Q1 2024 Kelly Services Inc Earnings Call

May 9, 2024

Okay.

Operator: Please continue to hold. Good morning, and welcome to the Kelly Services first quarter earnings conference call. All parties will be in a listen only mode until the question and answer portion of the presentation.

Speaker Change: Good morning, and welcome to Kelly Services first quarter earnings Conference call. All parties will be on a listen only mode until the question and answer portion of the presentation. Today's call is being recorded at the request of Kelly services. If anyone has any objections you may disconnect. At this time a webcast presentation is also available on Kevin Kelly.

These 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.

Operator: Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. A webcast presentation is also available on Kelly's website for this morning's call. I would now like to turn the meeting over to your host, Mr. Peter Quigley, president and CEO. Please go ahead.

Peter Quigley: Thank you, Greg Hello, everyone and welcome to Kellys first quarter conference call.

Peter Quigley: Thank you, Greg. Hello, everyone, and welcome to Kelly's first quarterly conference call. Before we begin, I'll walk you through our Safe Harbor language.

Peter Quigley: Before we begin I'll walk you through our Safe Harbor language as a reminder, any comments made during this call including the Q&A.

Peter 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 on an adjusted basis, discussion of items on an adjusted basis, or non-GAAP financial measures designed to give insight into certain trends in our operation. Finally, a presentation with information about Kelly's financial results for the quarter is available on our website. We have a lot to cover today, so let's get started.

Peter Quigley: 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.

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

Peter Quigley: 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.

Peter Quigley: Finally, our presentation with information about Kelly's financial results in the quarter is available on our website.

Speaker Change: We have a lot to cover today, so let's get started before.

Peter Quigley: Before we turn to Kelly's first-quarter results, I'd like to address our recent announcement regarding a transformational step forward on our specialty growth journey. Last week, Kelly entered into a definitive agreement to acquire Motion Recruitment Partners, a leading specialty talent solutions company. Under the terms of the agreement, Kelly will acquire MRP for $425 million in cash to be paid at close, with additional earn-out potential of up to $60 million based on certain performance criteria.

Speaker Change: Before we turn to Kellys first quarter results I'd like to address our recent announcement regarding a transformational step forward on our specialty growth journey.

Peter Quigley: The acquisition of MRP will significantly strengthen both the scale and capabilities of Kelly's already substantial staffing and consulting solutions across technology, telecommunications, and government specialties in North America, as well as RPO solutions globally. Following the close of the transaction, MRP will deliver services through its existing operating companies and brands with a goal of expanding its capabilities, enhancing its breadth of solutions, and significantly increasing market share across several key areas. Motion Recruitment's technology staffing and consulting business will expand Kelly's Set Delivery platform and establish the business as a top provider of tech talent solutions in the U.S. Seven Step will bring its industry-leading brand and highly attractive client base in both RPO and MSP to elevate Kelly OCG's RPO segment to among the top five globally.

Peter Quigley: Motion Telco will add a complementary client portfolio and delivery capabilities to Kelley's existing telecom specialty to create a market-leading telecom offering. And TG Federal will bring a dedicated new platform in government technology subcontracting with strong partnerships to build upon KelleySET's success in the government space. The highly complementary nature of our SET and OCG segments and MRP's portfolio of businesses and customers forms the basis for substantial long-term value creation. Through this transaction, Kelly will provide MRP and its leading brands with a highly invested partner and a breadth of resources to fuel its continued growth.

Speaker Change: Last week Kelly entered into a definitive agreement to acquire motion recruitment partners, a leading specialty talent solutions company under the terms of the agreement Kelly will acquire MRP for $425 million in cash to be paid at close with additional earn out potential of.

Peter Quigley: Likewise, the acquisition of MRP will enhance Kelly's revenue growth potential and accelerate EBITDA margin expansion. It will build upon the significant EBITDA margin expansion we've delivered through actions implemented in 2023 and the sale of Kelly's European Staffing Operations in January 2024. This deal demonstrates our commitment to rapidly and responsibly redeploying capital in pursuit of inorganic investments in higher margin, higher growth specialties. I look forward to sharing more details and formally welcoming MRP to the Kelly team when the transaction closes, which we expect to occur in the second quarter of this year, subject to regulatory approvals and other customary closing conditions. In tandem with our pursuit of this transformative acquisition, we remained focused on delivering results.

Speaker Change: To $60 million based on certain dry form performance criteria.

Speaker Change: The acquisition of MRP will significantly strengthen both the scale and capabilities of Kelly's already substantial staffing and consulting solutions across technology telecommunications and government specialties in North America, and <unk> solutions globally.

Speaker Change: Following the close of the transaction MRP will deliver services through its existing operating companies and brands with a goal of expanding Kelly's capabilities, enhancing mrp's breadth of solutions and significantly increasing market share across several key areas.

Speaker Change: Emotion recruitment technology staffing and consulting business will expand kellys set delivery platform and establish the business as a top provider of tech talent solutions in the U S. Seven step will bring its industry, leading brand and highly attractive client base in both <unk> and MSP.

Speaker Change: To elevate Kelly OCG as RPI segment, two among the top five globally.

Speaker Change: Motion telco will add a complementary client portfolio and delivery capabilities to Kelly's existing telecom specialty to create a market leading telecom offering.

Speaker Change: And TG federal will bring a dedicated new platform and government technology sub contracting with a strong partnerships to build upon Kelly sets success in the government space.

Speaker Change: The highly complementary nature of our set in OCG segment, and MRP as portfolio of businesses and customers forms the basis for substantial long term value creation.

Speaker Change: Through this transaction Kelly will provide MRP and its leading brands with a highly invested partner and a breadth of resources to fuel its continued growth.

Speaker Change: Likewise, the acquisition of MRP will enhance Kelly's revenue growth potential and accelerate EBITDA margin expansion.

Speaker Change: It will build upon the significant EBITDA margin expansion, we have delivered through actions implemented in 2023, and the sale of Kelly's European staffing operations in January 2024.

Speaker Change: This deal demonstrates our commitment to rapidly and responsibly redeploying capital in pursuit of inorganic investments in higher margin higher growth specialties.

Speaker Change: I look forward to sharing more details and formally welcoming MRP to the Kelly team when the transaction closes, which we expect to occur in the second quarter of this year subject to regulatory approvals and other customary closing conditions.

Speaker Change: In tandem with our pursuit of this transformative acquisition, we remained focused on delivering results.

Peter Quigley: Through persistent macroeconomic uncertainty and headwinds impacting our industry, we focused on what we can control and continued making progress on our journey to drive significant EBITDA margin expansion. We began 2024 with an adjusted EBITDA margin of 3% following the sale of Kelly's European Staffing Operations, and we delivered an increase of 20 basis points in the first quarter, raising our adjusted EBITDA margin to 3.2%. Our continued progress demonstrates that the growth and efficiency actions we are implementing across our businesses are working, positioning Kelly to convert a greater share of top-line growth to bottom-line growth. For more details on our results in the first quarter, I'll turn the call over to our Chief Financial Officer, Olivier Tiro. Thank you, Peter, and good morning, everybody.

Speaker Change: Through persistent macroeconomic uncertainty and headwinds impacting our industry, we focused on what we can control and continued making progress on our journey to drive significant EBITDA margin expansion.

Speaker Change: We began 2024 with an adjusted EBITDA margin of 3% following the sale of Kelly's European staffing operations, and we delivered an increase of 20 basis points in the first quarter raising our adjusted EBITDA margin to three 2%.

Speaker Change: Our continued progress demonstrates that the growth inefficiency actions, we are implementing across our businesses are working positioning Kelly to convert a greater share of topline growth to bottom line growth for.

Speaker Change: For more details on our results in the first quarter I will turn the call over to our Chief Financial Officer Olivier T. Rowe. Thank you Peter and good morning, everybody as a reminder, kidneys.

Olivier Tiro: As a reminder, Kelly's 2023 results include the European staffing business that we sold on January 2nd, 2024, and provide greater visibility into trends in our operating results. I will also discuss year-over-year changes on a reported and also on an organic basis, although references to organic information exclude the results of our European staffing business in 2023.

Speaker Change: Results include the European staffing business that we sold on January <unk> of 2024 to provide greater visibility into trends operating results I will also discuss year over year changes on the reported and also on an organic basis.

Speaker Change: The original NC two organic information excludes the results of our <unk> business in 2020 suite.

Olivier Tiro: Revenue for the first quarter of 2024 totaled $1.05 billion, compared to $1.27 billion in 2023, down 17.6 percent, resulting primarily from the sale of our European staffing business. On an organic basis, revenue declined 2.6% in the quarter, reflecting a continuation of staffing market headwinds. Notwithstanding those headwinds, our education segment's revenue growth continues to be strong, up 16% year-over-year. The continued double-digit growth reflects both net new customer wins, a strong fill rate, and demand from existing customers.

Speaker Change: Revenue for the first quarter of 2024 totaled $1 5 billion compound to $1 27 billion in 2023 down 17, 6%, resulting primarily from the sale of all yield and staffing business.

Speaker Change: On an organic basis revenue declined two 6% in the quarter, reflecting a continuation of staffing market headwinds.

Speaker Change: Non withstanding those headwinds our education segments revenue growth continues to be <unk> up 16% year over year. The continued double digit growth reflects both new net new customer wins, so generate and demand from existing customers.

Speaker Change: In the CIT segment, where revenue was up 6% during the first quarter, we saw the continuation of challenging market conditions, we year over year revenue down 4% in our staffing specialties and down 9% in our outcome based business.

Olivier Tiro: In the third segment, revenue was down 6%. During the first quarter, we saw the continuation of challenging market conditions, with year-over-year revenue down 4% in our staffing specialties and down 9% in our outcome-based business. Permanent placement fees continued to be impacted by lower demand and declined 23%.

Speaker Change: Permanent placement fees continued to be impacted by lower demand and declined 20 sweeper.

Olivier Tiro: In our OCG segment, revenue declined 6%; year-over-year declines in RPO continued due to slower hiring in certain market segments, acceleration in MSP revenues continued, while TPO revenues improved on a year-over-year basis. Revenue in our professional and industrial segment declined 11% year-over-year in the quarter. Revenue from our staffing product declined 14%, reflecting continued challenging market conditions, and the segment's contact center outcome-based specialty revenue also declined year-over-year in the quarter, although revenue improved in our other outcome-based specialty. I love you in Mexico, which is now included in PNI and also in Proof.

Speaker Change: In our OCG segment revenue declined 6% year over year declines Youll continued due to slower hiring in certain market sectors.

Speaker Change: Celebration in MSP revenues contribute.

Speaker Change: <unk> revenues improved on a year over year basis.

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

Speaker Change: New from our staffing product declined 14%.

Speaker Change: Selecting continued challenging market conditions and the segments contact center or outcome based specialty revenue also declined year over year in the quarter.

Speaker Change: Revenue improved in our other outcome based vision.

Speaker Change: Where are you in Mexico, which is now included in P&I So improved.

Olivier Tiro: Overall, firm fees in P&I declined 42%. Overall gross profit was 19% as reported or 8% on an organic basis. Our gross profit rate was 19.7%, compared to 20% in the first quarter of the prior year. Our GP rate reflects a 90 basis point improvement from the sale of our European staffing operation. So, on an organic basis, the GP rate declined 120 basis points in Q1, 80 basis points due to an unfavorable business mix, and 40 basis points due to lower perms.

Speaker Change: Overall films using P&I declined 42%.

Speaker Change: Overall gross profit was up 19% as we voted or 8% on an organic basis.

Speaker Change: Our gross worth its weight was 19, 7% compared to 20% in the first quarter of the prior year.

Olivier Tiro: Our GP rate reflects a 90 basis point improvement from the sale of our European staffing operations.

Speaker Change: On an organic basis, the GP rate declined 120 basis points in Q1, 80 basis points due to unfavorable business mix and 40 basis points due to lower perm fees.

Olivier Tiro: The business mix impact reflects growth in specialties with lower GP rates, including education, and lower GP rates in SET and OCE due to customer and product mix, respectively. SG&E expenses were down 22% year-over-year on a reported basis and 10% on an organic basis. Expenses for the first quarter of 2024 include $2.3 million of restructuring charges related to our ongoing transformation efforts, as well as $5.6 million of expenses related to the sale of our European staffing operations, including transactions and also transition expenses. SG&E expenses in 2023 include $6.6 million of restructuring charges. So, expenses declined by 23% on an adjusted basis or by 12% on an adjusted and organic basis.

Olivier Tiro: The business mix impact reflects growth in specialties, with lower GP rates, including education, and lower GP rates and set a new CG due to customer and product mix respectively.

Olivier Tiro: SG&A expenses were down 22% year over year on a reported basis and 10% on an organic basis.

Olivier Tiro: <unk> for the first quarter of 2024 includes $2 3 million of restructuring charges related to our ongoing transformation efforts as well as $5 6 million of expenses related to the sale of Europe, and starting operations, including transaction and also transition expenses.

Olivier Tiro: <unk> expenses in 2020 suite include $6 6 million of restructuring charges.

Olivier Tiro: <unk> expense declined by 23% on an adjusted basis or 12% on an adjusted and organic basis.

Olivier Tiro: Like-for-like expenses were lower in Q1 2024 due to the positive impacts of our structural transformation efforts, as well as lower performance incentive compensation expenses, reflecting the challenging top-line trend. As a reminder, beginning in the first quarter, we are now reporting the operating results of our reportable segments, utilizing revised business unit profit measures. We are allocating a greater share of the costs we have previously reported as corporate to our business unit. In addition, we are no longer including depreciation and amortization in our business unit profit measures.

Olivier Tiro: <unk> expenses were lower in Q1 2024 due to the impacts of our functional transformation efforts as well as lower performance incentive compensation expenses, reflecting the challenging top line trends.

Olivier Tiro: As a reminder, beginning in the first quarter. We are now reporting the operating results of our rebuilt table segments utilizing revise business unique measures. We are allocating a greater share of the growth. We had we have pledged easily rebuilt the scope of what it cost to our business units. In addition, we are known.

Olivier Tiro: Longer, including depreciation and amortization in our business unit.

Olivier Tiro: We believe this provides greater visibility to the financial performance of each business unit and how they contribute to Kelly's overall performance. On a consolidated basis, our reported earnings from operations in the first quarter were $26.8 million, compared to $10.7 million in Q1 of 2023. Our Q1 2024 results include 11.6 million gains on the sale of our European staffing operations. As I noted, our 2024 results also include 2.3 million of cross-structuring charges and 5.6 million of expenses related to the sale of all European staffing operations and related transition expenses. Our first quarter of 2023 included a 6.6 million refructuring.

Olivier Tiro: Sure.

Olivier Tiro: We believe this provides greater visibility into the financial performance of each business unit.

Olivier Tiro: And Jose contribute to <unk> overall performance.

Olivier Tiro: On a consolidated basis, our reported earnings from operations in the first quarter were $26 8 million.

Olivier Tiro: <unk> to $10 7 million in Q1 of 2020.

Olivier Tiro: Our Q1 2024 results include $11 6 million gain on the sale of our European staffing operations.

Olivier Tiro: As I noted our 2024 results also include $2 3 million of restructuring charges and $5 6 million of expenses related to the sale of our European staffing operation and related transition activities.

Olivier Tiro: Our first quarter of 2023 included a $6 6 million looks like swing jobs. So on an adjusted basis Q1 2020 for earnings from operations were $23 1, million% to 34% improvement over the pilot.

Olivier Tiro: So on an adjusted basis, Q1 2024 earnings from operations were $23.1 million, a 34% improvement over the prior year. An adjusted EBDA margin also improved 110 basis points to 3.2%, reflecting about 30 basis points of improvement from the sale of our European staffing operations and 80 basis points of improvement from our ongoing transformation efforts. Income tax expense for the first quarter was $4 million compared to $1.8 million in 2023.

Olivier Tiro: And adjusted EBITDA margin also improved 110 basis points to sweep one 2%, reflecting about 30 basis points of improvement from the sale of our European studying operations and 80 basis points of improvement from our ongoing consolidation efforts.

Olivier Tiro: Income tax expense for the first quarter was $4 million compared to $1 8 million in 2020 suite. Our effective income tax rate was 39, 5% in Q1 2024 consistent with the prior year.

Olivier Tiro: Our effective income tax rate was 13.5% in Q1 2024, consistent with the prior year, and finally reported earnings per share for the first quarter was $0.70, compared with 29 cents in 2023. Earnings per share in 2024 include $0.14 related to the gain on the sale of our European staffing operation and the gain from settlement of the related forward conflicts.

Olivier Tiro: And finally reported earnings per share for the first quarter was seven.

Olivier Tiro: Compared with 2009 in 2023.

Olivier Tiro: Earnings per share in 2024 include 14.

Olivier Tiro: Related to the gain on sale of our European staffing operations the gain from the settlement of the related forward contract, partially offset by transaction related charges analysts structuring charges or net of tax.

Olivier Tiro: Partially offset by transaction-related charges and restructuring charges, or net of, Earnings per share in 2023 included $0.13 per share of restructuring charges net of. So on an adjusted basis, Q1 2024 EPS was $0.56 compared to $0.42 per share in Q1 of 2020, a 33% increase year-over-year. Now, reflecting on the balance sheet, Quaterin cash cashed a total of 201 million, and we had no debt outstanding.

Olivier Tiro: Earnings per share in 2023 included 13 cents per share of her structuring charges net of tax.

Olivier Tiro: On an adjusted basis Q1, 2024, EPS was <unk> <unk> compared to 42 cents per share in Q1 of 2020 suite, a 33% increase year over year.

Olivier Tiro: Now, reflecting on the balance sheet at quarter end cash totaled $201 million and we had no debt outstanding.

Olivier Tiro: This includes the cash proceeds from the sale of our European staffing operations that were payable at close. We expect additional cash proceeds in the third quarter of 2024 under the terms of the transaction related to final cash debt and net working capital adjustment, but do not expect any earn-out proceeds. At Quatrain, accounts receivable totaled $1.2 billion, and global DSO was 58 days, down one day for both the year and 2023 and the first quarter of 2023. In the quarter, we used $29 million for... In the quarter, we used $29 million for operating activities and capital expenditures, compared to using $18 million in the comparable prior period.

Olivier Tiro: This includes the cash proceeds from the sale of our Europeans have some operations that was payable at closing we expect additional cash proceeds in the third quarter of 2024 under the terms of the collection related to final cash that our networking capital adjustment, but do not expect any proceeds.

Olivier Tiro: Yeah.

Olivier Tiro: At quarter end accounts receivable totaled $1 2 billion in global DSO was 58 days down one day for both year.

Olivier Tiro: And 2023, and the first quarter of 2023.

Olivier Tiro: In the quarter, we used 28 $29 million.

Olivier Tiro: In the quarter, we used 29 million for operating activities and capital expenditures compared to using $80 million in the comparable prior period.

Olivier Tiro: Looking forward we expect.

Olivier Tiro: The expected due to closing of the Motion Recruitment Partners acquisition will be funded by cash on hand and borrowing on existing credit facilities. Our ability to rapidly redeploy capital to advance our inorganic strategy will reflect the strengths of our balance sheet and our commitment to responsibly manage our economy. To maintain financial flexibility as we move forward, we are currently working with our bank in Pakistan to amend the World Credit to maintain our ability to invest in additional organic and inorganic fish and to navigate an uncertain market environment.

Olivier Tiro: We expect Q2 closing of the motion recruitment partners acquisition will be funded by cash on hand, and borrowing on existing credit facilities.

Olivier Tiro: Our ability to rapidly deploy cash to advance our inorganic strategy reflects the strength of our balance sheet and our commitment to responsibly manage our liquidity to maintain financial flexibility as we move along we are currently working with our banking partners to amend our credit facility to maintain our.

Olivier Tiro: Ability to invest and that's organic.

Olivier Tiro: Organic and inorganic initiatives and to navigate an uncertain market environment.

Olivier Tiro: Looking ahead to operating results for the second quarter, we believe that staffing market conditions will remain relatively consistent with what we have experienced over the past several quarters. For the second quarter of 2024, on an organic basis, we expect revenue to be up 1 to 2%, with no significant FX impact, resulting in a midpoint revenue expectation of $1.03 billion. Our outlook reflects an expectation that Q2 revenue trends will be consistent with Q1 of 2024, with the benefit of a lower comparison.

Olivier Tiro: For the second quarter of 2024 on an organic basis, we expect revenue to be up 1% to 2% with no significant FX impact, resulting in a midpoint revenue expectation of $1 3 billion.

Olivier Tiro: Our outlook.

Olivier Tiro: Flex and expectation that Q2 revenue trends will be consistent with Q1 of 2024 with a benefit of lower comparable.

Olivier Tiro: And for clarity, our expectations do not yet include any impact from our acquisition of motion recruitment partners as we await regulatory approval and the completion of other customary closing conditions. For the second quarter, we expect our GP rate to be between 20.1 and 20.3%.

Olivier Tiro: And for clarity our expectations do not yet include any impact from our acquisition of promotional recruitment partners as we await regulatory approval and the completion of other customary closing conditions.

Olivier Tiro: For the second quarter, we expect our <unk> rate to be.

Olivier Tiro: Between 21% to 23% on a like for like basis 60 basis point decline.

Olivier Tiro: On a lag-for-like basis, this is a 60-base-point decline at the midpoint of our range, reflecting the change in our business mix, primarily because our education business is expected to continue to deliver significant revenue growth. Additionally, we expect to continue to deliver sustained improvement in efficiency as the impact of our transformation-related actions continues. On a lag-for-lag basis, we expect adjusted SG&E expenses to be similar to Q1 2024. Overall, we expect to adjust the DbDa margin of about 3.3%, an improvement of 120 bases or 80 basepoints on an organism.

Olivier Tiro: The midpoint of our range, reflecting the change in our business mix, primarily because our education business is expected to continue to deliver significant revenue growth.

Olivier Tiro: Also we expect to continue to deliver sustained improvements in efficiency as the impact of all transformation related actions.

Olivier Tiro: On a like for like basis, we expect adjusted SG&A SG&A expenses to be similar to Q1 2024.

Olivier Tiro: Overall, we expect adjusted EBITDA margin of about three 3% an improvement of 120 basis points versus Q2 of last year or 80 basis points on an organic.

Peter Quigley: And we believe that when the staffing market recovers, we'll be well positioned... to take further advantage of our improved efficiency. We expect our effective tax rate to be in the mid to high teens. Thanks for those insights, Olivier. When we initiated this transformation last year, I committed that we would implement structural, sustainable improvements to our business that would benefit all our stakeholders. Through the progress we have achieved to date, I am pleased to say we're delivering on our commitment.

Olivier Tiro: And we believe that Essent market recovers, we'll be well position to take further advantage of our improved.

Peter Quigley: We expect our effective tax rate to be in the mid to high teens and now back to you Peter.

Peter Quigley: Thanks for those insights Olivier when we initiated this transformation last year I committed that we would implement structural sustainable improvements to our business that would benefit all our stakeholders through the progress we have achieved to date I am pleased to say we are delivering on our commitments.

Peter Quigley: We said, we would significantly improve kelly's profitability and we have increasing the company's EBITDA margin to three 2% in the first quarter. This is a step change from our recent net margin average of approximately 2% and we delivered the improvement in a very short time.

Peter Quigley: We said we would unlock new value-creating opportunities, and we have, signing the largest deal in the company's history in a bold move that redeploys capital to a business with a highly attractive financial profile, seasoned leadership, and valuable assets in which Kelly is well positioned to invest and grow over the long term. We said we would find new avenues of growth, and we have, as both our localized delivery model in P&I and large enterprise account strategy continue to deliver encouraging early results, positioning Kelly to capture increased demand when the macroeconomic environment rebounds.

Peter Quigley: We said, we would unlock new value, creating opportunities and we have signing the largest deal in the company's history and a bold move that redeploy capital to a business with highly attractive financial profile.

Peter Quigley: Profile seasoned leadership and valuable assets in which Kelly is well positioned to invest and grow over the long term. We said, we would find new avenues of growth and we have as both our localized delivery model and P&I and large enterprise account strategy continued to deliver encouraging early results positioning Kelly to <unk>.

Peter Quigley: Capture increased demand when the macroeconomic environment rebounds.

Peter Quigley: It's been an exceptionally productive start to the year as we've worked to deliver on these priorities. I'm grateful to the Kelley team who have executed on our specialty growth strategy with urgency and agility to bring us to this point on our journey. They've done so while keeping our clients and talent at the center of everything we do with our noble purpose as their guide. Their ongoing commitment to excellence is reflected in Kelley being named number one on Forbes' 2023 list of America's top temporary staffing companies, an honor we are proud to have received this week for the second consecutive year.

Peter Quigley: It's been an exceptionally productive start to the year as we've worked to deliver on these priorities I'm grateful to the Kelly team, who have executed on our specialty growth strategy with urgency and agility to bring us to this point on our journey they've done so while keeping our clients and talent at the center of everything we do with our noble purpose.

Peter Quigley: As their guide their ongoing commitment to excellence is reflected in Kelly being named number one on Forbes 2023 list of America's top temporary staffing companies an honor. We are proud to have received this week for the second consecutive year.

Peter Quigley: While there's more work to be done I'm confident these accomplishments form a solid foundation upon which we will establish 2024 as an inflection point on our journey and propel Kelly into a new era of growth.

Operator: While there's more work to be done, I'm confident these accomplishments form a solid foundation upon which we will establish 2024 as an inflection point on our journey and propel Kelly into a new era of growth. Greg, you can now open the call to questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press 1 and 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers.

Peter Quigley: Greg you can add up and open the call to questions.

Peter Quigley: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero comment if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one than zero at this time and one moment. Please for your first question.

Operator: Once again, if you have a question, please press 1 and 0 at this time. And one moment, please, for your first question. Your first question comes from the line of Joe Gomes from Noble Capital. Please go ahead.

Operator: Your first question comes from the line of Joe Gomes from Noble capital. Please go ahead.

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

Joe Gomes: Good morning. Thanks for taking my question. Good morning, Joe. Good morning, Joe.

Peter Quigley: So first, I'm going to hit you up with questions on the acquisition and see what more detail we can get. Can you give us any kind of indication of revenue, contribution, and adjusted EBITDA margins, obviously they should be higher than Kelly's existing since you say it. Kelly's overall margin.

Joe Gomes: So first I'm going to hit you up with questions on the acquisition and see what more detail. We can get can you give us any kind of indication.

Peter Quigley: Revenue contribution.

Peter Quigley: Adjusted EBITDA margins, obviously, they should be higher than Kelly's existing centers say it should increase Kelly's overall margins.

Olivier Tiro: You know, what kind of growth rates has this business been seeing recently, in terms of customer concentration, top management planning on staying with the business, or do you see some of the management? Thank you. Yeah, I think, Joe. Thank you for your question. Of course, you know that we are still to close the deal. I think it's going to be in the course of Q2.

Peter Quigley: Growth rates it has been.

Peter Quigley: This business has been seeing recently and types of customer concentration.

Olivier Tiro:

Speaker Change: Management planning on staying with the business or do you see some of the management.

Speaker Change: Leaving here any more detail on the acquisition would be greatly appreciated.

Speaker Change: Yes, I think Joe. Thank you for your question of course, you know that.

Speaker Change: To close the deal.

Speaker Change: Zinc is going to be a new course of Q2.

Olivier Tiro: So there is not so much we can provide at this stage, but what I would say in terms of pure numbers is that revenue is in excess of $500 million. So that's, of course, I think key information in terms of impact or future impact on Kelly's growth and value profile. As Peter was saying, the growth and net margin profile of this acquisition will enhance Kelly's value profile, including its net margin. We will be in a position to give more information when we close, which is in the course of Q2. And probably, Peter, you can comment a little bit more on the complementarity acquisition for new capabilities and size in various areas. Yeah, thanks, Olivier.

Speaker Change: So there is not so much we can provide at this stage, what I would say in demo fuel numbers.

Speaker Change: Revenue is in excess of $500 million.

Speaker Change: So that's of course <unk>.

Olivier Tiro: The information in term of impact future impact on the key growth and value profile as Peter was saying the gross and net margin profile of this.

Olivier Tiro: Acquisition.

Peter Quigley: We'll enhance.

Olivier Tiro: TB.

Speaker Change: <unk> profile, including the net margin.

Peter Quigley: We'll be in a position gives more information when we close.

Olivier Tiro: Thus in the course of Q2 and probably Peter you can comment more on complementary acquisitions new capabilities.

Joe Gomes: Insights in values areas, yes, thanks, Olivier Joe, we really like the financial and business profile of motion recruitment partners the capabilities that they bring to Kelly across the technology government telecom and <unk> and MSP spaces.

Peter Quigley: Joe, we really like the financial and business profile of Motion Recruitment Partners, the capabilities that they bring to Kelly across the technology, government, telecom, and RPO and MSP spaces. Customer set, very complementary to Kelly's customer set, very little overlap, strong leadership team, excellent business processes, and I think a very compatible culture. So we're very excited.

Peter Quigley: Sure.

Peter Quigley: Customer set.

Peter Quigley: Very complimentary to.

Peter Quigley: Kelly's customers at very little overlap strong leadership team.

Peter Quigley: Excellent excellent business processes, and I think a very compatible culture. So.

Olivier Tiro: We're going to continue, as I said, to operate their very successful businesses under the current operating entities and brands, and we will work diligently after the deal closes to work with their management team on the plentiful value creation opportunities that we see. Great, thank you for that. Olivia, I might have missed this, but I thought I heard you say you did not expect to see any additional earnings from the sale of a European staffing business. That's correct.

Peter Quigley: So we're very excited we're going to continue as I said to operate their very successful businesses under the current operating entities and brands.

Olivier Tiro: And we will work diligently after close do.

Olivier Tiro: Work with their management team on that.

Olivier Tiro: Plentiful value creation opportunities that we see.

Speaker Change: Great. Thanks, Thank you for that and I'll, Let me just.

Speaker Change: Might have missed this but I thought I heard you say you did not expect to see any additional earn out from the sale of the European staffing business.

Olivier Tiro: If you are referring to our EMEA staffing business, no, because now we have basically, you know, the condition where certain financial metrics are to be achieved in 2023, and we have the confirmation that they are not going to be achieved. Although now, as I stated, we have still to wait until we finalize the transaction in early Q3, looking at debt-free, cash-free, and networking capital adjustment. We expect at the moment, based on what we know and what is measurable, some cash in the region of $27 to $28 million that would come basically in early Q3.

Olivia: That is correct. If you are referring to our EMEA searching business no.

Olivier Tiro: Because now we have basically <unk> is a condition, where certain financial metrics to be achieved in 2023, and we have the confirmation of that.

Speaker Change: I will.

Olivier Tiro: <unk> also now as I stated.

Olivier Tiro: To wait until we.

Olivier Tiro: Finalizes all action in early Q3 looking at that.

Olivier Tiro: Free cash flow year in networking capital adjustment, we expect at the moment based on what we knew and what is measurable.

Olivier Tiro: Some cash in the region of $27 million to $28 million that would come basically early Q3, that's how all basis tomato for the moment. It may change a little bit when we know more about especially about the network can get to that adjustment but.

Olivier Tiro: That's our basic estimate for the moment. It may change a little bit when we know more, especially about the networking capital adjustment. Broadly, it should be around $28 million of additional cash. Okay, thank you for that clarification.

Olivier Tiro: Broadly it should be around 28 million of additional cash that we should receive again early Q3.

Olivier Tiro: Okay. Thank you for that clarification.

Peter Quigley: And Peter, just want to maybe give us a little additional color, you know, kind of on the environment, especially on talent supply and ability to get people to fill whatever roles that you're trying to fill. Yeah, Joe, I think the macro environment has not changed significantly from the past couple of quarters in terms of the availability of talent. If you take a look at the labor force participation rate, the quit rate, and some other key labor factors, they're all pretty flat compared to what they've been in the past few quarters.

Speaker Change: And Peter just wanted to maybe you can give us a little.

Olivier Tiro: Additional color kind of on the environment, especially on <unk>.

Peter Quigley: Talent supply ability to get people to fill whatever rolls that youre trying to fill.

Speaker Change: Yes, Joe.

Peter Quigley: The macro environment has not changed significantly from the past couple of quarters in terms of.

Peter Quigley: Availability of talent nephew.

Peter Quigley: Take a look at the labor force participation rate quit rates some other.

Peter Quigley: Key key labor factors.

Peter Quigley: They are all pretty flat to what they have been in the past.

Peter Quigley: A few quarters, so we don't anticipate.

Peter Quigley: So we don't anticipate in Q2 that we're going to see any significant change. But I will say I'm pleased with the ability of the Kelly team in the face of sluggish demand to improve our fill rates and continue to find ways to shorten cycle times and take market share where it's available without compromising price. Great, thanks for that. And one last one for me. I'll get back in line.

Peter Quigley: In Q2 that we're going to see any significant change I will say I am pleased with the ability of the Kelly team in the face of.

Peter Quigley: Sluggish demand to improve our fill rates and.

Peter Quigley: <unk> continued to find ways to shorten cycle times.

Peter Quigley: And.

Peter Quigley: Take take market share, where it's available without compromising price.

Peter Quigley: Okay.

Speaker Change: Great. Thanks for that and one last one for me I'll get back in queue.

Peter Quigley: You know, one of the other acquisitions... that occurred, you know, at the struggles going on, rocket power, and I just wanted you to give us a little update. I know you talked about doing a lot of different things to try and improve some of their operations, just trying to maybe give us some updates on how all of that progress is progressing. Yeah, we're very pleased, Joe, with the, I would say, foundational and structural improvements at RocketPower because they're in the RPO space. Like many operations in the RPO space, they've faced some headwinds.

Peter Quigley: One of the other acquisitions.

Peter Quigley: Occurred.

Peter Quigley: <unk> had some struggles going on rocket power and I was wondering if you can give us a little update I know you've been you had talked about doing a lot of different things to try and improve some of their operations and I was just trying to get maybe give us some update on how all of that progresses.

Peter Quigley: Dressing.

Peter Quigley: Yes, we're very pleased Joe with the I would say the foundational and structural improvements at rocket power.

Peter Quigley: Because they are in the ERP space like many.

Peter Quigley: Operations in RP O they've faced some headwinds.

Peter Quigley: But we're beginning to see, particularly in the technology space, some, I would refer to, green shoots in RocketPower's book of business. And the steps that we've taken between the time we acquired them and now, we think, position them well to capitalize on any rebound in that space. The, you know, we have.

Peter Quigley: But we're beginning to see particularly in the technology space.

Peter Quigley: I would refer to green shoots.

Peter Quigley: And rocket powers book of business and.

Peter Quigley: The steps that we've taken between the time, we acquired them and now we think position them well to capitalize on any rebound in that space and.

Peter Quigley: The.

Peter Quigley: We have.

Peter Quigley: We are optimistic about the potential for rocket power going forward as part of the larger Kelly OCG RPO practice. So we're starting to see some good traction, a better pipeline, as Peter was mentioning. Great. It's awesome news for that business. I'll get back in queue.

Peter Quigley: We are optimistic about the potential for rocket power going forward as part of the larger Kelly OCG ERP practice I would just add.

Speaker Change: One data point when you look at revenue.

Peter Quigley: Oh in Q1 versus Q4, so sequentially, we have seen an improvement of about 27%. So we start to see some good traction better pipeline as Peter was mentioning.

Speaker Change: Great. That's awesome news for that business I'll get back in queue. Thanks for taking my questions and looking forward to see how the.

Joe Gomes: Thanks for taking my questions. Really looking forward to see how the MRP acquisition unfolds here. Thank you. Thank you, Joe. Your next question comes from the line of Kevin Steinke from Barentine Research.

Kevin Steinke: MRP acquisition unfolds here. Thank you. Thank.

Kevin Steinke: Thank you Joe.

Kevin Steinke: Your next question comes from the line of Kevin Stankey from Barrington Research. Please go ahead.

Kevin Steinke: Please go ahead. Good morning, Kevin. Good morning. So following up on the motion recruitment partners acquisition, the one piece of information you did give there was the revenue size. And I don't know if you'd be able to give more detail just kind of in terms of the breakdown between the various areas, technology, telecom, government, RPO, MSP, just to maybe give us a sense of, you know, how much scale will be added to those various pieces of your business from this transaction. Yeah, I think we are going to give you a high-level percentage. So if you think about the seven-step RPO, MSP on one side, and I would say.

Kevin Steinke: Good morning, Kevin.

Kevin Steinke: Good morning, Bonnie.

Olivier Tiro: IT, telco, and federal business IT, telco, and federal business is about 90% of the revenue, so it's heavily weighted into our said business. However, again, I think the RPO ad is very interesting, not only because of the well-known brand name, 7-step, but also in terms of coverage, industry verticals, and so on. And within, basically, the said business, a large majority of this business is basically, whether it's IT staffing or consulting and... Yeah, Kevin, I'd add from a qualitative standpoint, particularly in the technology space, the addition of a substantial technology business repositions Kelly when added to our existing technology practice, including Softworld and the legacy Kelly IT business. We're substantially repositioned in what is potentially the fastest-growing part of the industry And we think that that's really important to continue to remix our business towards higher-margin, higher-growth businesses. Similarly, in the telecom and government businesses, MRP's businesses are highly complementary to Kelly's, as opposed to overlapping.

Kevin Steinke: So.

Kevin Steinke: Following up on the <unk>.

Olivier Tiro: Recruitment partners.

Olivier Tiro: Acquisition. The one piece you did give there was the revenue size.

Peter Quigley: So in government, while we're very strong as a prime contractor, MRP has some excellent relationships as a subcontractor, which is not something that Kelly currently participates in. And in the telecom space, very little overlap in terms of customers, but excellent addition of, particularly, technology capabilities in the telecom space from MRP, whereas Kelly tends to be stronger in the engineering side of telecom. So, very nice adjacencies within the MRP portfolio of businesses that, in addition to scale, we think they're going to bring some really significant capabilities to our portfolio. Okay, thank you.

Kevin Steinke: That was very helpful insight. Just in terms of the organic revenue trend in the first quarter, you mentioned you didn't see a whole lot of change in the macro environment, a bit more of a decline than you saw in the fourth quarter, I guess, maybe not materially so. But, you know, any meaningful change in terms of the trend in perm placement or any other areas you might point to?

Olivier Tiro: And I don't know.

Speaker Change: Able to give more detail just kind of in terms of the breakdown between the various areas technology Telecom government, our MSP just to.

Kevin Steinke: Kevin, no change in the continued results from education growth, which is, you know, continuing. And again, I repeat myself that we're very bullish on the pipeline. New wins, growth in existing customers, improved operation performance. Perm placement has been where it's been. We haven't seen any significant change among perm placements.

Kevin Steinke: Maybe give us a sense of.

Kevin Steinke: How much.

Kevin Steinke: Scale will be added to those.

Kevin Steinke: Various pieces of your business from this transaction.

Speaker Change: Yes, I think what we are going to give you high level percentage.

Kevin Steinke: So as you're seeing about seven step.

Kevin Steinke: A few MSP on one side and I would say.

Kevin Steinke: <unk>.

Kevin Steinke: <unk> business.

Kevin Steinke: David Cohen and federal business is about 90% of the revenues so it's heavily weighted into.

Kevin Steinke: I will set the business.

Kevin Steinke: Although again I think the op, you'll add these very interesting.

Kevin Steinke: Not only the well known brand names have instead, but also in terms of coverage industry vertical and so on and within basically.

Kevin Steinke: That business larger my jewelry.

Kevin Steinke: Basically.

Kevin Steinke: Whether it's staffing or consulting and equations, yes.

Speaker Change: Kevin I would add from a qualitative standpoint.

Peter Quigley: We have seen some, as Olivier mentioned in rocket power, some signs that there is in the technology space, and I would say we're seeing similar green shoots in our soft world and legacy Kelly technology business. It's still early, but those businesses are going to recover at some point, but as Olivier mentioned regarding Q2, we don't foresee any significant change in the next few months. Okay, thank you.

Kevin Steinke: Particularly in the technology space. The addition of substantial technology business Repositions Kelly when added to.

Peter Quigley: <unk> exist.

Peter Quigley: Existing technology practice, including soft world and the legacy.

Peter Quigley: Kelly.

Peter Quigley: I'd business.

Peter Quigley: We're substantially repositioned in the what is the potential.

Peter Quigley: The fastest growing part of the industry and.

Peter Quigley: At least historically and we think that that's really important to continuing to remix our business towards higher margin higher growth businesses. Similarly in the telecom and government businesses.

Peter Quigley: <unk>.

Peter Quigley: <unk> are highly complementary to Kelly's as opposed to overlapping so in government while were very strong as a prime contractor.

Peter Quigley: <unk> has some excellent relationships.

Peter Quigley: As a subcontractor, which is not something that Kelly currently participates in and in the telecom space.

Peter Quigley: Very little overlap in terms of customers, but excellent addition of particularly technology capabilities in the telecom space from.

Peter Quigley: MRP that whereas Kelly is tends to be stronger in the engineering in telecom so very nice.

Peter Quigley: Jason CS within the MRP portfolio of <unk>.

Peter Quigley: Our business is that in addition to scale, we think theyre going to bring some really significant capabilities to our portfolio.

Speaker Change: Okay. Thank you that was very helpful insight.

Peter Quigley: This is in terms of the.

Peter Quigley: Organic.

Peter Quigley: Revenue trend in the first quarter.

Peter Quigley: You mentioned you didn't see a whole lot of.

Peter Quigley: And the macro environment.

Peter Quigley: A bit more of a decline than we saw in the fourth quarter I guess, maybe not materially so but any meaningful change in terms of the trend in perm placement or any other.

Peter Quigley: As you might point to.

Peter Quigley: Kevin No change in that continued.

Peter Quigley: Results from education growth, which is continues and again I repeat myself that we're very.

Peter Quigley: Bullish on.

Speaker Change: On the pipeline.

Peter Quigley: New wins growth in existing customers.

Peter Quigley: <unk> improved operation performance.

Peter Quigley: Perm placement has been.

Peter Quigley: Where its been we havent seen any significant change.

Peter Quigley: Among perm placements.

Peter Quigley: We have seen some as.

Peter Quigley: Olivier mentioned in rocket power is some signs that there is.

Peter Quigley: In the technology space and I would say, we're seeing similar green shoots in our in our software and legacy Kelly technology business, It's still early but.

Peter Quigley: Those businesses are going to recover at some point and.

Peter Quigley: But as Olivier mentioned regarding Q2, we don't foresee any significant change.

Peter Quigley: In the next few months.

Kevin Steinke: I did have one other question I want to circle back with on motion recruitment partners, maybe just, if it's possible to give us a sense as to, you know, how the deal came together, if it was a... Business that was up for sale or somebody built a relationship with over time just kind of curious about that aspect, Yeah, we developed a relationship with MRP over the course of a period of time, and I think on both MRP's side as well as within Kelly, we were strongly attracted to the complementary nature of these two businesses, and saw significant upside potential by the two of them, partnering in towards growth in the future. And all of our discussions up to the signing a couple weeks ago, did nothing but to reinforce that.

Speaker Change: Okay. Thank you.

Speaker Change: I did have one other question I wanted to circle back with.

Kevin Steinke: Motion recruitment partners, maybe just.

Kevin Steinke: It is possible to give us a sense as to.

Kevin Steinke: How the deal came together if it was.

Kevin Steinke: Business that was up for sale or someone you built a relationship with over time, just kind of curious about that aspect.

Kevin Steinke: Yes.

Kevin Steinke: We developed a relationship.

Kevin Steinke: With.

Kevin Steinke: With MRP over the course of the period of time and I think on both.

Kevin Steinke: <unk> side as well as within Kelly, we were strongly attracted to the complementary nature of these two businesses and.

Kevin Steinke: <unk> saw significant upside potential by.

Kevin Steinke: The partnering and towards growth in the future and all of our discussions up to the signing of a couple of weeks ago did.

Kevin Steinke: It did nothing but to reinforce that so.

Kevin Steinke: We're we're very very pleased with the process and the result.

Kevin Steinke: So we're very, very pleased with the process and the results. Okay, just a couple more here, which I'll try and combine into one question, but... You know, your projection for organic growth in the second quarter is consistent with what you said before. Would you attribute that to some of your own?

Kevin Steinke: Okay.

Speaker Change: A couple more here, which I'll try and combined into one question, but.

Kevin Steinke: Your projection.

Kevin Steinke: For organic growth in the second quarter.

Kevin Steinke: Consistent with what you said before.

Kevin Steinke: Is that.

Kevin Steinke: Would you attribute that to some of your.

Peter Quigley: I think, Kevin, on the first part of the question about revenue, we are, as I said in my notes or in my script, encouraged by the steps we've taken to focus on organic growth, particularly the omnichannel strategy that we've introduced in our professional and industrial space segment, as well as the large account enterprise strategy. You know, we're basically a quarter into it, but we are encouraged by new wins, both existing customer expansion as well as the acquisition of new logos, and we think that when the macroeconomic environment for our industry improves, we're very well positioned to continue to see success in those two areas. I'll turn it over to Olivier on the gross margin question. Yes,

Kevin Steinke: Transformation related growth initiatives gaining traction.

Olivier Tiro: And then secondly, just if you can give any insight on.

Olivier Tiro: Just the change in the gross margin outlook relative to what you had.

Olivier Tiro: Previously discussed.

Olivier Tiro: Yes, I think Kevin on the <unk>.

Olivier Tiro: First part of the question about revenue we are as I said in my notes there Mike.

Olivier Tiro: Encouraged by the.

Olivier Tiro: The steps, we've taken to focus on organic growth.

Olivier Tiro: Particularly in the Omnichannel strategy that we've introduced in our professional and industrial space or.

Olivier Tiro: Our segment as well as the large account enterprise strategy.

Olivier Tiro: Were basically a quarter into it but encouraged by.

Olivier Tiro: New wins, both existing customer expansion as well as the acquisition of new logos.

Olivier Tiro: And we think that.

Olivier Tiro: When the when the macroeconomic environment for our industry improves.

Olivier Tiro: We're very well positioned to.

Olivier Tiro: Continuing to.

Peter Quigley: See success in those two areas I'll turn it over to Olivier on the gross margin question just on the gross margin.

Peter Quigley: Just on the gross margin question. I would say, as we said, you know, for Q1 and we anticipate something very similar in Q2. The main mix.

Olivier Tiro: I would say as we said for Q1, and we anticipate something similar in Q2 mix.

Olivier Tiro: The main mix be.

Peter Quigley: No.

Peter Quigley: Education.

Olivier Tiro: The rest of the business.

Olivier Tiro: Is that.

Peter Quigley: <unk>.

Olivier Tiro: Something that is going to continue and our.

Olivier Tiro: Our top line growth is more balanced.

Olivier Tiro: [inaudible] What I can tell you is when you look at, and I look at the spread, whether it's in P&I, in education, or in set, our spread was moving up, especially in set, to some extent in PNI, is now flat but not at all declining, which is a sign that basically we don't see big pricing pressure and we don't sacrifice our price. But we still, and we will still continue to suffer a little bit about this mixed factor that is linked to our top line dynamic that should evolve as soon as, you know, we get a more balanced top line growth.

Olivier Tiro: What I can tell you is when you look at and I look at spreads.

Olivier Tiro: P&I and education.

Olivier Tiro: Or said I will spread was moving up especially in sets some extending P&I is now flat, but not the total declining which is a sign that basic.

Olivier Tiro: Don't see big pricing pressure, and we don't sacrifice that will price.

Olivier Tiro: But with TD and we will still continue to suffer beats about sneaks.

Olivier Tiro: Mix factor all of that is in into our top line dynamic that should evolve as soon as we get to a more balanced top line growth.

Olivier Tiro: If you ask me why we believe that we are going to move from 19.7% growth margin rate in Q1 to a mid-range of 20.2% in Q2, one of the points is education seasonality, meaning education is usually at the far end of Q2 is starting to slow down because of school years and summer types of events.

Olivier Tiro: Can you why we believe that we are going to move from 19, 7% gross margin.

Olivier Tiro: Q1 to meet the range of 22 in Q2 from one of the points is education seasonality, meaning education, usually at the final end of Q2 is starting to settle down.

Olivier Tiro: Yes.

Olivier Tiro: Some of them.

Olivier Tiro: Type of.

Olivier Tiro: We see good traction in terms of our BPO business in PNI, which would help us a little bit. And also, as Peter was mentioning, we anticipate a more favorable mix in sets because of the traction we are starting to see in technology. So there are a few factors that should help us to go to something around 20.2 versus 19.7. But as I mentioned, at 20.2, we are going to a basis point on an organic basis versus a year ago, and the main driver is going to continue to be mixing. Okay, that's very helpful. I'll turn it back over.

Olivier Tiro: Even.

Olivier Tiro: We see good traction demos.

Speaker Change: Our <unk> business.

Olivier Tiro: <unk> that would help us.

Olivier Tiro: And also as Peter was mentioning we anticipate.

Olivier Tiro: More favorable mix, you said equals a retraction, we start to see technology.

Olivier Tiro: Usually a better margin profile than the ABA.

Olivier Tiro: So there are a few factors that should help us to go to something around 22.

Olivier Tiro: Versus $19, seven but as I mentioned.

Olivier Tiro: At 'twenty, two we are going to be.

Olivier Tiro: 50 basis points on a organic basis versus a year ago and the main driver is going to continue to be unique special.

Kevin Steinke: Thanks for taking the question. Thanks, Kevin. Thank you. Your next question comes from the line of Karthik Mehta from North Coast Research.

Speaker Change: Okay. That's very helpful. I'll turn it back over thanks for taking my questions.

Karthik Mehta: Thanks, Kevin.

Karthik Mehta: Your next question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Karthik Mehta: Please go ahead. Good morning, Peter and Olivier. Good morning, Carter. Good morning. Peter, just on trends in April, I'm assuming from the commentary you gave that the trends in April were very similar to what you saw in the first quarter, but I'm curious to understand if you looked throughout the first quarter, if you saw any change in trends. Not really.

Karthik Mehta: Hey, good good.

Karthik Mehta: Good morning, Peter and Olivia Good morning Carter.

Speaker Change: Good morning.

Karthik Mehta: Peter just on trends in April I'm, assuming from the.

Karthik Mehta: In the commentary you gave the trend in April were very similar to what you saw in the first quarter, but I'm curious to understand it.

Karthik Mehta: If you look at throughout the first quarter. If you saw any change in trend.

Peter Quigley: I would say that it was pretty, when we look at the monthly performance, the sequential month-to-month changes, I would say it was relatively consistent throughout the quarter. Probably a little too early to talk about the full month of April, but we didn't see anything or haven't seen anything that would cause us to change our outlook for Q2. And I agree. When you look at our March exit rate, we are basically... On par with our total Q1 trend. So far, we have not seen anything that would lead us to say there is something changing in the world.

Peter Quigley: Not really I would say that it was a pretty good when we look at the monthly performance the sequential month to month changes.

Peter Quigley: I would say it was relatively consistent throughout the quarter.

Peter Quigley: Probably a little too early to talk about the full month of April, but we didn't see anything or havent seen anything that would cause us to change our outlook for Q2.

Speaker Change: And then I agree.

Peter Quigley: At our March exit rate, we are basically.

Peter Quigley: I will start that in Q1 trend so far we have not seen any.

Peter Quigley: <unk>.

Peter Quigley: Needless to say there is something changing.

Peter Quigley: In the market conditions.

Peter Quigley: And I guess from a similar standpoint, Peter, what are your conversations with customers? Are they, you know, just the market's not changing? Do you think, as you talk to other people in the industry or your customers, have they come to this area where just the market is kind of what it is and it's flat, and they're not seeing any changes either, or are you getting any inclinations that maybe things are starting to improve?

Speaker Change: And I guess from a similar standpoint Peter.

Peter Quigley: Thank you Congress Asia with customers are they.

Peter Quigley: Market by changing do you think.

Peter Quigley: You talked to other people in the industry your customers have they come to the area where it does.

Peter Quigley: The market is kind of what it is and its flat and theyre not seeing any changes either or are you getting any inclination that maybe things are starting to improve their kind of accepting where we are and.

Peter Quigley: They're kind of accepting where we are and, you know, this is kind of the bottom. Yeah, I think what we hear from customers is not doom and gloom. It's not that they're discouraged by their prospects for business growth going forward. Probably, the period of time that they're expecting it to happen may be pushed out a little bit from, say, December of last year.

Peter Quigley: This is kind of the bottom.

Speaker Change: Yes, I think.

Peter Quigley: What we what we hear from customers is not doom and gloom, it's not that they are discouraged by.

Peter Quigley: There are prospects for business growth going forward, probably the period of time that they're expecting it to to happen may be pushed out a little bit from say.

Peter Quigley: But customers are still optimistic and looking for ways to optimize their talent supply chain and optimize their expense structure. And all of that, in the long term, bodes well for Kelly because we're right in the middle of that and can support their efforts to figure out how to optimize their talent strategies and supply the talent that they need to deliver their products and services. So I would say no significant change, still positive about the future, and maybe a little bit more optimistic or less pessimistic about a possible downturn.

Peter Quigley: December of last year.

Peter Quigley: Customers are still optimistic and looking for ways to optimize their talent supply chain optimized.

Peter Quigley: Their expense structure and all of that.

Peter Quigley: Long term bodes well for Kelly, because we're right in the middle of that and can support their efforts to figure out how to optimize their tam.

Peter Quigley: Talent strategies and supply.

Peter Quigley: The talent that they need to deliver their products and services. So.

Peter Quigley: I would say no significant change still.

Peter Quigley: Positive on the future and maybe.

Peter Quigley: A little bit more optimistic or less pessimistic about.

Peter Quigley: A possible downturn.

Peter Quigley: And then just one last question, Peter, as you look to transform Kelly, you know, you've made a pretty large acquisition in MRP. And I'm wondering, you know, is that mean, for now, or until you digest this acquisition, that you won't make any more acquisitions? Are you still looking, and are there still opportunities that you'd like to pursue?

Peter Quigley: And then just one last question Peter as you look to transform Kelly.

Peter Quigley: We made a pretty large acquisition.

Peter Quigley: And MRP and I'm wondering.

Peter Quigley: Is that mean for now or until you Digest. This acquisition no more acquisitions or are you still looking and are there still opportunities that you'd like to pursue.

Peter Quigley: Well, I think we've got a large acquisition to manage in the near term, but that doesn't mean we're going to stop continuing to develop relationships and look for high-quality assets that could potentially complement the Kelly portfolio of businesses. We understand that the cycle time, the lead time actually of finding high-quality properties, developing a relationship, and avoiding a bidding process takes time, takes a lot of hard work to do that, and we will not let up on that regardless of the amount of work that we will also put into making sure that the acquisition of motion recruitment partners lives up to its very significant upside. Thank you very much; I appreciate it.

Peter Quigley: Well I think we've got a we've got a large <unk>.

Peter Quigley: Acquisition too.

Peter Quigley: To manage in the near term.

Peter Quigley: But that doesn't mean, we're going to stop continuing to develop relationships and look for high quality.

Peter Quigley: Assets that.

Peter Quigley: Could potentially complement the kelly portfolio of businesses.

Peter Quigley: We understand that the cycle time, the lead time actually of <unk>.

Peter Quigley: Finding high quality properties that developing a relationship.

Peter Quigley: Avoiding a.

Peter Quigley: Our bidding process takes time takes a lot of.

Peter Quigley: Hard work.

Peter Quigley: Do that and we will not let up on that regardless of the amount of work that will also put in to making sure that the.

Peter Quigley: Acquisition of motion recruitment partner's lives up to its very significant upside.

Speaker Change: Thank you very much I appreciate it.

Speaker Change: Thank you. Thank you.

Karthik Mehta: Thank you. Thank you. Your next question comes from the line of Mark Riddick from Sidoti, please go ahead.

Peter Quigley: Your next question comes from the line of Marc Riddick from Sidoti. Please go ahead.

Mark Riddick: Good morning, Mark. Good morning. I wanted to sort of maybe follow up on the last question to some degree. I was sort of curious as to, given the size of the transaction that we're looking at, is there some sort of general way we should think about how you're looking at your balance sheet going forward, comfort as far as leverage levels, financial flexibility, and the like? So as we speak, we have 201 million in cash and about... projections we have, you know both acquisitions we are going to go to probably 2.3, 2.4 dead to ABDA for a few quarters but rapidly going below two and then below one and a half.

Mark Riddick: Good morning, Mark good morning.

Mark Riddick: Good morning, gentlemen, so I wanted to sort of maybe a follow up on the last question to some degree it was sort of curious as to given the size of the transaction that we're looking at is there sort of a general way, we should think about how you're looking at your balance sheet going forward.

Mark Riddick: As far as leverage levels.

Mark Riddick: Our financial flexibility.

Mark Riddick: Mike.

Speaker Change: Okay. So as we speak.

Mark Riddick: We have $201 million of cash.

Mark Riddick: And about.

Mark Riddick: $300 million of <unk>.

Mark Riddick: Financing capabilities.

Mark Riddick: Has it been in liquidity.

Mark Riddick: You'll get.

Mark Riddick: The projections, we have post acquisition.

Mark Riddick: We aren't going to go to probably two points, we two four.

Mark Riddick: Debt to EBITDA for few quarters.

Mark Riddick: But Italy.

Mark Riddick: Going.

Mark Riddick: Two when below one and a half.

Mark Riddick: We still have a strong balance sheet, and I think we still have opportunities. If we de-leverage as planned to go back... knowing the lag time you have between, you know, starting some relationships and when some of them may come into. But, Madame Chitwa, I mean, the cash we have now...

Speaker Change: We still have a strong balance sheet and I think we serve.

Mark Riddick: Yes.

Mark Riddick: If we deleverage as planned to go back to.

Mark Riddick: Acquisitions.

Mark Riddick: Knowing the lag time between starts.

Mark Riddick: Starting some relationship and when some of them make.

Mark Riddick: To fruition, but balance sheet wise and cash we have now.

Olivier Tiro: The fact that our DSO now is at 58 days, which I think is great news, good management of working capital, and cash flow generation. I think we are comfortable not only to get to this transaction with your partly funding it in cash and the rest in borrowing. But we believe that we still have opportunities after that to continue on our inorganic journey. Okay, that's very helpful.

Mark Riddick: The fact that our DSO now.

Mark Riddick: Days, which I think is great news.

Olivier Tiro: Good management of what can get done.

Olivier Tiro: <unk>.

Olivier Tiro: Cash flow generation I think we are comfortable not only to.

Olivier Tiro: To get to the collection.

Olivier Tiro: Okay.

Olivier Tiro: Funding is in cash and the rest of the board.

Olivier Tiro: But we believe that we still have opportunities up to that to continue on our journey I think pretty quickly impact.

Mark Riddick: And then maybe sort of as a tangent to that, outside of this transaction, are there any thoughts or views as to maybe what the overall sort of what we're looking at as far as the general pipeline, as far as valuations, competition levels from private equity, and maybe just the availability of attractive targets. Maybe you could sort of give us an update as to what you're seeing out there beyond the transaction you've already got on your plate? Yeah, Mark. I wouldn't say the landscape has changed significantly. We haven't reached, maybe, what I would call a thaw in the prior 12 to 18 months.

Olivier Tiro: Okay. That's very helpful. Thank you and then maybe sort of as a tangent to that.

Mark Riddick: Outside of this.

Mark Riddick: Are there sort of any thoughts or views as to maybe what that overall.

Mark Riddick: Sort of what we're looking at as far as the general pipeline as far as valuations.

Mark Riddick: Competition levels from private equity.

Mark Riddick: And maybe just.

Mark Riddick: The availability of attractive targets.

Mark Riddick: Give us an update as to what Youre seeing out there beyond.

Mark Riddick: The transaction, we've already got on your plate now.

Peter Quigley: There are still fewer properties on the market, and those that are not always of the highest quality. But I would say there are more discussions happening. There are more companies that are at least beginning to entertain discussions around possible combinations or exits, etc. Private equity is still not at the level it was two or three years ago but is beginning to show some interest in our space because I think people recognize that. Whatever the duration of this current industry environment is, it's not going to last forever.

Speaker Change: Yes, thanks Mark.

Mark Riddick: I wouldn't say the.

Peter Quigley: The landscape has changed significantly we haven't reached maybe what I would call a <unk> in the prior 12 months to 18 months are still fewer properties on the market and those that are.

Peter Quigley: Not always carrying a quality.

Peter Quigley: But I would say there is more discussions happening there as more companies that are.

Peter Quigley: At least beginning to entertain.

Peter Quigley: Discussions around.

Peter Quigley: Possible combinations or exits what have you.

Peter Quigley: Private equity is still.

Peter Quigley: Not at the level it was two or three years ago, but is beginning to show some interest in our space because I think people recognize that.

Peter Quigley: Whatever the duration of this current.

Peter Quigley: And industry environment as it is not going to last forever and there is likely going to be a fairly significant upturn at some point and I think companies recognize that now is a great time to consider.

Peter Quigley: And there is likely to be a fairly significant upturn at some point, and I think companies recognize that now is a great time to consider adding high-quality assets to their portfolios, like we just did. Thank you very much.

Peter Quigley: Adding high quality assets to their portfolio.

Peter Quigley: Like we just did.

Speaker Change: Okay. Thank you very much.

Mark Riddick: Thanks, Mark. If there are any additional questions, please press 1 and 0. And at this time, there are no further questions. Okay, great.

Speaker Change: Thanks Mark.

Speaker Change: If there are any additional questions. Please press one zero.

Mark Riddick: Yeah.

Mark Riddick: And at this time there are no further questions.

Speaker Change: Okay, great. Thank you very much for your help.

Speaker Change: We can end the call. Thank you.

Operator: Thank you very much for your help and... We can end the call. Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect. We're sorry, your conference is ending now. Please hang up. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good morning and welcome to Kelly services first quarter earnings conference call. All parties will be on a listen only mode until the question and answer portion of the presentation.

Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

Operator: Yeah.

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

Operator: [music].

Peter Quigley: Good morning, and welcome to Kelly Services first quarter earnings Conference call. All parties will be on a listen only mode until the question and answer portion of the presentation. Today's call is being recorded at the request of Kelly services. If anyone has any objections you may disconnect. At this time a webcast presentation is also available on Cal.

Operator: These 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.

Peter Quigley: Thank you, Greg. Hello, everyone, and welcome to Kelly's first quarterly conference call. Before we begin, I'll walk you through our Safe Harbor language.

Peter Quigley: Thank you, Greg Hello, everyone and welcome to Kellys first quarter conference call before we begin I'll walk you through our Safe Harbor language as a reminder, any comments made during this call including the Q&A.

Peter Quigley: It 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.

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

Peter Quigley: Finally, our presentation with information about Kelly's financial results in the quarter is available on our website.

Peter Quigley: We have a lot to cover today, so let's get started before.

Peter Quigley: Before we turn to Kellys first quarter results I'd like to address our recent announcement regarding a transformational step forward on our specialty growth journey.

Peter Quigley: The acquisition of MRP will significantly strengthen both the scale and capabilities of Kelly's already substantial staffing and consulting solutions across technology, telecommunications, and government specialties in North America, and RPO solutions globally. Following the close of the transaction, MRP will deliver services through its existing operating companies and brands with a goal of expanding Kelly's capabilities, enhancing MRP's breadth of solutions, and significantly increasing market share across several key areas, motion recruitment technology staffing and consulting business will expand kelly's set delivery platform and establish the business as a top provider of tech talent solutions in the u s, Seven Step will bring its industry-leading brand and highly attractive client base in both RPO and MSP to elevate Kelly OCG's RPO segment to among the top five globally.

Peter Quigley: Motion Telco will add a complementary client portfolio and delivery capabilities to Kelly's existing telecom specialty to create a market-leading telecom offering. And TG Federal will bring a dedicated new platform in government technology subcontracting with strong partnerships to build upon Kelly Seth's success in the government space.

Peter Quigley: Last week Kelly entered into a definitive agreement to acquire motion recruitment partners, a leading specialty talent solutions company under the terms of the agreement Kelly will acquire MRP for $425 million in cash to be paid at close with additional earn out potential.

Peter Quigley: Up to $60 million based on certain performance criteria.

Peter Quigley: Blowing the close of the transaction MRP will deliver services through its existing operating companies and brands with a goal of expanding Kelly's capabilities, enhancing mrp's breadth of solutions and significantly increasing market share across several key areas.

Peter Quigley: Motion recruitment technology staffing and consulting business will expand kellys set delivery platform and establish the business as a top provider of tech talent solutions in the U S. Seven step will bring its industry, leading brand and highly attractive client base in both <unk> and MSP.

Peter Quigley: To elevate Kelly OCG as RPI segment, two among the top five globally.

Peter Quigley: Motion telco will add a complementary client portfolio and delivery capabilities to Kelly's existing telecom specialty to create a market, leading telecom offering and TG federal will bring a dedicated new platform and government technology sub contracting with a strong partnerships to bill.

Peter Quigley: Upon Kelly sets success in the government space.

Peter Quigley: The highly complementary nature of our SET and OCG segments and MRP's portfolio of businesses and customers forms the basis for substantial long-term value creation. Through this transaction, Kelly will provide MRP and its leading brands with a highly invested partner and a breadth of resources to fuel its continued growth. Likewise, the acquisition of MRP will enhance Kelly's revenue growth potential and accelerate EBITDA margin expansion. It will build upon the significant EBITDA margin expansion we've delivered through actions implemented in 2023 and the sale of Kelly's European Staffing Operations in January 2024.

Peter Quigley: The highly complementary nature of our set and OCG segment, and MRP as portfolio of businesses and customers forms the basis for a substantial long term value creation.

Peter Quigley: Through this transaction Kelly will provide MRP and its leading brands with a highly invested partner and the breadth of resources to fuel. Its continued growth. Likewise, the acquisition of MRP will enhance kelly's revenue growth potential and accelerate EBITDA margin expansion.

Peter Quigley: It will build upon the significant EBITDA margin expansion, we have delivered through actions implemented in 2023, and the sale of Kelly's European staffing operations in January 2020 for this deal demonstrates our commitment to rapidly and responsibly redeploying capital in pursuit of inorganic.

Peter Quigley: This deal demonstrates our commitment to rapidly and responsibly redeploying capital in pursuit of inorganic investments in higher margin, higher growth specialties. I look forward to sharing more details and formally welcoming MRP to the Kelly team when the transaction closes, which we expect to occur in the second quarter of this year, subject to regulatory approvals and other customary closing conditions. In tandem with our pursuit of this transformative acquisition, we remained focused on delivering results.

Peter Quigley: <unk> in higher margin higher growth specialties.

Peter Quigley: We look forward to sharing more details and formally welcoming MRP to the Kelly team when the transaction closes, which we expect to occur in the second quarter of this year subject to regulatory approvals and other customary closing conditions.

Peter Quigley: In tandem with our pursuit of this transformative acquisition, we remained focused on delivering results.

Olivier Tiro: Staffing operations and we delivered an increase of 20 basis points in the first quarter raising our adjusted EBITDA margin to three 2%.

Olivier Tiro: Our continued progress demonstrates that the growth and efficiency actions. We are implementing across our businesses are working positioning Kelly to convert a greater share of topline growth to bottom line growth.

Olivier Tiro: For more details on our results in the first quarter I will turn the call over to our Chief Financial Officer Olivier T. Rowe. Thank you Peter and good morning, everybody.

Olivier Tiro: As a reminder, <unk> 2020 results include the European staffing business that we sold on January the second of 2024 to provide greater visibility to trends operating results I will also discuss year over year changes on a reported and also on an organic basis.

Olivier Tiro: References to organic information excludes the results of our <unk> business in 2023.

Olivier Tiro: Revenue for the first quarter of 2024 totaled $1.05 billion, compared to $1.27 billion in 2023, down 17.6%, resulting primarily from the sale of our European staffing business. On an organic basis, revenue declined 2.6% in the quarter, reflecting a continuation of staffing market headwinds. Notwithstanding those headwinds, our education segment's revenue growth continues to be strong, up 16% year-over-year. The continued double-digit growth reflects both net new customer wins, a strong fill rate, and demand from existing customers.

Olivier Tiro: Revenue for the first quarter of 2024 totaled $1 5 billion compound to $1 $27 billion in 2023.

Olivier Tiro: <unk> 17, 6%, resulting primarily from the sale of <unk> business.

Olivier Tiro: On an organic basis revenue declined two 6% in the quarter, reflecting a continuation of staffing market headwinds.

Olivier Tiro: Non withstanding those headwinds our education segments revenue growth continues to be swung up 16% year over year. The continued double digit growth reflects both new net new customer wins strong fee rate and demand from existing customers.

Olivier Tiro: <unk> segment revenue was up 6% during the first quarter, we saw the continuation of challenging market conditions with year over year revenue down 4% in our staffing specialties and down 9% in our outcome based business.

Olivier Tiro: Permanent placement fees continued to be impacted by lower demand and declined 20 sweeper.

Olivier Tiro: In our OCG segment, revenue declined 6%; year-over-year declines in RPO continued due to slower hiring in certain market sectors, MSP revenues continued, while TPO revenues improved on a year-over-year basis. Revenue in our professional and industrial segment declined 11% year-over-year in the quarter. Revenue from our staffing product declined 14%, reflecting continued challenging market conditions, and the segment's contact center outcome-based specialty revenue also declined year-over-year in the quarter, although revenue improved in our other outcome-based specialty. And revenue in Mexico, which is now included in P&I, also improved. However, overall, firm fees in P&I declined 42%.

Olivier Tiro: In our OCG segment revenue declined 6% year over year declines in up Youll continued due to slower hiring in certain market sectors.

Olivier Tiro: Celebration in MSP revenues contribute royalty revenues improved on a year over year basis.

Olivier Tiro: Revenue in our professional and then just real segment declined 11% year over year in the quarter.

Olivier Tiro: Revenue from our assessing product declined 14%.

Olivier Tiro: Electing continued challenging market conditions, and the segments contact center or outcome based specialty revenue also declined year over year in the quarter.

Olivier Tiro: Revenue improved in our other outcome based specialty.

Olivier Tiro: Revenue in Mexico, which is now including P&I also improved.

Olivier Tiro: Overall film season, P&I declined 42%.

Olivier Tiro: Overall gross profit was 19% as reported or 8% on an organic basis. Our gross profit rate was 19.7%, compared to 20% in the first quarter of the prior year. Our GP rate reflects a 90 basis point improvement from the sale of our European staffing operation. Therefore, on an organic basis, the GP rate declined 120 basis points in Q1, 80 basis points due to an unfavorable business mix, and 40 basis points due to lower permship.

Olivier Tiro: Overall gross profit was up 19% as we voted or 8% on an organic basis.

Olivier Tiro: Our gross profit rate was 19, 7% compared to 20% in the first quarter of the prior year.

Olivier Tiro: Our GP rate reflects a 90 basis point improvement from the sale of our European staffing operations.

Olivier Tiro: So on an organic basis, the GP rate declined 120 basis points in Q1, 80 basis points due to unfavorable business mix and 40 basis points due to lower perm fees.

Olivier Tiro: The business mix impact reflects growth in specialties, with lower GP rates, including education, and lower GP rates and set a new CD due to customer and project mix respectively.

Olivier Tiro: SG&A expenses were down 22% year over year on a reported basis and 10% on an organic basis.

Olivier Tiro: <unk> for the first quarter of 2024 include $2 3 million of restructuring charges related to our ongoing transformation.

Olivier Tiro: As well as $5 6 million as expenses related to the sale of Europe in the station operations, increasing transaction and also transition expenses.

Olivier Tiro: SG&A expenses in 2020 suite include $6 6 million of restructuring charges. So expense declined by 23% on an adjusted basis or 12% on an adjusted and organic basis.

Olivier Tiro: Like-for-like expenses were lower in Q1 2024 due to the positive impacts of our structural transformation efforts, as well as lower performance incentive compensation expenses, reflecting the challenging top-line trend. As a reminder, beginning in the first quarter, we are now reporting the operating results of our reportable segments, utilizing revised business unit profit measures. We are allocating a greater share of the costs we have previously reported as corporate to our business soon. In addition, we are no longer including depreciation and amortization in our business unit profit measure.

Olivier Tiro: <unk> expenses were lower in Q1 2024 due to the positive impacts of our cultural transformation efforts as well as lower performance incentive compensation expenses.

Olivier Tiro: It means a challenging top line trends.

Olivier Tiro: As a reminder, beginning in the first quarter. We are now reporting the operating results of our repo table segments utilizing revised business unit measures. We are allocating a greater share of the growth. We had we have previously reported as corporate costs.

Olivier Tiro: All business units. In addition, we are no longer including depreciation and amortization in our business unit profit measure.

Olivier Tiro: We believe this provides greater visibility to the financial performance of each business unit and how they contribute to Kelly's overall performance. On a consolidated basis, our reported earnings from operations in the first quarter were $26.8 million, compared to $10.7 million in Q1 of 2023. Our Q1 2024 results include 11.6 million gains on the sale of our European staffing operations. As I noted, our 2024 results also include 2.3 million of restructuring charges and 5.6 million of expenses related to the sale of our European staffing operations and related transition expenses.

Olivier Tiro: We believe this provides greater visibility into the financial performance of each business unit and how they contribute to <unk> overall performance.

Olivier Tiro: On a consolidated basis, our reported earnings from operations in the first quarter were $26 8 million comp.

Olivier Tiro: Compared to $10 7 million in Q1 of 2023.

Olivier Tiro: Our Q1 2024 results include $11 6 million gain on the sale of our European staffing operations as I know.

Olivier Tiro: Our 2024 results also include $2 3 million of restructuring charges and $5 6 million of expenses related to the sale of our European staffing operation and related transition activities.

Olivier Tiro: Our first quarter of 2023 included a 6.6 million refructuring. So on an adjusted basis, Q1 2024 earnings from operations were $23.1 million, a 34% improvement over the prior year. An adjusted EBDI margin also improved 110 basis points to 3.2%, reflecting about 30 basis points of improvement from the sale of our European staffing operations and 80 basis points of improvement from our ongoing transformation efforts. Income tax expense for the first quarter was $4 million compared to $1.8 million in 2023.

Olivier Tiro: And adjusted EBITDA margin also improved 110 basis points to sweep one 2%, reflecting about 30 basis points of improvement from the sale of our European staffing operations.

Olivier Tiro: 80 basis points of improvement from our ongoing consolidation efforts.

Olivier Tiro: Income tax expense for the first quarter was $4 million compared to $1 8 million in 2020 suite. Our effective income tax rate was 39, 5% in Q1 2024 consistent with the prior year.

Olivier Tiro: Our effective income tax rate was 13.5% in Q1 2024, consistent with the prior year, and finally reported earnings per share for the first quarter was $0.70, compared with 29 cents in 2023. Earnings per share in 2024 include $0.14 related to the gain on sale of our European staffing operation. The gain from settlement of the related forward contract...

Olivier Tiro: And finally reported earnings per share for the first quarter was seven.

Olivier Tiro: Compared with 29 in 2023.

Olivier Tiro: Earnings per share in 2024 include 14.

Olivier Tiro: Related to the gain on sale of our European staffing operations the gain from settlement of the related forward contract, partially offset by transaction related charges analysts structuring charges net of tax.

Olivier Tiro: Earnings per share in 2023 included 13 cents per share of restructuring charges net of tax. So on an adjusted basis Q1, 2024, EPS was <unk> <unk> compared to 42 cents per share in Q1 of 2020 suite a.

Olivier Tiro: 33% increase year over year.

Olivier Tiro: Now, reflecting on the balance sheet at quarter end cash totaled $201 million and we had no debt outstanding at.

Olivier Tiro: This includes the cash proceeds from the sale of our European staffing operations that were payable at close. We expect additional cash proceeds in the third quarter of 2024 under the terms of the transaction related to final cash debt and net working capital adjustment, but do not expect any earn-out proceeds. At Quaterin, accounts receivable totaled $1.2 billion, and global DSO was 58 days, down one day for both the year and 2023 and the first quarter of 2023. In the quarter, we used $29 million for...

Olivier Tiro: This includes the cash proceeds from the sale of our European inception operations that was payable at closing we expect additional cash proceeds in the third quarter of 2024 under the terms of the transaction related to final cash that our networking capital adjustment, but do not expect any.

Olivier Tiro: At quarter end accounts receivable totaled $1 2 billion in global DSO was 58 days down one day for bus year.

Olivier Tiro: And 2023, and the first quarter of 2023.

Olivier Tiro: In the quarter, we used 28 $29 million.

Olivier Tiro: In the quarter, we used 29 million for operating activities and capital expenditures, compared to using 18 million in the comparable prior period. Looking forward, the expected due to closing of the Motion Recruitment Partners acquisition will be funded by cash on hand and borrowing on existing credit facilities, our ability to rapidly redeploy capital to advance our inorganic strategy, and reflect the strength of our balance sheet and our commitment to responsibly manage our economy.

Olivier Tiro: In the quarter, we used 29 million for operating activities and capital expenditures compared to using $80 million in the comparable prior period.

Olivier Tiro: Looking forward we expect.

Olivier Tiro: We expect Q2 closing of the motion recruitment partners acquisition will be funded by cash on hand, and borrowing on existing credit facilities.

Olivier Tiro: To maintain financial flexibility as we move forward, we are currently working with our bank in Pakistan to amend the World Credit to maintain our ability to invest in additional organic and inorganic fish and to navigate an uncertain market environment. Looking ahead to operating results for the second quarter, we believe that staffing market conditions will remain relatively consistent with what we have experienced over the past several quarters. For the second quarter of 2024, on an organic basis, we expect revenue to be up 1 to 2%, with no significant FX impact, resulting in a midpoint revenue expectation of $1.03 billion.

Olivier Tiro: Ability to invest in that.

Olivier Tiro: Unique inorganic initiatives and to navigate an uncertain market environment.

Olivier Tiro: For the second quarter of 2024 on an organic basis, we expect revenue to be up 1% to 2% with no significant FX impact, resulting in a midpoint revenue expectation of $1 3 billion.

Olivier Tiro: Our outlook reflects an expectation that Q2 revenue trends will be consistent with Q1 of 2024, with the benefit of a lower comparison. And for clarity, our expectations do not yet include any impact from our acquisition of motion recruitment partners as we await regulatory approval and the completion of other customary closing conditions. For the second quarter, we expect our GP rate to be between 20.1 to 20.3%.

Olivier Tiro: Our outlook reflects an expectation that Q2 revenue trends will be consistent with Q1 of 2024 with the benefit of lower comparable.

Olivier Tiro: And for clarity our expectations do not yet include any impact from our acquisition of motion recruitment partners as we await regulatory approval and the completion of other customary closing conditions.

Olivier Tiro: For the second quarter, we expect our <unk> rate to be between 21% to 23% on a like for like basis 60 basis point decline at.

Olivier Tiro: On a lag-for-lag basis, this is a 60 base point decline at the midpoint of our range, reflecting the change in our business mix, primarily because our education business is expected to continue to deliver significant revenue growth. Also, we expect to continue to deliver sustained improvement in efficiency as the impact of our transformation-related actions continues. On a lag-for-lag basis, we expect adjusted SG&E expenses to be similar to Q1 2024. Overall, we expect an adjusted EBD margin of about 3.3%, an improvement of 120 basis points. This is Q2 of life, or 80 basis points for an organism.

Olivier Tiro: At the midpoint of our range, reflecting the change in our business mix, primarily because our education business is expected to continue to deliver significant revenue growth.

Olivier Tiro: Also we expect to continue to deliver sustained improvements in efficiency.

Olivier Tiro: Fact of all transformation related actions continue.

Olivier Tiro: On a like for like basis, we expect adjusted SG&A SG&A expenses to be similar to Q1 2024.

Olivier Tiro: Overall, we expect adjusted EBITDA margin of about three 3% an improvement of 120 basis points versus Q2 of last year or 80 basis points on the inorganic plays.

Peter Quigley: And we believe that when the staffing market recovers, we'll be well positioned... to take further advantage of our improved efficiency. We expect our effective tax rate to be in the mid to high teens. Thanks for those insights, Olivier. When we initiated this transformation last year, I committed that we would implement structural sustainable improvements to our business that would benefit all our stakeholders. Through the progress we have achieved to date, I am pleased to say we're delivering on our commitment.

Olivier Tiro: And we believe that <unk> market.

Olivier Tiro: Market recovers, we'll be well position to take further advantage of our improved efficiency, we expect our effective tax rate to be in the mid to high teens and now back to you Peter.

Peter Quigley: We said we would significantly improve Kelly's profitability, and we have, increasing the company's EBITDA margin to 3.2% in the first quarter. This is a step change from our recent net margin average of approximately 2%, and we delivered the improvement in a very short time. We said we would unlock new value-creating opportunities, and we have, signing the largest deal in the company's history in a bold move that redeploys capital to a business with a highly attractive financial profile, seasoned leadership, and valuable assets in which Kelly is well positioned to invest and grow over the long term.

Peter Quigley: We said we would find new avenues of growth, and we have, as both our localized delivery model in P&I and large enterprise account strategy continue to deliver encouraging early results, positioning Kelly to capture increased demand when the macroeconomic environment rebounds. It's been an exceptionally productive start to the year as we worked to deliver on these priorities. I'm grateful to the Kelley team who have executed on our specialty growth strategy with urgency and agility to bring us to this point on our journey.

Peter Quigley: <unk> increased demand when the macroeconomic environment rebounds.

Peter Quigley: They've done so while keeping our clients and talent at the center of everything we do with our noble purpose as their guide. Their ongoing commitment to excellence is reflected in Kelley being named number one on Forbes' 2023 list of America's top temporary staffing companies, an honor we are proud to have received this week for the second consecutive year.

Peter Quigley: Done so while keeping our clients and talent at the center of everything we do with our noble purpose as their guide their ongoing commitment to excellence is reflected in Kelly being named number one on Forbes 2023 list of America's top temporary staffing companies an honor we are proud to have receipt.

Peter Quigley: This week for the second consecutive year.

Peter Quigley: Greg you can add up and open the call to questions.

Greg: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero comment if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one zero at this time and one moment. Please for your first question.

Operator: Your first question comes from the line of Joe Gomes from Noble capital. Please go ahead.

Joe Gomes: Good morning. Thanks for taking my question. Good morning, Joe. Good morning, Joe.

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

Joe Gomes: So first, I'm going to hit you up with questions on the acquisition and see what more detail we can get. Can you give us any kind of indication of revenue or contribution? adjusted EBITDA margins, obviously, they should be higher than Kelly's existing since you say Kelly's overall mark. You know, what kind of growth rates has this business been seeing recently, in terms of customer concentration, top management planning on staying with the business, or do you see some of the management? I am leaving here.

Joe Gomes: So first I'm going to hit you up with questions on the acquisition and see what more detail. We can get can you give us any kind of indication.

Joe Gomes: Revenue contribution.

Joe Gomes: Adjusted EBITDA margins, obviously, they should be higher than Kelly as existing centers say it should increase Kelly's overall margins.

Joe Gomes: Growth rates. It has this business been seeing recently.

Joe Gomes: Customer concentration.

Joe Gomes: Top management planning on staying with the business or do you see some of the management.

Olivier Tiro: Any more detail on the acquisition would be great. Yeah, I think, Joe, thank you for your question. Of course, you know that we are still to close the deal. I think it's going to be in the course of Q2.

Joe Gomes: Leaving here any more detail on the acquisition would be greatly appreciated.

Speaker Change: Yes, I think Joe. Thank you for your question of course, you know that.

Speaker Change: To close the deal.

Speaker Change: <unk> is going to be new course of Q2. So there is not so much we can provide at this stage what I would say in terms of fuel numbers.

Olivier Tiro: So there is not so much we can provide at this stage, but what I would say in terms of pure numbers is that revenue is in excess of $500 million. So that's, of course, I think key information in terms of impact, or future impact, on Kelly's growth and value profile. As Peter was saying, the growth and net margin profile of this acquisition will enhance Kelly's value profile, including its net margin. We will be in a position to give more information when we close, thus in the course of Q2.

Olivier Tiro: Our revenue is in excess of $500 million.

Olivier Tiro: So that's of course, a key information in term of impact future impact on the key growth and value profile as Peter was saying the gross and net margin profile of this.

Olivier Tiro: Position.

Olivier Tiro: We'll enhance.

Olivier Tiro: <unk>.

Olivier Tiro: Value profile, including the net margin we will be in a position gives more information when we close.

Olivier Tiro: Thus in the course of Q2 and probably Peter you can comment more on complementary acquisitions, new capabilities and size in values areas. Yes. Thanks, Olivier Joe we really like the financial and business profile of motion recruitment partner.

Olivier Tiro: And probably, Peter, you can comment a little bit more on complementarity, acquisitions, new capabilities, and size in various areas. Yeah, thanks, Olivier. Joe, we really like the financial and business profile of Motion Recruitment Partners, the capabilities that they bring to Kelly across the technology, government, telecom, and RPO and MSP spaces. Customer set, very complementary to Kelly's customer set, very little overlap.

Olivier Tiro: <unk>.

Olivier Tiro: Capabilities that they bring to Kelly across the technology.

Olivier Tiro: Government telecom and <unk> and MSP spaces.

Olivier Tiro: Customer set.

Olivier Tiro: Very complementary to <unk>.

Olivier Tiro: Kelly as customers at very little overlap strong leadership team.

Peter Quigley: A strong leadership team, excellent business processes, and, I think, a very compatible culture. So we're very excited. We're gonna continue, as I said, to operate their very successful businesses under the current operating entities and brands, and we will work diligently after the deal closes to work with their management team on the plentiful value creation opportunities that we seek. Great, thank you for that. Olivia, I might have missed this, but I thought I heard you say you did not expect to see any additional earnings from the sale of the European staffing business. That's correct.

Olivier Tiro: Excellent excellent business processes, and I think a very compatible culture.

Peter Quigley: So we're very excited we're going to continue as I said to operate their very successful businesses under the current operating entities and brands.

Peter Quigley: And we will work diligently after close do.

Peter Quigley: Work with their management team on that.

Peter Quigley: Plentiful value creation opportunities that we see.

Speaker Change: Great. Thanks, Thank you for that and I'll, let me if I.

Olivia: I just might have missed this but I thought I heard you say you did not.

Peter Quigley: Expect to see any additional earn out from the sale of the European staffing business.

Olivier Tiro: If you are referring to our EMEA staffing business, no, because now we have basically, you know, the condition where certain financial metrics are to be achieved in 2023, and we have the confirmation that they are not going to be thrown out. Although now, as I stated, we have to wait until we finalize the transaction in early Q3, looking at debt-free, cash-free, and networking capital. We expect at the moment, based on what we know and what is measurable, some cash in the region of $27 to $28 million that would come basically in early Q3.

Olivia: That's correct. If you are referring to our EMEA searching business.

Olivier Tiro: Because now we have basically <unk> is a condition, where certain financial metrics to be achieved in 2023 and the confirmation of that.

Olivier Tiro: Nothing to note, although now as I stated we have still.

Olivier Tiro: To wait until we.

Olivier Tiro: Finalize the transaction in early Q3 looking at that.

Olivier Tiro: Free cash flow year in networking capital adjustment.

Olivier Tiro: We expect at the moment based on what we knew and what is measurable.

Olivier Tiro: Some cash in the region of $27 million to $28 million that would come basically early Q3, that's how all base estimate of solid momentum may change a little bit when we know more about especially about the networking capital adjustment but.

Olivier Tiro: Broadly it should be around $28 million of additional cash that's for sure.

Olivier Tiro: Again early Q3.

Olivier Tiro: Okay. Thank you for that clarification.

Peter Quigley: And Peter, just wanted maybe to give us a little additional color, you know, kind of on the environment, especially on talent supply and ability to get people to fill whatever roles that you're trying to fill. Yeah, Joe, I think the macro environment has not changed significantly from the past couple of quarters in terms of the availability of talent. If you take a look at the labor force participation rate, the quit rate, and some other key labor factors, they're all pretty flat compared to what they've been in the past few quarters.

Speaker Change: And Peter I, just wanted to maybe you can give us a little.

Peter Quigley: Additional color kind of on the environment, especially on <unk>.

Peter Quigley: Talent supply ability to get people to fill whatever rolls that youre trying to fill.

Peter Quigley: Yes, Joe.

Peter Quigley: The macro environment has not changed significantly from the past couple of quarters in terms of.

Peter Quigley: Availability of talent nephew.

Peter Quigley: Take a look at the labor force participation rate quit rates. Some other key key labor factors.

Peter Quigley: They're all pretty flat to what they've been in the past.

Peter Quigley: So we don't anticipate in Q2 that we're going to see any significant change. But I will say I'm pleased with the ability of the Kelly team in the face of sluggish demand to improve our fill rates and continue to find ways to shorten cycle times and take market share where it's available without compromising price. Great, thank you for that. And one last one for me. I'll get back in line.

Speaker Change: A few quarters, so we don't anticipate.

Peter Quigley: In Q2 that we're going to see any significant change I will say I am pleased with the ability of the Kelly team in the face of.

Peter Quigley: Sluggish demand to improve our fill rates and.

Peter Quigley: Continue to find ways to shorten cycle times.

Peter Quigley: And.

Peter Quigley: Take take market share, where it's available without compromising price.

Peter Quigley: Okay.

Speaker Change: Great. Thanks for that and one last one for me I'll get back in queue.

Joe Gomes: You know, one of the other acquisitions... that occurred, you know, at the struggles going on, rocket power, and I just wanted you to give us a little update. I know you talked about doing a lot of different things to try and improve some of their operations, just trying to maybe give us some updates on how all of that progress is progressing. Yeah, we're very pleased, Joe, with the, I would say, foundational and structural improvements at RocketPower because they're in the RPO space. Like many operations in the RPO space, they've faced some headwinds.

Peter Quigley: One of the other acquisitions.

Joe Gomes: It occurred.

Joe Gomes: <unk> had some struggles going on rocket power and I'm. Just wondering if you can give us a little update I know you've been you talked about doing a lot of different things to try and improve some of their operations and I was just trying to get maybe give us some update on how all of that progresses.

Joe Gomes: <unk>.

Joe Gomes: Yes, we're very pleased Joe with the I would say the foundational and structural improvements at rocket power.

Joe Gomes: Because they are in the ERP space like many.

Joe Gomes: Operations in RPE, Oh, they've faced some headwinds.

Joe Gomes: But we're beginning to see particularly in the technology space. Some I would refer to green shoots.

Peter Quigley: And rocket powers book of business and the.

Peter Quigley: The steps that we've taken between the time, we acquired them and now we think position them well to capitalize on any rebound in that space and.

Peter Quigley: The.

Peter Quigley: We have.

Peter Quigley: We are optimistic about the potential for rocket power going forward as part of the larger Kelly OCG ERP practice I will just add.

Speaker Change: One data point when you look at revenue of BOE in Q1 versus Q4, so sequentially.

Peter Quigley: <unk> seen an improvement of about 27%. So we start to see some good traction better pipeline as Peter was mentioning.

Speaker Change: Great. That's awesome news for that business I'll get back in queue. Thanks for taking my questions and looking forward to see how the.

Kevin Steinke: <unk> acquisition unfolds here. Thank you. Thank.

Kevin Steinke: Thank you Joe.

Kevin Steinke: Your next question comes from the line of Kevin Stankey from Barrington Research. Please go ahead.

Kevin Steinke: Please go ahead. Good morning, Kevin. Good morning. So following up on the Motion Recruitment Partners acquisition, the one piece of information you did give there was the revenue size. And I don't know if you'd be able to give more detail just kind of in terms of the breakdown between the various areas, technology, telecom, government, RPO, MSP, just to maybe give us a sense of, you know, how much scale will be added to those various pieces of your business from this transaction. Yeah, I think we are going to give you a high-level percentage.

Kevin Steinke: Good morning, Kevin.

Kevin Steinke: Good morning, Bonnie.

Kevin Steinke: So.

Kevin Steinke: Following up on the <unk>.

Kevin Steinke: Most of the recruitment partners.

Kevin Steinke: Acquisition.

Kevin Steinke: One piece you did give there was the revenue size.

Kevin Steinke: And I don't know.

Kevin Steinke: Are you able to give more detail just in terms of the breakdown between the various areas technology Telecom government, our MSP just to.

Kevin Steinke: Maybe give us a sense of.

Kevin Steinke: How much.

Kevin Steinke: Scale will be added to those.

Kevin Steinke: Various pieces of your business from this transaction.

Kevin Steinke: Yes, I think we are going to give you high level percentage.

Olivier Tiro: So if you think about seven step and RPO, MSP on one side, and I would say IT, telco, and federal business is about 90% of the revenue, so it's heavily weighted into our said business. However, again, I think the RPO ad is very interesting, not only with the well-known brand name, 7-Step, but also in terms of coverage, industry verticals, and so on.

Kevin Steinke: So as you're seeing about seven step.

Kevin Steinke: A few MSP on one side and I would say.

Olivier Tiro: <unk>.

Olivier Tiro: <unk> business.

Olivier Tiro: Telco federal business is about 90% of the revenues so it's heavily weighted into.

Olivier Tiro: I will set the business.

Olivier Tiro: Also again seeing the op, you'll add is very interesting.

Olivier Tiro: Not only with a well known brand names have instead, but also in terms of coverage industry verticals and so on and within basically.

Peter Quigley: And within, basically, the said business, a large majority of this business is basically, whether it's IT staffing or consulting and... Yeah, Kevin, I'd add from a qualitative standpoint, particularly in the technology space, the addition of a substantial technology business repositions Kelly when added to our existing technology practice, including Softworld and the legacy Kelly IT business. We're substantially repositioned in what is potentially the fastest-growing part of the industry And we think that that's really important to continue to remix our business towards higher-margin, higher-growth businesses.

Olivier Tiro: <unk> business large majority of these expenses basically.

Kevin Steinke: Whether it's staffing.

Speaker Change: Consulting and equations, yes.

Speaker Change: Kevin I would add from a qualitative standpoint.

Kevin Steinke: Particularly in the technology space. The addition of substantial technology business Repositions Kelly when added to.

Speaker Change: <unk> exist.

Kevin Steinke: Existing technology practice, including soft world and the legacy.

Peter Quigley: Kelly.

Speaker Change: I'd business.

Kevin Steinke: We're substantially repositioned in what.

Kevin Steinke: What is the potentially the fastest growing part of the industry and.

Kevin Steinke: At least historically and we think that that's really important to continuing to remix our business towards higher margin higher growth businesses. Similarly in the telecom and government businesses.

Peter Quigley: Similarly, in the telecom and government businesses, MRP's businesses are highly complementary to Kelly's, as opposed to overlapping. For example, in government, while we're very strong as a prime contractor, MRP has some excellent relationships as a subcontractor, which is not something that Kelly currently participates in. And in the telecom space, very little overlap in terms of customers, but an excellent addition of particularly technology capabilities in the telecom space from MRP, whereas Kelly tends to be stronger in the engineering side of telecom. So very nice adjacencies within the MRP portfolio of businesses that, in addition to scale, we think they're going to bring some really significant capabilities to our portfolio. Okay, thank you.

Peter Quigley: <unk> businesses are highly complementary to Kelly's as opposed to overlapping so in government while were very strong as a prime contractor.

Peter Quigley: <unk> has some excellent relationships.

Peter Quigley: As a subcontractor, which is not something that Kelly currently participates in and in the telecom space.

Peter Quigley: Little overlap in terms of customers, but excellent addition of particularly technology capabilities in the telecom space from.

Peter Quigley: MRP that whereas Kelly is tends to be stronger in the engineering in telecom so very nice.

Peter Quigley: Adjacencies within the MRP portfolio of.

Peter Quigley: Business is that in addition to scale, we think theyre going to bring some really significant capabilities to our portfolio.

Speaker Change: Okay. Thank you that was very helpful insight.

Kevin Steinke: This is in terms of the.

Kevin Steinke: Organic.

Kevin Steinke: Revenue trend in the first quarter.

Kevin Steinke: Mentioned, you didn't see a whole lot of.

Kevin Steinke: Change in the macro environment.

Kevin Steinke: A bit more of a decline than we saw in the fourth quarter I guess, maybe not materially so but any meaningful change in terms of the trend in perm placement or any other areas you might point to.

Kevin Steinke: Kevin No change in that continued.

Kevin Steinke: Results from education growth, which is <unk>.

Kevin Steinke: Continues and again.

Kevin Steinke: I'll repeat myself that we're very.

Kevin Steinke: Bullish on.

Kevin Steinke: On the pipeline.

Kevin Steinke: New wins growth in existing customers.

Kevin Steinke: Improved operation performance.

Kevin Steinke: Perm placement has been.

Kevin Steinke: Where its been we havent seen any significant change.

Kevin Steinke: Among perm placements.

Speaker Change: We have seen some.

Kevin Steinke: Olivier mentioned in rocket power is some signs that there is.

Peter Quigley: In the technology space and I would say we are seeing.

Peter Quigley: Similar green shoots in our in our self World and legacy Kelly technology business, it's still early but.

Peter Quigley: Those businesses are going to recover at some point and.

Peter Quigley: But as Olivier mentioned regarding Q2, we don't foresee any significant change.

Peter Quigley: In the next few months.

Kevin Steinke: I did have one other question I want to circle back with on motion recruitment partners, maybe just, if it's possible to give us a sense as to, you know, how the deal came together, if it was a... Business that was up for sale or somebody built a relationship with over time just kind of curious about that aspect, Yeah, we developed a relationship with MRP over the course of the period of time, and I think on both MRP's side as well as within Kelly, we were strongly attracted to the complementary nature of these two businesses, and saw significant upside potential by the two of them, partnering towards growth in the future and all of our discussions up to the signing a couple weeks ago did nothing but to reinforce that. So we're very pleased with the process and the results.

Speaker Change: Okay. Thank you.

Speaker Change: I did have one other question I wanted to circle back with.

Kevin Steinke: Motion recruitment partners, maybe just.

Kevin Steinke: It is possible to give us a sense as to.

Kevin Steinke: How the deal came together if it was it.

Kevin Steinke: Business that was up for sale or someone who built a relationship with over time, just kind of curious about that aspect.

Kevin Steinke: Yes.

Kevin Steinke: We developed a relationship.

Kevin Steinke: With.

Kevin Steinke: With MRP over the course of the period of time and I think on both.

Kevin Steinke: MRP side as well as within Kelly, we were strongly attracted to the complementary nature of these two businesses and.

Kevin Steinke: We saw significant upside potential by.

Kevin Steinke: Uh huh.

Kevin Steinke: Partnering and towards growth in the future and all of our discussions up to the signing of a couple of weeks ago did.

Kevin Steinke: It did nothing but to reinforce that so.

Kevin Steinke: We're we're very very pleased with the process and the result.

Kevin Steinke: Okay, just a couple more here, which I'll try and combine into one question, but... You know, your projection for organic growth in the second quarter is consistent with what you said before. Would you attribute that to some of your transformation-related growth initiatives gaining traction? And then, secondly, if you can give any insight on just the change in the gross margin outlook relative to what you had previously discussed. Thanks.

Kevin Steinke: Okay.

Speaker Change: A couple more here, which I'll try and combined into one question, but.

Kevin Steinke: Your projection.

Kevin Steinke: For organic growth in the second quarter, that's consistent with what you said before.

Kevin Steinke: Is that.

Kevin Steinke: Would you attribute that to some of your.

Kevin Steinke: Transformation related growth initiatives gaining traction.

Kevin Steinke: And then secondly, just if you can give any insight on.

Kevin Steinke: Just the change in the gross margin outlook relative to what you had.

Kevin Steinke: Previously discussed.

Peter Quigley: Yeah, I think, Kevin, on the first part of the question about revenue, we are, as I said, particularly in the omni-channel strategy that we've introduced in our professional and industrial space segment, as well as the large account enterprise strategy. We're basically a quarter into it, but encouraged by new wins, both existing customer expansion as well as the acquisition of new logos, and we think that... When the macroeconomic environment for our industry improves, we're very well positioned to continue to see success in those two areas. I'll turn it over to Olivier on the gross margin question. I would say, as we said, you know, for Q1 and we anticipate something very similar in Q2. The main mix.

Speaker Change: I think Kevin on the on the.

Speaker Change: First part of the question about revenue we are as I said in my notes or in my script encouraged by the.

Olivier Tiro: Steps, we've taken to focus on organic growth.

Peter Quigley: Particularly in the Omnichannel strategy that we've introduced in our professional and industrial space.

Olivier Tiro: Our segment as well as the large account enterprise strategy.

Olivier Tiro: Were basically a quarter into it but encouraged by.

Peter Quigley: New wins, both existing customer expansion as well as the acquisition of new logos.

Olivier Tiro: And we think that.

Peter Quigley: When the when the macroeconomic environment for our industry improves.

Olivier Tiro: We're very well positioned to.

Olivier Tiro: Continuing to.

Peter Quigley: See success in those two areas I will turn it over to Olivier on the gross margin question just on the gross margin.

Olivier Tiro: I would say as we said for Q1, and we anticipate something similar in Q2 mix.

Olivier Tiro: The main mix.

Peter Quigley: No.

Peter Quigley: Education.

Olivier Tiro: The rest of the business.

Olivier Tiro: Is that.

Peter Quigley: <unk>.

Olivier Tiro: Something that is going to continue until our top line growth is more balanced.

Olivier Tiro: What I can tell you is when you look at and I look at spreads.

Olivier Tiro: P&I and education.

Olivier Tiro: Or said I will spread was moving up especially in sets to some extent in P&I is now flat, but not at all declining which is a sign that basically you don't see big pricing pressure and we don't sacrifice that will price.

Olivier Tiro: But with TD and we will still continue to suffer a bit about.

Olivier Tiro: Sneaks factor all of that is in into our top line dynamic that should evolve as soon as we get to a more balanced top line growth.

Olivier Tiro: Can you why we believe that we are going to move from 19, 7% gross margin.

Olivier Tiro: One to meet the range of 22 in Q2, one of the points is education seasonality, meaning education, usually at the final end of Q2 is starting to settle down.

Olivier Tiro: Because of yields.

Olivier Tiro: Some of them.

Olivier Tiro: Type of.

Olivier Tiro: Even.

Olivier Tiro: We see good traction demos.

Olivier Tiro: Our <unk> business in P&I that would help us.

Olivier Tiro: Yes.

Olivier Tiro: And also as Peter was mentioning we anticipate.

Olivier Tiro: More favorable mix, you said because of the traction will start to see technology.

Olivier Tiro: <unk> got a better margin profile than the average. So there are a few factors that should help us to go to something around 22.

Olivier Tiro: $19, seven but as I mentioned.

Olivier Tiro: At 'twenty, two we are going to be 60 basis points.

Olivier Tiro: On a organic basis versus a year ago and the main driver is going to continue to be unique special.

Speaker Change: Okay, that's fair.

Speaker Change: Very helpful. I'll turn it back over thanks for taking my questions.

Kevin Steinke: Thanks, Kevin.

Kevin Steinke: Thanks for taking the question. Thanks, Kevin. Thank you. Your next question comes from the line of Karthik Mehta from North Coast Research.

Olivier Tiro: Your next question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Karthik Mehta: Please go ahead. Good morning, Peter and Olivier. Good morning, Carter. Good morning.

Karthik Mehta: Hey, good good.

Karthik Mehta: Good morning, Peter and Olivia Good morning Carter.

Peter Quigley: Peter, just on trends in April, I'm assuming from the commentary you gave that the trends in April were very similar to what you saw in the first quarter. But I'm curious to understand if you looked throughout the first quarter, if you saw any change in trends. Not really.

Karthik Mehta: Yep.

Karthik Mehta: Peter just on trends in April I'm, assuming from the.

Peter Quigley: In the commentary you gave the trends in April were very similar to what you saw in the first quarter, but I'm curious to understand it.

Peter Quigley: If you look at throughout the first quarter. If you saw any change in trend.

Peter Quigley: I would say that it was pretty, when we look at the monthly performance, the sequential month-to-month changes, I would say it was relatively consistent throughout the quarter. Probably a little too early to talk about the full month of April, but we didn't see anything or haven't seen anything that would cause us to change our outlook for Q2. And I agree. When you look at our March exit rate, we are basically... on par with our total Q1 trend so far. We have not seen anything that would lead us to say there is something changing. And I guess from a similar standpoint, Peter, what are your conversations with customers?

Peter Quigley: Not really I would say that it was a pretty good when we look at the monthly performance the sequential month to month changes.

Peter Quigley: I would say it was relatively consistent throughout the quarter.

Peter Quigley: Probably a little too early to talk about the full month of April, but we didn't see anything or havent seen anything that would cause us to change our outlook for Q2.

Peter Quigley: And then I agree.

Peter Quigley: At our March exit rate, we are basically.

Peter Quigley: I will say that in Q1 trend so far we have not seen any.

Peter Quigley: <unk>.

Speaker Change: Needless to say there is something changing.

Peter Quigley: In the market conditions.

Speaker Change: And I guess from a similar standpoint Peter.

Peter Quigley: Your conversations with customers are they.

Peter Quigley: Are they, you know, just the market's not changing? Do you think, as you talk to other people in the industry or your customers, have they come to this area where just the market is kind of what it is and it's flat, and they're not seeing any changes either? Or are you getting any indications that maybe things are starting to improve?

Peter Quigley: Just market by changing do you think.

Peter Quigley: You talked to other people in the industry your customers have they come to the area where it does.

Peter Quigley: This is kind of the bottom.

Speaker Change: Yes, I think.

Peter Quigley: What we what we hear from customers is not doom and gloom, it's not that they are discouraged by.

Peter Quigley: There are prospects for business growth going forward, probably the period of time that they're expecting it to to happen may be pushed out a little bit from say.

Peter Quigley: December of last year, but.

Peter Quigley: Customers are still optimistic and looking for ways to optimize their talent supply chain optimized.

Peter Quigley: Their expense structure and all of that.

Peter Quigley: Long term bodes well for Kelly, because we're right in the middle of that and can support their efforts to figure out how to optimize their tam.

Peter Quigley: Talent strategies and supply.

Peter Quigley: The talent that they need to deliver their products and services. So.

Peter Quigley: I would say no significant change still.

Peter Quigley: Positive on the future and maybe.

Peter Quigley: A little bit more optimistic or less pessimistic about.

Peter Quigley: A possible downturn.

Peter Quigley: And then just one last question, Peter, as you look to transform, Kelly, you know, you've made a pretty large acquisition in MRP. And I'm wondering, you know, does that mean, for now, or until you digest this acquisition, no more acquisitions? Are you still looking, and are there still opportunities that you'd like to pursue?

Peter Quigley: And then just one last question Peter as you look to transform Kelly.

Peter Quigley: We made a pretty large acquisition.

Peter Quigley: And MRP and I'm wondering.

Peter Quigley: Is that mean for now or until you Digest. This acquisition that you know more.

Peter Quigley: Acquisitions are you still looking and are there still opportunities that you'd like to pursue.

Peter Quigley: Well I think we've got a we've got a large <unk>.

Peter Quigley: Acquisition too.

Peter Quigley: To manage in the near term.

Peter Quigley: But that doesn't mean, we're going to stop continuing to develop relationships and look for high quality.

Peter Quigley: Assets that.

Peter Quigley: Could potentially complement the kelly portfolio of businesses.

Peter Quigley: We understand that the cycle time, the lead time actually.

Peter Quigley: Finding high quality properties that developing a relationship.

Peter Quigley: Sure.

Peter Quigley: <unk>.

Peter Quigley: Our bidding process. It takes time takes a lot of.

Peter Quigley: Hard work.

Peter Quigley: Do that and we will not let up on that regardless of the amount of work that will also put in to making sure that the.

Peter Quigley: Acquisition of motion recruitment partner's lives up to its very significant upside.

Speaker Change: Thank you very much I appreciate it.

Karthik Mehta: Thank you. Thank you. Your next question comes from the line of Mark Riddick from Sidoti, please go ahead. Good morning, Mark. Good morning.

Speaker Change: Thank you.

Peter Quigley: Your next question comes from the line of Marc Riddick from Sidoti. Please go ahead.

Mark Riddick: Good morning, Mark good morning.

Mark Riddick: I wanted to sort of maybe follow up on the last question to some degree. I was sort of curious as to, given the size of the transaction that we're looking at, is there some sort of general way we should think about how you're looking at your balance sheet going forward, comfort as far as leverage levels, financial flexibility, and the like? So as we speak, we have 201 million in cash and about... projections we have, you know, post acquisition, we are going to go to probably 2.3, 2.4 dead to ABDA for a few quarters but rapidly going below two and then below one and a half.

Mark Riddick: For as far as leverage levels.

Mark Riddick: Our financial flexibility.

Mark Riddick: Mike.

Speaker Change: Okay. So as we speak.

Mark Riddick: We have $201 million of cash.

Mark Riddick: And about.

Mark Riddick: $300 million of Fitch and financing capabilities.

Mark Riddick: Has it been in liquidity you get.

Mark Riddick: Projections, we have post acquisition.

Mark Riddick: We aren't going to go to probably two points, we two four.

Mark Riddick: Sure.

Mark Riddick: Debt to EBITDA for few quarters.

Mark Riddick: But.

Mark Riddick: We are going.

Mark Riddick: Eagle, two and below one and a half.

Mark Riddick: We still have a strong balance sheet, and I think we still have opportunities. If we de-leverage as planned to go back, knowing the lag time you have between, you know, starting some relationships and when some of them may come into conflict. But Madame Chitois, I mean, the cash we have now.

Mark Riddick: We still have a strong balance sheet and I think we set of opportunities.

Mark Riddick: If we deleverage as planned to go back to.

Mark Riddick: Acquisitions.

Mark Riddick: The lag time between.

Mark Riddick: Starting some relationship and win some of them may come into fruition, but balance sheet wise and cash we have now.

Mark Riddick: The fact that our DSO now.

Olivier Tiro: Days, which I think is great news.

Olivier Tiro: Good management of what can get done.

Olivier Tiro: <unk>.

Olivier Tiro: Cash flow generation I think we are comfortable not only to.

Olivier Tiro: To get to the collection.

Olivier Tiro: Okay.

Olivier Tiro: Funding is in cash and the rest of the board.

Olivier Tiro: But we believe that we still have opportunities after that to continue on that journey I think pretty quickly in fact.

Mark Riddick: And then maybe sort of as a tangent to that, outside of this transaction, are there any thoughts or views as to maybe what the overall sort of what we're looking at as far as the general pipeline, as far as valuations, competition levels from private equity, and maybe just the availability of attractive targets. Maybe you could sort of give us an update as to what you're seeing out there beyond the transaction you've already got on your plate. Yeah, Mark. I wouldn't say the landscape has changed significantly. We haven't reached, maybe, what I would call a thaw in the prior 12 to 18 months.

Olivier Tiro: Okay. That's very helpful. Thank you and then maybe sort of as a tangent to that.

Mark Riddick: Outside of this.

Mark Riddick: Are there sort of any thoughts or views as to maybe what that overall.

Mark Riddick: Sort of what we're looking at as far as the general pipeline as far as valuations.

Mark Riddick: Competition levels from private equity.

Mark Riddick: And maybe just.

Mark Riddick: The availability of attractive targets.

Mark Riddick: Give us an update as to what Youre seeing out there beyond.

Mark Riddick: The transaction, we've already got on your plate now.

Speaker Change: Yes, thanks Mark.

Mark Riddick: I wouldn't say the.

Mark Riddick: The landscape has changed significantly we haven't reached maybe what I would call a phy in.

Peter Quigley: There are still fewer properties on the market, and those that are not always of the highest quality. But I would say there are more discussions happening. There are more companies that are at least beginning to entertain discussions around possible combinations or exits, etc. Private equity is still not at the level it was two or three years ago but is beginning to show some interest in our space. Because I think people realize that, and whatever the duration of this current industry environment is, it's not going to last forever. And there is likely to be a fairly significant upturn at some point, and I think companies recognize that now is a great time to consider adding high-quality assets to their portfolios, like we just did.

Mark Riddick: The prior 12 months to 18 months, there is still fewer properties on the market and those that are.

Peter Quigley: Not always carrying a quality.

Peter Quigley: But I would say there is more discussions happening there as more companies that are at least beginning to entertain discussions around.

Peter Quigley: Possible combinations or exits what have you.

Peter Quigley: Private equity is.

Peter Quigley: <unk>.

Peter Quigley: Not at the level it was two or three years ago, but is.

Peter Quigley: Beginning to show some interest in our space, because I think people recognize that.

Peter Quigley: Whatever the duration of this current.

Peter Quigley: And industry environment is it's not going to last forever and there is likely going to be a fairly significant upturn at some point and I think companies recognize that now is a great time to consider.

Peter Quigley: Adding high quality assets to their portfolio.

Peter Quigley: Like we just did.

Mark Riddick: Thank you very much. Thanks, Mark. If there are any additional questions, please press 1 and 0. And at this time, there are no further questions. Okay, great. Thank you very much for your help.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thanks Mark.

Mark Riddick: If there are any additional questions. Please press one zero.

Mark Riddick: Okay.

Mark Riddick: And at this time there are no further questions.

Mark Riddick: Okay, great. Thank you very much for your help.

Operator: We can end the call. Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.

Speaker Change: We can end the call. Thank you.

Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

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