing is, if you think about our expectations for fee business, I would say in the first half of this year, it's what I would call a stabilization, so more an improvement linked to a lower base of comparables. So something that I would say is kind of neutral.

And lastly on the.

The M&A front, you talked about you're actively.

But you see contributing to that.

Traction in the second quarter.

Continuing to look at.

Well as as we've discussed Kevin.

Properties and <unk>.

In 2023, we delivered significant improvements in our SG&A through.

Olivier you mentioned with the additional capital you now have on the European staffing sale, maybe being able to afford some properties that you might not at before you're just talking about in terms of.

Olivier Thirot: The main factor we really did compute is this mix that I was referring to, especially related to the growth we have in education and basically the type of overall pressure that it's putting on our GP rate, not on our GP dollar growth. So I would say neutral for fees would be the biggest thing that would compress our margin, especially driven by education. That's that's our assumption for the moment, which is what we have seen also in Q4, although in Q4, you know that we also had 60 base points of revenue coming from the fee business, but now the comps are much lower. So I don't think that is going to have the impact we have seen all over 2020. Okay, great. That's helpful.

Through efficiency gains and <unk>.

Pivoted.

To focus on growth later in 2023.

Targets of a larger size or.

The.

Time, it takes for those to materialize and show up as a little bit longer than the SG&A.

Maybe paying a little more on the valuation side, maybe you could just delve into the.

Benefits that we saw.

So that comment in the overall pipeline youre seeing.

But we're.

Yes, I think it's more the former than the latter we're not going to we're going to continue to be very disciplined in terms of what we pay for properties and we're going to be looking for the kinds of high quality high growth properties that we have.

<unk> that sometime in the second quarter the.

<unk>.

The steps that we've taken to grow our market share within our large enterprise customers will begin to.

Take hold and.

<unk> demonstrated that we've found in the past and so that's where we're going to.

We're approaching a very significant portion of our revenue through that program and.

Spend our money the.

We think there is opportunity for revenue growth again, starting sometime in the second quarter.

Pipeline is still not what it was in the.

Post pandemic period.

Okay, well that's great.

There is deal flow, but the quality is still not.

Peter W. Quigley: You know, obviously education continues to be a performer and there is really impressive growth there. Maybe just talk about the continued runway or opportunity you see there. I don't know, new customers, penetration of existing customers, et cetera, you know, how, how, uh, sustainable the runway is that you see there in terms of the growth outlook. Well, clearly, as Olivier was talking about comps, the comps get more and more difficult for education, which has had a very good, a very good run. But the, you know, the business is operating extremely well, both with We've seen a steady improvement in fill rates in many of the school districts, which is very positive.

Lastly on the.

As good as we.

The M&A front, you talked about you're actively.

Like it to be.

But we're not we're not just relying on.

Continuing to look at.

Active sales.

Properties and <unk>.

Sales were proactively.

<unk>.

Evaluating and engaging companies that we think would be a.

Positive addition to the to the Kelly portfolio.

And we still have you might remember, we're disclosing and discussing the fact that in terms of valuation and so on we have we use amongst other things internal rate of return we are still in the 25%.

Targets of a larger size or.

Maybe paying a little more on the valuation side, maybe you could just delve into the.

So that comment in the overall pipeline youre seeing.

I was referring to sometimes ago so.

Yes, I think it's more the former than the latter we're not going to we're going to continue to be very disciplined in terms of what.

That's clearly the you know the approach we have internal evaluation.

What we pay for properties and we're going to be looking for the kinds of high quality high growth properties that we have.

Okay that all makes sense I appreciate all the commentary I'll turn it over.

Thank you Kevin.

Demonstrated that we've found in the past and so that's where we're going to.

Okay.

Thank you we'll go next to the line of Kartik Mehta with Northcoast research.

Spend our money the.

Good morning.

Pipeline is still not what it was in the.

Good morning, Peter Good morning.

I was hoping to maybe get your thoughts a little bit about what youre seeing in January I realize I'm sure the guidance reflects.

Post pandemic period.

There is deal flow, but the quality is still not.

What you've seen but.

Peter W. Quigley: We've seen improvements in pay rates. Those last two items, the fill rates and pay rates, do have a sort of a natural ceiling. But other than that, the fact is, the business is responding to a demand. We have demonstrated that we are the best in the business at filling those instructor positions, and we think the future is very bright for education. Okay, great. Just also on education.

As good as we are.

Any changes youre seeing outside of seasonality in January or early parts of February.

Like it to be.

But we're not we're not just relying on.

Impaired to.

Active sale.

What you saw in the fourth quarter or December.

Sales were proactively.

<unk>.

So two things on that.

Evaluating and engaging companies that we think would be a.

One one is when you look at revenue exit rate.

Positive addition to the to the Kelly portfolio.

End of Q4 of 2023.

And we still have the you might remember, we're disclosing and discussing the fact that in terms of valuation and so on.

Overall, we were at minus 0.1 saw equally flat on a constant currency basis. So that's that's where we ended up at.

Peter W. Quigley: The fourth quarter Gross Margin was, you know, a bit lower than we had seen historically over the last few years. I don't know if there's anything to call out there in terms of mix or something like that, but I'm just curious about the group. Yeah, probably a few things to call out. I would say.

We use amongst other things internal rate of return we are still on the 25% I was.

At the front end of 2023, when I look at the first.

I was referring to sometimes ago. So that's clearly the you know the approach we have in Denver valuation.

Weeks of January what we have seen so far in <unk>.

I've heard that so far.

Okay that all makes sense I appreciate all the commentary I'll turn it over.

From many sources, but we have seen it.

Livestock in manufacturing at least for the first couple of weeks of January and then some more ramp up we have started to see a little bit later for the rest of the business.

Thank you Kevin.

Olivier Thirot: It was a little bit of a challenging quarter, but not, I mean, more for saving reasons in our fee business. But we don't see that as a deceleration, it's more that our fee business in education is like any fee business, going up, going down. We don't see that as a pattern like what we have seen in the fee business in SET or PNI. The second factor is a little bit of mix.

Thank you we'll go next to the line of Kartik Mehta with Northcoast research.

Good morning.

Good morning, Peter Good morning.

Education as Peter was saying still are still on the high growth mode.

I was hoping to maybe get your thoughts a little bit about what youre seeing in January I realize I'm sure the guidance reflects.

And I would say four.

OCG and set.

What <unk> seen but.

Any changes youre seeing outside of seasonality in January or early parts of February.

Stabilization.

Virtues.

A little bit similar to what we have the.

Compared to.

Front end of 2024.

What you saw in the fourth quarter or December.

The 2023, sorry.

So two things on that.

And then.

Olivier Thirot: We don't see our spread moving down. There is a little bit of pressure, but it's more the mix, especially because, very recently, we have welcomed pretty big customers and new wins. And the mix is a little bit more challenging, but I don't see that as a kind of long-term issue.

As you look at I think.

One one is when you look at revenue exit rate.

Peter you said deal flow maybe to quality.

As good as you would like.

End of Q4 of 2023.

Is it just.

Quality or is it maybe number of opportunities.

Overall, we were at minus 0.1, so our echoed it flat on a constant currency basis. So that's that's where we ended up at.

Considering the environment we're in.

<unk>.

Are you getting to see enough opportunities where.

At the end of 2023, when I look at the first.

You can make a good decision or do you think that will come a little bit later.

Olivier Thirot: So honestly, looking at Q4, I see that more, whether it's on the fee side or on the mix side, as something that is more temporary. And the normal fluctuation we see quarter over quarter. All right, understood. That's helpful. Maybe just a couple more here.

Weeks of January what we have seen so far in <unk>.

Maybe as people get a better feel for what the economy is going to eventually do this year.

I've heard that too so.

I think the big damper right now is continues to be interest rate environment and.

From many sources, but we have seen it.

Livestock in manufacturing at least for the first couple of weeks of January and then some ramp up we have started to see a little bit later for the rest of the business.

The participation of.

Peter W. Quigley: So you talked about the revenue outlook for the first half of 2024 and the first quarter. Smith, Peter Thirot, Kelly Smith, Olivier Thirot, Joe Gomes, Josh Vogel, Peter Quigley, you know, the traction you expect there and the various initiatives that you see contributing to that traction in the second quarter. Well, as we've discussed, Kevin, you know, in 2023, we delivered significant improvements in our SG&A through efficiency gains and pivoted to focus on growth later in 2023. The time it takes for those to materialize and show up is a little bit longer than the SG&A benefits that we saw, but we anticipate that sometime in the second quarter, the steps that we've taken to grow our market share within our large enterprise customers will begin Okay, that's great, and Leslie on the.

Certain and Investor communities.

But I think as that.

Either stabilizes or we actually get into a rate reduction environment that money is going to come off the sidelines and companies that.

Education, as Peter was saying still still on the high growth mode.

<unk>.

And I would say four.

<unk> b in the part of their cycle that they want to.

OCG.

And set.

Stabilization.

Enter into an exit transaction.

Best use.

We'll see we'll see greater deal flow based on the folks we've talked to.

A little bit similar to what we have.

End of 2024.

The 2023, sorry.

We're not in a permanent state of.

And then.

<unk>.

Low quality M&A properties, it's just that the <unk>.

As you look at I think Peter you said deal flow, maybe the quality is as good as you would like.

Current environment for the past year or so has been.

Not conducive to a lot of companies coming on the market.

Is it just.

Or is it maybe number of opportunities.

And just one last question Olivier when you report.

Considering the environment.

And are you getting to see enough opportunities where.

First quarter results right now you have the Americas, and Europe, and AP and obviously, the EMEA business was about $864 million for the year of 2023.

You can make a good decision or do you think that will come a little bit later.

As people get a better feel for what the economy is going to eventually do this year.

Will will you still keep that European region segment or will that.

Yes, I think the big damper right now is continues to be interest rate environment and.

The remainder are left move.

Move somewhere else.

The participation of certain and investor communities.

As I mentioned during our prepared remarks, so the perimeter of what we have sold.

I think as that.

Is Europe. So it is excluding.

Either stabilizes or we actually get into a rate reduction environment.

Mexico from from the.

That money is going to come off the sidelines and companies that.

From the perimeter.

Might be in there.

Part of their cycle that they want to.

And basically the Mexican business he is going to be under the leadership of P&I, but just to make sure. It was it. Your question there were some scenes Tony I may have missed something.

Peter W. Quigley: You talked about you're actively, continuing to look at, you mentioned with the additional capital you now have from the European staffing sale, maybe being able to afford some properties that you might not have before. Are you just talking about in terms of Healy, Joe Gomes, Josh Vogel, Peter Quigley, Olivier Thirot, Kelly Healy, Joe Gomes, Josh, to that comment and the overall pipeline you're seeing. Yeah, I think it's more of the former than the latter.

Enter into an exit transaction we.

We will see we'll see greater deal flow based on the folks we've talked to.

No I was just making sure I think Europe reported $864 million, you talked about $810 million.

We're not in a permanent state of.

Low quality M&A properties, it's just that the <unk>.

Current environment for the past year or so has been.

As a comparison yes.

Yes, so the.

Not conducive to a lot of companies coming on the market.

810 million was to make sure.

Externally.

And just one last question Olivier when you report it.

And you can capture the data.

Right, it's lower than the total revenue of this segment international the main difference is because basically our Mexican business is not part of the deal with.

First quarter results right now you have the Americas and Europe.

Peter W. Quigley: We're not going to, we're going to continue to be very disciplined in terms of what we pay for properties, and we're going to be looking for the kinds of high quality, high growth properties that we've, you know, demonstrated that we've found in the past. And so that's where we're going to spend our money. The pipeline is still not what it was in the Post-pandemic period.

AP and obviously the EMEA business was about $864 million for the year of 2023.

That we're referring to and our OCG business is going to continue to operate in.

Will will you still keep that European region segment or will that whats the remainder are left move.

Globally, yes.

Alright.

Move somewhere else.

Right. So that OCG business will then be just reflected in your international segment right. So in OCG and OCG. It is already known right.

As I mentioned during our prepared remarks, so the perimeter of what we have sold.

Is Europe. So it is excluding.

We keep the footprint in Europe, a little bit similar than the one we have in Asia.

Peter W. Quigley: There's deal flow, but the quality is still not as good as we'd like it to be. But we're not just relying on active sales. We're proactively evaluating and engaging companies that we think would be a positive addition to the Kelly portfolio. And we still have, you might remember, we're disclosing and discussing the fact that, in terms of valuation and so on, we use, amongst other things, the internal rate of return. We are still on the 25 percent I was referring to some time ago. So that's still, you know, the approach we have in terms of valuation. Okay, that all makes sense. I appreciate all the commentary. I'll turn it over to Kevin.

Mexico from from the.

From the perimeter.

In Asia Pacific through our OCG business, namely MSP.

And basically the Mexican business he is going to be under the leadership of P&I, but just to make sure. It was it. Your question there were some scenes story.

And to some extent FSP.

Btu when relevant.

Perfect. Thank you so much.

Thank you.

Miss something.

No I was just.

And we will go next to the line of Marc Riddick with Sidoti.

Making sure I think Europe reported $864 million, you talked about $810 million.

Hey, good morning, everyone.

As a comparison.

Good morning, So a lot of my questions have been answered and I want to thank you for.

Yes, so the.

810 million was to make sure.

Providing greater clarification on that breakdown that that's super helpful. I wanted to circle back around to your thoughts around the acquisition.

Externally.

And you can capture the perimeter right it's slower than the total revenue of this segment international the main difference is because basically our Mexican business is not part of the of the deal with.

Pipeline and potential targets and the like are you getting the sense that.

While it may not be quite where you'd like it to be are you getting the sense that there are any particular pockets that may sort of.

That's what you're referring to and our OCG business is going to continue to operate in.

Emerge or or B.

Cardiff Métis: Thank you. We'll go next to the line of Cardiff Métis with North Coast. Good morning. Good morning.

Globally, yes.

Relatively actionable sooner rather than later or whether it be regionally or by industry vertical.

And bill right.

Alright, so that OCG business will then be just reflected in Nash.

Cardiff Métis: I was hoping to maybe get your thoughts a little bit about what you're seeing in January. I realize I'm sure the guidance reflects what you've seen, but any changes you're seeing outside of seasonality in January or early parts of February compared to what you saw in the fourth quarter or December? So two things on that, Olivier.

National segment right now.

Well, we're focusing as I've said previously in.

<unk> is already known.

So we keep the footprint in Europe, a little bit similar than the one we have in Asia.

Science Engineering technology, and telecom and our education practice, others would be opportunistic.

In Asia Pacific through our OCG business, namely MSP.

And.

We think that the because of the size of the technology staffing market in the U S and North America that Thats.

And to some extent FSP.

Btu when relevant.

Perfect. Thank you so much.

A very fertile area to continue to pursue.

Thank you.

And we will go next to the line of Marc Riddick with Sidoti.

Olivier Thirot: One is when you look at the revenue exit rate at the end of Q4 of 2023. Overall, we were at minus 0.1. So I call it flat on the constant currency basis. So that's where we ended up, you know, at the far end of 2023. When I look at the first weeks of January, what we have seen so far, and I've heard that also from many sources, but we have seen a very light start in manufacturing, at least for the first couple of weeks of January, and then some ramp-up we have started to see a little bit later. For the rest of the business, education, as Peter was saying, still in high growth mode. And I would say for OCG and SET, stabilization versus a little bit similar to what we have seen at the far end of 2020, the 2020 switch. And then, as you look at, I think, Peter, you said deal flow, maybe the quality isn't as good as you would like. Is it just quality?

We think it will.

<unk> an excellent complement to the acquisition we made in software world.

Good morning, Mark Good morning, everyone.

Good morning, So a lot of my questions have been answered, but I want to thank you for providing greater clarification on that breakdown. It's super helpful. I wanted to circle back around to your thoughts around the acquisition.

So that we will continue to focus on science engineering technology, and telecom and think that there is.

Historically been enough deal flow that.

When things ease up a little bit.

We will begin to see the kinds of high quality.

Pipeline and potential targets and the like are you getting the sense that.

Assets that we'd be looking for.

While it may not be quite where you'd like it to be are you getting the sense that there are any particular pockets that may sort of.

Excellent and then shifting gears I was wondering it with everything thats going on with the client demand environment, and we're sort of navigating through I was wondering if you could.

Emerge or or B.

Relatively actionable sooner rather than later, whether it be regionally or by industry vertical.

Sure on your thoughts as to.

If you see any.

Potential changes or any particular go to market strategies or approaches.

Well, we're focusing as I've said previously in.

And or sort of how you feel about the general pricing environment. If there are any sort of.

Science Engineering technology, and telecom and our education practice, others would be opportunistic.

Tweaks or adjustments that we did.

Youre looking at engaging and as we begin the year.

And.

We think that the because of the size of the technology staffing market in the U S and North America that Thats.

I don't think anything of consequence that.

I would point to a mark I think there are pockets where there are.

A very fertile area to continue to pursue.

Pricing challenges due to due to the competitive land escape and the decline in demand in certain areas, but.

We think it will.

<unk> an excellent complement to the acquisition we made in software world.

So that we will continue to focus on science engineering technology, and telecom and think that there is.

I think historically have demonstrated that we're able to navigate through that and.

Peter W. Quigley: Or is it maybe the number of opportunities? Considering the environment we're in, are you getting to see enough opportunities where you can make a good decision? Or do you think that will come a little bit later?

And also take.

<unk> historically been enough deal flow that.

Get price where the environment.

When things ease up a little bit.

Call Stuart and the labor market continues to be tight so well.

We will begin to see the kinds of high quality.

Assets that we'd be looking for.

Demand hasn't necessarily we havent seen it show up in demand yet.

Excellent and then shifting gears I was wondering with everything that's going on with the client demand environment and we're sort of navigating through I was wondering if you could.

Cardiff Métis: Maybe as people get a better feel for what the economy is going to do this year. I think the big damper right now continues to be the interest rate environment and the participation of certain investor communities, but I think as that either stabilizes or we actually get into a rate reduction environment, that money is going to come off the sidelines in companies that might be in a part of their cycle that they want to enter into an exit transaction. We'll see greater deal flow based on the folks we talk to. We're not in a permanent state of low-quality M&A properties; it's just that the current environment for the past year or so has not been... not conducive to a lot of companies coming on the market.

As the macroeconomic conditions improve.

Large and small enterprises are going to continue to struggle finding people in that.

Sure on your thoughts as to.

It's something that they will often turn to Kelly to help them with yes, I mean, when you look at the spreads and it's something we look at to make sure that we understand where.

If you see any.

Potential changes or any particular go to market strategies or approaches.

Our margin our raw spreading.

And or sort of how you feel about the general pricing environment. If there are any sort of.

Spreading in P&I and set are pretty much stable and even up a little bit. So we have not seen anything in terms of pricing pressure that will translate into.

Tweaks or adjustments that we.

Youre looking at engaging and as we begin the year.

I don't think anything of consequence that.

Basically some erosion in our spreads.

I would point to a mark I think there are pockets where there are.

Great and then I would be remiss if I didn't.

Bringing the top pick ups, but I was wondering if you could talk a little bit about if you've heard any.

Pricing challenges due to the competitive land escape.

Relatively speaking any any changes or updates acquainted thoughts around.

The decline in demand in certain areas, but.

AI, driven revenue opportunities and demand opportunities or.

I think historically have demonstrated that we're able to navigate.

Through that end.

If there is any update you could provide there that would be great. Thank you.

Cardiff Métis: And just one last question, Olivier, when you report the first quarter results, you know, right now you have Americas and Europe and AP, and obviously, the EMEA business was about $864 million for the year of 2023. Will you still keep that European region segment, or will what's remained or left move somewhere else? As I mentioned during our prepared remarks, the perimeter of what we have sold is Europe, so it excludes Mexico from the market, from the Perimeter, and basically, this Mexican business is going to be under the leadership of PNI. But just to make sure, was that your question, or was there something else? Sorry, I may have missed something. No, I was just making sure.

And also take.

Get price where the environment.

Yes.

We're spending a lot of time talking with customers about AI I would say there is activity, but it's still very early early innings in that.

Cold storage in the labor market continues to be tight so well.

Demand as in necessarily we havent seen it show up in demand yet.

In that game, but we're not we're not waiting so we're we're using AI in a lot of our operations.

As the macroeconomic conditions improve.

Large and small enterprises are going to continue to struggle finding people in that.

Particularly to improve the productivity of our recruiters and salespeople.

It's something that they will often turn to Kelly to help them with yes, I mean, when you look at the spreads and it's something we look at to make sure that we understand where.

And we have.

Used AI and other <unk>.

Parts of our operations as well as.

Our margins are.

Our spreading in P&I and set are pretty much stable and even up a little bit. So we have not seen anything in terms of pricing pressure that will translate into.

In <unk>.

<unk> technology that we have that customers face off with in use like our helix.

Analytics.

Portola.

Basically some erosion in our spreads.

<unk> and our OCG practice.

Great and then I would be remiss, if I didn't bring the top pick ups, but I was wondering if you could talk a little bit about if you've heard any.

But it's still Kelly operator, it's not a customer.

Olivier Thirot: I think Europe reported $864 million; you talked about $810 million, kind of as a comparison. Oh, yeah. So the $810 million was to make sure externally you can capture the perimeter, right? It's lower than the total revenue of the segment international. The main difference is that basically, our Mexican business is not part of the deal that we are referring to, and our OCG business is going to continue to operate globally. Yeah, and globally. Right, so that OCG business will then be just reflected in your international segment, right? No, in the OCG.

<unk> driven activity right now, but there are a lot of conversations a lot of interest.

Relatively speaking any any changes or updates quieted thoughts around AI, driven revenue opportunities and demand opportunities or.

We are.

Launched a program to connect.

If there's any update you can provide there that would be great. Thank you.

Customers, who have demand for <unk>.

Experts in the AI space Kelly arc.

Yes.

We're spending a lot of time talking with customers about AI I would say there is activity, but it's still very early early innings in that in that game, but we're not we're not waiting. So we're we're using AI in a lot of our operations.

Program.

Our platform and.

We've got customers, who are on that platform because they're looking for talent that can help them with their own internal AI.

All of this is still relatively small in early.

Particularly to improve the productivity of our recruiters and salespeople.

Relative to other technologies and solutions.

And we have.

<unk> solutions.

Used AI and other <unk>.

Thank you very much.

Parts of our operations as well as.

Thanks, Mark Thank you.

Thank you once again for questions. Please press one zero at this time.

In <unk>.

Olivier Thirot: It is already in OCG. So we keep a footprint in Europe a little bit similar to the one we have in Asia, in Asia-Pacific through our OCG business, namely MSP, RPO, and to some extent FSP or BPO when relevant. Thank you so much. Thank you. And we'll go next to the line of Mark Riddick with Sidoti.

Technology that we have that customers face off with in use like our helix.

Yes.

Analytics.

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

Portola.

Helix UX and our OCG practice.

Okay. Kelly. Thank you very much thank you and terminate the call.

But it's still Kelly operated it's not a customer.

Thank you and ladies and gentlemen, this conference is available for replay beginning at 11 30 eastern time today and running through March 13th at Midnight, you May access the AT&T replay system by dialing 806, 2071041 and entering the access code of 5856971 international parties.

<unk> driven activity right now, but there are a lot of conversations a lot of interest.

Mark Riddick: Good morning, everyone. Good morning. A lot of my questions have been answered, and I want to thank you for providing greater clarification on that breakdown. That's super helpful.

We are.

Launched a program to connect.

Customers, who have demand for <unk>.

Experts in the AI space Kelly arc.

Since may dial four zero to 90 700 847, those numbers again are one 806 2071041 or four zero to 9700847 with the access code of 5856971 that does conclude our conference for today.

Program.

Our platform and.

Mark Riddick: I wanted to circle back around to your thoughts around the acquisition pipeline and potential targets and the like. Are you getting the sense that while it may not be quite where you'd like it to be, are you getting the sense that there are any particular pockets that may sort of or be relatively actionable sooner rather than later, whether it be regionally or by industry. Well, we're focusing, as I've said previously, on science, engineering, technology, and telecom and our education practice. Others would be opportunistic.

We've got customers, who are on that platform because they're looking for talent that can help them with their own internal AI.

All of this is still relatively small in early.

Thank you for your participation and thank you for using AT&T event conference. Thank you may now disconnect.

Relative to other technologies and solutions.

<unk> solutions.

Thank you very much.

Thanks, Mark Thank you.

Thank you once again for questions. Please press one zero at this time.

Yes.

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

Okay Kelly. Thank you very much thank you terminate the call.

Peter W. Quigley: And we think that because of the size of the technology staffing market in the U.S. and North America, that's a very fertile area to continue to pursue. We think it would be an excellent complement to the acquisition we made in Softworld. So we will continue to focus on science, engineering, technology, and telecom and think that there's Historically, there has been enough deal flow that when things ease up a little bit, we will begin to see the kinds of high-quality... assets that we'd be looking for. Excellent

Suppose may dial four zero to 90 700 847, those numbers again are one 806 2071041 or four zero to 9700847 with the access code of 5856971 that does conclude our conference for today.

Peter W. Quigley: And then, shifting gears, I was wondering with everything that's going on with the client-to-man environment and what we're sort of navigating through, I was wondering if you could share any thoughts as to whether you see any potential changes for any particular go-to-market strategies or approaches or, or, sort of how you feel about the general pricing environment, if there are any sort of you know tweaks or adjustments that we that you're looking I think there are pockets where there are pricing challenges due to the competitive landscape and the decline in demand in certain areas, but we, I think, historically have demonstrated that we're able to navigate through that. And also take, you know, get a price where the environment calls for it and the labor market continues to be tight.

Thank you for your participation and thank you for using AT&T event conferencing you may now disconnect.

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

Olivier Thirot: So while demand hasn't necessarily, we haven't seen it show up in demand yet, as macroeconomic conditions improve, large and small enterprises are going to continue to struggle to find people, and that is something that they'll often turn to Kelly to help them with. Yeah, I mean, when you look at the spread, and this is something we look at to make sure that we understand where our margins are, our spread in PNI and SET is pretty much stable and even up a little bit, so we have not seen anything in terms of pricing pressure that would translate into basically some erosion in our spread. Great, and then I would be remiss if I didn't bring this topic up, but I was wondering if you could talk a little bit about any, you know, relatively speaking, any changes or updates in client thoughts around AI driven revenue opportunities and demand opportunities, or if there's any update you could provide there, that would be great. Thank you. Yeah, well, we're spending a lot of time talking with customers about AI. I would say there is activity, but it's still very early, early innings in that game.

[music].

Peter W. Quigley: But we're not, we're not waiting. So we're using AI in a lot of our operations, particularly to improve the productivity of our recruiters and salespeople. And we have, you know, used AI in other parts of our operations, as well as in the technology that we have that customers face off with and use, like our Helix Analytics portal and Helix UX in our OCG practice, but it's still Kelly-operated. It's not a customer service-driven activity right now. But there are a lot of conversations, and a lot of people are interested.

Peter W. Quigley: We have launched a program to connect customers who have demand for experts in the AI space, a Kelly Arc program or platform. And we've got customers who are on that platform because they're looking for talent that can help them with their internal AI. But all of this is still relatively small and early, you know, relative to other technologies and solutions.

Mark Riddick: Thank you very much. Thanks, Mark. Thank you. Thank you.

Operator: Once again, for questions, please press 1, then 0 at the end. There are no further questions in queue from the phones at this time. OK, Keely, thank you very much. Thank you so much.

Operator: Thank you. And, ladies and gentlemen, this conference is available for replay beginning at 11: 30 Eastern Time today and running through March 13th at midnight. You may access the AT&T Replay System by dialing 866-883-4111.

Operator: 1041 and entering the access code of 585-6971. International participants may dial 402-970-0847. Those numbers again are 1-866-207-1041 or 402-970-0847 with the access code of 585-6971. That does conclude our conference for today. Thank you for your participation, and thank you for using AT&T Event Conferencing. You may now hang up.

Operator: We're sorry, your conference is ending now. Please hang up. Healy, Joe Gomes, Josh Vogel, Peter Quigley, Olivier Thirot, Kelly Healy, Joe Gomes, Josh Vogel, Olivier Thirot, Kelly Healy, Joe Gomes, Josh Vogel, Olivier Thirot, Kelly Healy, Joe Gomes, Josh Vogel, Olivier Thirot, Kelly Healy, Joe Gomes, Josh Vogel, Olivier Thirot, Kelly Healy, Joe Gomes, Josh Vogel, Olivier Thirot, Kelly Healy, Joe Gomes, Joe Gomes, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Our thanks to our patrons. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning and welcome to Kelly Services' fourth quarter earnings conference call. All parties will be on a listen only until the question and answer portion of the presentation.

Peter W. Quigley: Today's call is being recorded at the request of Kelly Services. If anyone has any objections, they may disconnect at this time. A fourth quarter 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.

Peter W. Quigley: Thank you, Healy. Hello, everyone, and welcome to Kelly's fourth quarter conference call. Before we begin, I'll walk you through our safe harbor language, which can be found in our presentation material. As a reminder, any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, during the call, certain data will be discussed on a reported and an adjusted basis. Items on an adjusted basis are non-gap financial measures designed to give insight into certain trends in our operations. Finally, the slide deck that we're using on today's call is available on our website. With that, let's get started.

[music].

Olivier Thirot: Thank you, Peter, and good morning, everybody. First, I will make some brief comments on our full year performance. Full year revenue was down 2.6% as reported, or 3.2% on a constant currency basis. This reflects the challenging staffing market conditions we saw across a wide range of specialties and geographies.

Olivier Thirot: Amid those challenges, our education business demonstrated resilience and delivered another year of excellent revenue growth, up 32% in 2023, achieving over $840 million in revenue, almost doubling the level of revenue from the pre-COVID-19 period. Overall, the gross profit rate for 2023 was 19.9%. This is a 50-basic point decline from the prior year, driven primarily by lower permanent placement.

Olivier Thirot: Our 2023 results also reflect the significant efforts made as part of our transformation initiative to lower our cost base and position us to benefit from our improved efficiency moving forward. On an adjusted basis, we lowered our SG&E expenses by 5.4%, which allowed us to deliver adjusted earnings from operations of $69.1 million, consistent with 2022, in spite of difficult market conditions. And finally, our full-year 2023 adjusted ABDA margin rate improved by 20 basis points.

Good morning, and welcome to Kelly services fourth quarter earnings Conference call. All parties will be on a listen only until the question and answer portion of the presentation.

This call is being recorded at the request of Kelly services. If anyone has any objections you may disconnect. At this time, our fourth quarter webcast presentation is also available on Kelly's website for this mornings call I would now like to turn the meeting over to your host Mr. Peter Quigley President and CEO. Please go ahead.

Thank you Julie Hello, everyone and welcome to Kelly's fourth quarter Conference call.

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

As a reminder, any comments made during this call, including the Q&A may include forward looking statements about our expectations for future performance.

Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call.

Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

In addition, during the call certain data will be discussed on a reported and on an adjusted basis.

Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.

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

Olivier Thirot: During the fourth quarter, we continued to see the impact of challenging market conditions, with year-over-year revenue down 6% in our staffing specialty, as well as lower revenue trends in our outcome-based business, which was flat year-over-year. Permanent placement fees in SET continue to be impacted by lower market demand and declined by 41%. In our OCG segment, revenue declined by 3%, year-over-year declines in RPO continued due to slower hiring in certain market sectors, year-over-year MSP revenues also declined while PPO year-over-year revenues improved. Revenue in our professional and industrial segments declined 11.5% year-over-year in the quarter. Revenue from our staffing product declined 15%, reflecting continuous challenging market conditions.

With that let's get started.

In a moment I'll invite our chief financial officer Olivier to row to share our results for the fourth quarter.

I'll then share my reflections on what has been a transformative year defined by decisive action and rapid progress on our growth and efficiency objectives.

Finally, we will provide our preliminary expectations for 2024 before taking your questions with that I'll turn the call over to Olivier.

Thank you Peter and good morning, everybody.

Before I provide more details on our Q4 results. Some brief comments on our full year performance first.

Full year revenue was down two 6% as reported or three 2% on a constant currency basis.

This reflects the challenging staffing market conditions, we saw across a wide range of specialties and geographies.

Amid those challenges our education business.

Consolidated resilience and delivered another year of excellent revenue growth up 32% in 2023, achieving over 840 million in revenue almost doubling the level of revenue from the pre Covid 2019 period.

Olivier Thirot: The segment's outcome-based revenue was flat year-over-year in the quarter; growth across most of our outcome-based specialties was offset by a contraction in the year-over-year demand for our call center specialties. And finally, revenue in our international segment improved 5% on a reported basis and was down 2% on a constant currency basis. Overall gross profit was down 4.7% as reported or 5.7% on a constant currency basis.

Overall gross profit rate for 2020, Sui was 19, 9%.

This is a 50 basis point decline from the prior year over year, driven primarily by lower permanent placement fees.

Our 2023 results also reflect the significant efforts made as part of our transformation initiatives to lower our cost base and position us to benefit from our improved efficiency moving forward.

Olivier Thirot: Our gross profit rate was 19.3%, compared to 20.3% in the fourth quarter of the Priory. Lower perm fees continue to unfathomably impact our GP rate by 60 basis points in Q4. And for the quarter, our GP rate was also impacted by unfavorable business by about 60 days. This reflects growth in specialties with lower GP rates, including education and PPO, and lower GP rates in SET, education, and international due to product, customer, and country mix, respectively. Partially offsetting those impacts were 20 basis points of law employee related costs.

On an adjusted basis, we lowered our SG&A expenses by five 4%.

That allowed us to deliver adjusted earnings from operations of $69 1 million.

<unk> with 2022 in spite of difficult market conditions, and finally, our full year 2023, adjusted EBITDA margin rate improved by 20 basis points.

Now looking at the fourth quarter of 2023 in more detail revenue totaled $1 2 billion essentially flat with the prior year increase.

Including 120 basis points of favorable currency impact so revenues were down one 3% on a constant currency basis.

As we now look at revenue in the fourth quarter by segment.

As noted in my fully remarks, our education segments revenue growth continues to be strong up 27% year over year the.

The continued double digit growth reflect both strong fee rate and demand from existing customers as well as net customer wins.

Overall, the education business delivered more than $50 million of year over year revenue growth in the quarter.

In the <unk> segment revenue was down 5%.

Permanent placement fees in set continued to be impacted by lower market demand and declined by 41%.

Olivier Thirot: The reduction reflects the positive impact of our transformation efforts, which are designed to reduce costs on a structural basis. Our reported earnings from operations in the fourth quarter were $7.3 million compared to $4.6 million in Q4 of 2022. As noted, our 2023 results include $7.9 million in charges related to our transformation activities and $6.9 million charges related to the sale of our European staffing operations. Our fourth quarter 2022 included 10.3 million Goodwill Impairment Charges.

In our OCG segment revenue declined 3% year over year declines in our fuel continued due to slower hiring in certain market sectors.

Year over year MSP revenues also declined while Pete deal year over year revenues improved.

Revenue in our professional and then just real segment declined 11, 5% year over year in the quarter.

Revenue from our staffing products declined 15%, reflecting continues challenging market conditions.

The segment's outcome base revenue was flat year over year in the quarter.

Growth across most of our outcome based specialties was offset by contraction in the year over year demand from our call Center specialty.

And finally revenue in our international segment improved 5% on a reported basis and was down 2% on a constant currency basis.

Overall gross profit was down four 7% as reported or five 7% on a constant currency basis.

Our gross profit rate was 19, 3% compared to 23% in the fourth quarter of the prior year.

Lower Perm fees continued to unfavorably impact our GP rate by 60 basis points in Q4.

And for the quarter, our GP rate was also impacted by unfavorable business mix by about 60 basis points.

This reflects growth in specialties with lower GP rates, including education, and CPU and lower GP rates set education, and the national due to product customer and country mix respectively.

Olivier Thirot: The tax benefits from outside basis differences on health for sale assets and other tax impacts from the legal entity restructuring of our European subsidiaries in anticipation of the Q1 2024 completion of the European staffing transaction, and finally, reported earnings per share for the fourth quarter of 2023 were $0.31 per share compared to a loss per share of $0.02 in 2022. Earnings per share in 2023 include 46 cents of unfavorable tax adjustment. Transaction costs, an unrealized loss on a forward contract, old net of tax, and all related to the sale of our European staffing operation, and 16 cents related to restructuring charges, net of. The losses per share in 2022 included the impact of a goodwill impairment charge, net of tax, partially offset by a gain on the sale of real property, net of tax.

Partially offsetting those impacts were 20 basis points of lower employee related costs.

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

<unk> for the fourth quarter of 2023 include $7 9 million of charges related to our ongoing transformation efforts as well as $6 9 million related to activities associated with the Q1 2020 for sale or for Europe, and the staffing operations.

So on an adjusted basis constant currency basis expenses declined by nine 5% similar to Q3.

The reduction reflects the positive impact of our transformation efforts, which are designed to reduce cost on a structural basis.

Our reported earnings from operations in the fourth quarter was $7 3 million compared to $4 6 million in Q4 of 2022.

As noted our 2023 results include $7 9 million of charges related to our transformation activities and $6 9 million of charges related to the sale of our European staffing operations.

Olivier Thirot: So on an adjusted basis, Q4 2023 EPS was 93 cents, compared to $0.18 per share in Q4 of 2020. The significant improvement is driven by year-over-year changes in income taxes, as well as business performance. Now moving to the bench. As of year-end 2023, our European staffing operations are now classified as health care, and those assets and liabilities are now included on separate line items on our balance sheet. Atty.

Our fourth quarter 2022 included $10 3 million goodwill impairment charge, so on and.

On an adjusted basis Q4, 2023 earnings from operations were $22 1, million% to 59% improvement over the prior year.

And that adjusted EBITDA margin also improved 60 basis points to two 6%.

Income taxes for the fourth quarter were $86 5 million benefit compared with our 2020 to income tax expense.

Olivier Thirot: Rand, cash total $126 million, and we have no debt outstanding. Of course, this cash position does not include the more than $100 million of proceeds from the sale of our European staffing operations received early in 2024 or additional proceeds expected under the terms of the sales agreement in the third quarter of 2024. So when combining our strong balance sheet with our existing borrowing capacity... We continue to have ample capital available to fund our organic and inorganic strategy and navigate an uncertain market environment. At Iran, accounts receivable as reported total 1.2 billion and represent receivables generated from our North American staffing and outcome-based business, as well as our global MSP and RPO practice. Receivables from our European staffing operations are now included in assets held for sale Our global DSO, which includes all receivables, including those generated by our European staffing operations, was 59 days.

A $5 2 million.

Income taxes in 2023 include the impact of non taxable gains on the cash surrender value of company owned life insurance and the benefits of work opportunity tax credits, which are recurring.

Completion of the European staffing collection.

And finally reported earnings per share for the fourth quarter of 2023 with <unk> 31 per share compared to a loss per share of <unk> in 2022.

Earnings per share in 2023 include 46 cents of unfavorable tax adjustments.

<unk> costs.

And an unrealized loss on our forward contract all net of tax and all related to the sale of our European staffing operations and 16.

Olivier Thirot: This is down two days over year-end 2022 and reflects continued efforts to manage our working capital investment in customer accounts receivable primarily in the U.S. For the year, we generated $61 million of free cash flow compared to using $88 million in free cash flows in 2022, given the one-time items in the 2022 period, including the final repayment of approximately $87 million of federal payroll tax balances, which we deferred in 2020 But on a like-for-like basis, free cash flow did improve from careful management of working capital. And now I'll turn it back over to Peter for additional.

Related to restructuring charges net of tax.

Loss per share in 2022 includes the impact of goodwill impairment charge net of tax partially offset by a gain on sale of real property net of tax. So on an adjusted basis Q4, 2023, EPS was <unk> 93, compared to 18 cents per share.

In Q4 of 2022.

This significant improvement is driven by year over year change in income taxes as well as business performance.

Now moving to the balance sheet.

As of year end 2020, our European staffing operations are now classified as held for sale and those assets and liabilities.

Included on separate line items on our balance sheet.

At yearend cash total whenever and $26 million and we have no debt outstanding of course discuss cash position doesn't include the more than 100 million of proceeds from the sale of our European setting operations received early in 2024 or additional proceeds expected under the.

Terms of the sales agreement in the third quarter of 2024.

So when combining our strong balance sheet with our existing borrowing capacity will continue to have a humble capital available to fund, our organic and inorganic strategy and navigate an uncertain market environment.

Peter W. Quigley: Thanks for those insights, Olivier. When we began 2023, we did so with a clear vision for the company's future, a future defined by significantly improved profitability, sustainable growth, and greater value creation for all our shareholders and stakeholders. As the year progressed, macroeconomic uncertainty persisted, fueled by inflation, higher interest rates, and geopolitical volatility. In general, employers continued to proceed cautiously with hiring both full-time and temporary workers while taking a measured approach to workforce reduction.

Receivables from our European setting operations are now included in assets held for sale.

Our global DSO, which include all receivable, including those generated by our European staffing operations was 59 days.

This is down two days over year end 2022, and reflects continued efforts to manage our working capital investments and customer accounts receivable.

Primarily in the U S.

For the year, we generated $61 million of free cash flow compared to using $88 million in free cash flows in 2022.

Given the one time items in the 2000 22 billion, including the final repayment of approximately $87 million of federal payroll tax balances, which were deferred in 2020 under the cares Act and also $48 million of income taxes due in Japan. Following the sale of our investment in.

<unk> common stock comparisons from year over year of challenging but on a like for like basis free cash flow did improve from careful management of working capital and now I'll turn it back over to Peter for additional comments. Thanks for those insights Olivier.

When we began 2023, we did so with a clear vision for the company's future.

Future defined by significantly improved profitability sustainable growth and greater value creation for all our shareholders stakeholders.

Peter W. Quigley: He said we would significantly improve our net margin to create greater financial flexibility to invest in Kelly's future. And we have, delivering 60 basis points of adjusted net margin expansion in the second half of the year. We committed to finding new avenues of growth, and we have. Refreshing our go-to-market strategy with innovative offerings to meet the evolving needs of both customers and talent. This includes a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers to capture a greater share of wallet. As of January, we are now executing on this strategy with an initial set of focus accounts that represent a meaningful portion of Kelly's revenue base. Of course, we remain committed to providing the highest quality of service to all our customers, regardless of their spend or size.

As the year progressed macroeconomic uncertainty persisted fueled by inflation higher interest rates and geopolitical volatility.

In general employers continue to proceed cautiously with hiring both full time and temporary workers, while taking a measured approach to work force reductions.

While some signs of cooling emerged the labor market remained relatively relatively resilient in the supply of talent for open roles continued to be constrained.

Diverging from the trend our industry has typically experienced during periods of uncertainty.

Notwithstanding these unique dynamics, we focused on what we can control and executed on our vision with urgency and agility.

Peter W. Quigley: In our P&I segment, our enhanced localized delivery model continues to generate positive momentum with both clients and talent, benefiting further from our KellyNow mobile app. The app is now live nationwide and actively serving up tailored job opportunities in commercial and light industrial to thousands of highly qualified candidates. With an eye trained on the future, we continue to drive growth and value in the near term as well.

We are committed to finding new avenues of growth and we have refreshing our go to market strategy with innovative offerings to meet the evolving needs of both customers and talent.

This includes a comprehensive approach to delivering the full suite of Kelly solutions to our large enterprise customers to capture a greater share of wallet.

As of January we are now executing on this strategy with an initial set of focus accounts that represent a meaningful portion of kellys revenue base.

Of course, we remain committed to providing the highest quality of service to all our customers regardless of spend or size.

Peter W. Quigley: We remain focused on capturing demand in more resilient markets, including higher margin, higher growth, outcome-based business, as well as in education, which, as Olivier mentioned, continues to be a high-performing growth engine within our portfolio. We have unlocked additional value-creating opportunities, entering an agreement to sell our European staffing business and unlocking more than $100 million in capital to redeploy in pursuit of organic and inorganic growth. And we successfully completed a $50 million share repurchase program in the third quarter, returning value directly to Kelly's shareholders.

In our P&I segment, our enhanced localized delivery model continues to generate positive momentum with both clients and talent benefiting further from our Kelly now mobile App. The App is now live nationwide and actively serving up tailored job opportunities in commercial enlightened us real <unk>.

<unk> of highly qualified candidates.

With an I trained on the future, we continue to drive growth and value in the near term as well.

Peter W. Quigley: Taken together, these accomplishments form a strong foundation upon which we will continue to build. We will enter 2024 as a more efficient, profitable, and focused enterprise. And with further streamlined operating model, now comprising four business units, with market-leading positions in North America staffing and global MSP and RPO solutions, will continue to realize more of the benefits from these changes throughout the year. For more details on our expectations for 2024, I'll turn the call back over to Olivier. Thank you, Peter.

And we successfully completed a $50 million share repurchase program in the third quarter returning value directly to Kelly shareholders.

<unk> and global MSP and <unk> solutions.

We will continue to realize more of the benefits from these changes throughout the year.

For more details on our expectations for 2024, I'll turn the call back over to Olivier. Thank you Peter as Peter mentioned the staffing market.

Flying economic trends.

That moved in the same patterns, we have seen in other economic cycles and that has made it more difficult to know how quickly the staffing market will improve as we move into 2024.

As a result, we'll share our outlook for the first half of 2024 only.

Areas, where we believe that Stephanie market conditions will remain relatively consistent with what we have experienced over the past several quarters.

Before I dive into 2024, I will give you some color on the impact of the sale of our European staffing operations on our historical results and for clarity we have retained our Mexico operations, which were included in our international rebuilt the reportable segment through 2000.

<unk> 23.

Revenue for Mexico has been rebuilt separating the revenue tables of our earnings release. So you can get more information, including quarterly revenue impact from our historical filings.

Olivier Thirot: So you can get more information, including quarterly revenue impacts, from our historical filings. For the full year of 2023, our European staffing operation generated approximately $810 million of revenue, $120 million in gross profit, and added $119 million in ASEAN expenses.

For the full year of 2023.

Our European <unk> operations generated approximately $810 million of revenue.

$120 million in gross profit and add $119 million.

Olivier Thirot: So reported revenue should be approximately 17% lower as we move into 2024 on a like-for-like basis. GP rates should improve by 100 basis points, and our APD margin should improve by 40 basis points as a result of the SEC. The reminder of my comments on our outlook for 2024 will exclude the European staffing operations from the 2023 base.

SG&A expenses.

Note of the safe.

The reminder of my my comments on our outlook for 2024 will exclude the European staffing operations from the 2023 base.

For the first half of 2024 on the like for like basis, We expect net revenue to be flat to up <unk>, 5% with no significant FX impact impact.

Resulting in a midpoint revenue expectation of $2 9 billion.

Our outlook reflects an expectation that Q1 revenue trends will be consistent with Q4 of 2023, and then the transformation related growth initiatives that Peter has mentioned.

Start to gain traction as we moved into Q2.

We expect our GP rate to be 25% to 27% on a like for like basis. These a 70 basis point decline in the midpoint of our range, reflecting the change in our business mix, primarily because of our education business.

Olivier Thirot: The business is expected to continue to deliver significant revenue growth. Also, we expect to see a continued improvement in efficiency as the impact of our transformation-related actions continues. On a LACRON-like basis, we expect adjusted SDN expenses to be down 5% to 6% for the first half of 2024. At the midpoint of our outlook, that's an expected run rate of about $190 million per quarter for the first half of the year. Overall, we expect an adjusted EBDM margin in the range of 3.3 to 3.5%.

This is expected to continue to deliver significant revenue growth.

Also we expect to see a continued improvement in efficiency as the impact of our transformation related actions continue.

On a like for like basis, we expect adjusted SG&A expenses to be down 5% to 6% for the first half of 2024.

At the midpoint of our outlook, that's unexpected run rate.

About $190 million per quarter.

For the first time for the year.

Overall, we expect adjusted EBITDA margin in the range of $3 three to three 5%.

Olivier Thirot: In addition to the 60 basis point improvement we made in our cost structure in the second half of 2023 and the 40 basis point favourable impact from the sale of our European staffing operation, we expect an additional 30 to 50 basis points of net margin improvement in the first half of 2021. And we believe that when the staffing market recovers, we'll be well positioned to take further advantage of our improved efficiency. Finally, as we move into 2024, beginning with our first quarter results, we'll report the operating results of our segment, utilizing revised segment earnings from operations and EBD margin measures, and allocate a greater share of the costs we have previously reported as corporate costs to our business units. This aligns with feedback from investors and others that they would value greater transparency on the financial results each business unit generates and how they contribute to Kelly's overall performance. And now back to you, Peter. Thanks, Olivier.

And we believe that one of the staffing market recovers.

We'll be well positioned to take further advantage of our improved efficiency.

Corporate cost.

Our business units.

It aligns with feedback from investors and others that they would value greater transparency on the financial results each business unique generates and how does it contribute to <unk> overall performance.

And now back to you Peter Thanks Olivier.

Peter W. Quigley: With the decisive action and rapid progress our team delivered in 2023, we have laid the groundwork for 2024 to be an inflection point in Kelly's 77-year history. Our efficiency measures are delivering sustained results. Our growth initiatives are now in the implementation phase, and we enter the year with an adjusted EBITDA margin of 3%, a step change from our historical net margin average of around 2%. As Olivier shared, the stage is set for the company to achieve our previously disclosed expectation of a net margin of 3.3 to 3.5%.

The decisive action and rapid progress our team delivered in 2023, we have laid the groundwork for 2024 to be an inflection point and Kelly 77 year history.

Our efficiency measures are delivering sustained results our growth initiatives are now in the implementation phase and we entered the year with an adjusted EBITDA margin of 3%.

<unk> change from our historical net margin average of around 2%.

As Olivier shared the stage is set for the company to achieve our previously disclosed expectation for net margin of three three to three 5%.

Peter W. Quigley: With these structural improvements in place, I'm confident that Kelly is well positioned to capture increased customer demand when the macroeconomic environment improves and convert a greater share of top-line gains to bottom-line growth. I'm very proud of the way our team has kept their sights set on dual horizons, deftly steering Kelly through a challenging external environment and delivering results in the near term, all while embracing the change that's necessary to position the company for the future. Finally, I'm grateful to our customers, talent, and shareholders who have been with us on this journey, placing their trust in Kelly to deliver on our commitments and create value over the long term. While there is work to be done, I'm confident that 2024 is the start of a new era of growth for Kelly, a year in which we'll begin to reap.

Finally, I am grateful to our customers talent and shareholders, who have been with US on this journey, placing their trust and Kelly to deliver on our commitments and create value over the long term. While there is work to be done I'm confident that 2024 is a start of a new era of growth for Kelly a year in which we'll begin to reap.

Q4 2023 Kelly Services Inc Earnings Call

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