Q1 2024 Kelly Services Inc Earnings Call - Q&A
Operator: Good morning and welcome to Kelley Services' first quarter earnings conference call. All parties will be in a listen-only mode until the question and answer portion of the presentation.
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 made this.
Operator: Today's call is being recorded at the request of Kelley Services. If anyone has any objections, they may disconnect at this time. A webcast presentation for this morning's call is also available on Kelley's website. I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO. Please go ahead.
Operator: Connect 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 Mister Peter Quigley, President and C. E. O. Please go ahead.
Peter Quigley: Thank you, Greg Hello, everyone and welcome to Kelly's first quarter confidence skull 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: 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: As a reminder, any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. However, actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, during the call, certain data will be discussed on a reported and an adjusted basis.
Peter Quigley: May include forward looking statements about our expectations for future performance.
Peter Quigley: 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 S E C 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 and adjusted basis discussion of items on and then adjusted basis or non-GAAP financial measures designed to give insight into certain trends in our operations.
Peter Quigley: Discussion of items on an adjusted basis is a non-GAAP financial measure 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: Finally, a 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.
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.
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.
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 Kelly's capabilities, enhancing MRP's breadth of solutions, and significantly increasing market share across several key areas. Motion's 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 Motion Telco will add a complementary client portfolio and delivery capabilities to Kelley's existing telecom specialty to create a market-leading telecom offering.
Peter Quigley: 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.
Peter Quigley: Last week Kelly entered into a definitive agreement to acquire emotion recruitment partners are leading specialty talent solutions company under the terms of the agreement Kelly will acquire MRP for $425 million in cash to be paid that 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.
Peter Quigley: Up to $60 million based on certain Dry-farm performance criteria.
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 our P O solutions globally.
Peter Quigley: Lowering 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 breath of solutions and significantly increasing market share across several key areas.
Peter Quigley: Motion Recruitments technology staffing and consulting business will expand Kelly set delivery platform and establish the business as a top provider of tech talent solutions in the U S. Seven.
Peter Quigley: Seven steps will bring its industry, leading brand and highly attractive client base in both our P. O M. M. S. B to elevate Kelly O C. G is R. P O 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 build.
Peter Quigley: Upon Kelly sets success in the government space.
Peter Quigley: The highly complimentary nature of our set an O C G segments, and Mrp's portfolio of businesses and customers forms the basis for a substantial longterm value creation.
Peter Quigley: Through this transaction Kelly will provide MRP and it's leading brands with a highly invested partner and a breath of resources to fuel its continued growth.
Peter Quigley: Likewise, the acquisition of M. R. P will enhance kelly's revenue growth potential and accelerate EBIT margin expansion.
Peter Quigley: It will build upon the significant EBIT margin expansion, we've delivered through actions implemented in 2023, and the sale of Kelly's European staffing operations in January 2024, they're still demonstrates our commitment to rapidly and responsibly redeploying capital in pursuit of inorganic.
Peter Quigley: <unk> in higher margin higher growth specialties.
Peter Quigley: I look forward to sharing more details and formally welcoming MRP 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. Through persistent macroeconomic uncertainty and headwinds impacting our industry, we focused on what we could 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%.
Peter Quigley: 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 EBIT margin expansion. We began 2024 with an adjusted EBITDA margin of three per cent following the sale of Kelly's European.
Peter Quigley: [noise] and staffing operations and we delivered an increase of 20 basis points in the first quarter, raising our adjusted EBIT margin to 3.2%.
Peter Quigley: 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.
Peter Quigley: 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 top line growth to bottom line growth.
Olivier Tiro: For more details on our results in the first quarter I'll turn the call over to our Chief Financial Officer alleviate hero. Thank you Peter and that good morning, everybody.
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.
Olivier Tiro: As a reminder, kidneys 2023 results include the European Stashing business that we sold on January the second of 2024 two.
Olivier Tiro: To provide greater visibility trends you know operating results I will sue this because you'll have a you'll changes on the reported.
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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 total 1.5 billion compound to one point 27 billion 2023 down 17.6%, resulting primary from the sale of all Europe and steps in business.
Olivier Tiro: And then they'll get any babies revenue decline, 2.6% in the quarter, reflecting a continuation of stashing market Edwards.
Olivier Tiro: None withstanding those headwinds how education segments revenue growth continues to be soon.
Olivier Tiro: 16% year over year. The continued double G girls reflects bus new net you customer wins thrown phenolate and demand from existing customers.
Olivier Tiro: In that segment, revenue was around $6.5 billion. 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 continued to be impacted by lower demand and declined 23%. In our OCG segment, revenue declined 6%. Year-over-year declines in RPO continued due to slower hiring in certain market sectors, acceleration in MSP revenues continued, while TPO revenues improved on a year-over-year basis. However, revenue in our professional and industrial segment declined 11% year-over-year in the quarter.
Olivier Tiro: In the set segment or the new <unk>, 6% during the first quarter. We saw was a continuation of challenging market conditions with <unk> and your downfall persons stepping specialties and on nine persons you know outcome based business.
Olivier Tiro: Permanent placement fees continued to be impacted by lower abdomen and declined 20 sweeper.
Olivier Tiro: You know what let's see G segment revenue declined 6% you'll have to yield declines now you will continue to.
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Olivier Tiro: 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. However, revenue improved in our other outcome-based specialty, and revenue in Mexico, which is now included in P&I, also improved. Overall, firm fees in P&I declined 42%.
Olivier Tiro: New from our staffing product decline 14 person.
Olivier Tiro: Collecting continued challenging market conditions and the segments contact centre outcome based species you revenue also decline you'll have the year in the corner.
Olivier Tiro: Revenue improve you know on the outcome bass fishing.
Speaker Change: And what do you mean, Mexico, which is now including P&I so improved.
Olivier Tiro: Overall film season, P&I decline, 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. 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.
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Olivier Tiro: The business mix impact reflects growth in specialties with lower GP rates, including education, and lower GP rates in SET and OCR 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.
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Olivier Tiro: 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 transaction and also transition expenses. SG&E expenses in 2023 include point six million of restructuring charges. So, expenses declined by 23% on an adjusted basis or 12% on an adjusted and organized basis. 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.
Olivier Tiro: Expenses for the first quarter of 2024 include two boys swimming in a flood searching charges related to ongoing pulse formation, a fault as well as 516 minutes expenses related to the sale of Europe and searching operations, including transaction and also tells you shouldn't expenses.
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Olivier Tiro: Last four like expenses were lowering Q1 2024 due to the boots back so false hope show I'll call sublimation at fault as well as lower performance incentive composition expenses.
Olivier Tiro: Is it challenging Doublemint twins.
Olivier Tiro: 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. Additionally, we are allocating a greater share of the costs we have previously reported as corporate to our business units. In addition, we are no longer including depreciation and amortization in our business unit profit measure. We believe this provides greater visibility to the financial performance of each business unit and how they contribute to Kelly's overall performance.
Olivier Tiro: As a reminder, beginning in the first quarter. We are now reporting deal breaking results of all rebuilt it will segments utilizing revise business unique measures.
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Speaker Change: How's it going to keep you two kidneys overall performance.
Olivier Tiro: 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. Our first quarter of 2023 included a 6.6 million restructuring charge.
Olivier Tiro: On the consolidated babies that will reported earnings Wolpert nations in the first quarter with 26.8 million <unk>.
Olivier Tiro: Bear to 10.7 million Q1 of 2023.
Olivier Tiro: I will Q1 2024 results include 11.6 million gain on the sale of all European Stashing operations.
Olivier Tiro: As I noted that will 2024 results also includes $2.3 million plus watching charges and 5.6 million of expenses related to this they look for Europeans, that's <unk> operation and it related position activities.
Olivier Tiro: I will first quarter of 2023 included the 6.6 million looks like between jobs. So on the net just it Busies Q1 2024 earnings from operations with 20 sweep one 1, million% to 34% improvement over the <unk>.
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 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.
Olivier Tiro: And adjusted EBITDA Mountain also improved 110 basis points to sweep one two person, reflecting about 30 basis points of improvement from the sale of all Europeans Stashing operations, and 80 basis points of improvement from our ongoing Halsall nation efforts.
Olivier Tiro: Income tax expense for the first quarter was $4 million, compared to $1.8 million in 2023. 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: Income tax expense for the first quarter with 4 million compared to 1.8 million 2020 sweet.
Olivier Tiro: Income tax rate was 17 and a half books 19, Q1 2024 consistent with <unk>.
Olivier Tiro: And finally reported earnings per share for the first quarter, what seven cents.
Olivier Tiro: <unk> 29 cents in 2023.
Olivier Tiro: <unk> share in 2024 will include 14 cents related to the gain on the sale of all Europeans touching operations. The gain from settlement of the related <unk> contract, partially offset by transaction related charges analysts switching charges or net of tax.
Olivier Tiro: Partially offset by transaction-related charges and restructuring charges, all net effects; earnings per share in 2023 included 13 cents 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.
Olivier Tiro: Mm sharing 2023 included 13 cents a share of hustler.
Olivier Tiro: <unk> net of tax so on the net just at babies Q1, 2024, EPS with 66 cents compared to 42 cents spelled sharing you one of 2020 Sweet a 33 person you'll have a year.
Olivier Tiro: Now reflecting on the balance sheet, Quaterin cashed a total of 201 million, and we had no debt outstanding. It includes the cash proceeds from the sale of our European staffing operations, which was payable at close. We expect additional cash proceeds in the third quarter of 2024 under the terms of the transaction related to the final cash debt and net working capital adjustment, but do not expect any earn-out proceeds. At Kotoran, 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.
Olivier Tiro: Now, reflecting on the balance sheet that Clinton ran cashed it at 201 million and we had no debt outstanding.
Olivier Tiro: This includes the cash proceeds from the sale of all Europeans have some operations that was being able at closing we expect additional cash proceeds in the third quarter of 2024 under the terms of the transaction related to finally cash that and networking get tell adjustment, but do not expect any L. Now.
Olivier Tiro: At <unk> accounts receivable and 1.2 billion in global yet so with 58, the eighth download one Dave for votes year.
Olivier Tiro: And 2023, and the first quarter of 2023.
Olivier Tiro: 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. 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.
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Olivier Tiro: In the corner, we use 29 million, followed berating activities and kept and expenditures compare.
Olivier Tiro: Using 80 million comparable prior Italian.
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Olivier Tiro: The expected to closing of the emotional recruitment partners acquisition will be funded by cash on hand, and borrowing on existing credit facilities.
Olivier Tiro: Our ability to rapidly broiled catch the end to advance I will not getting touchy reflects the science of all balance sheet and our commitment to responsibly manage or liquidity to.
Olivier Tiro: To maintain financial flexibility as we move forward, we are currently working with our banking partners 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: To maintain financial flexibility as we move along we are currently working with our Bunking button nose to Amanda or credit facilities to maintain our ability to envision that should that 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. And for Clavity, 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: Looking ahead to operating results for the second quarter, we believe that stepping market conditions, we remain relatively consistent with what we have experienced over the past several quarters.
Olivier Tiro: The second quarter of 2024 on the note we're gonna need bases, we expect revenue to be up 1% to 2% with no significant impact, resulting in a mute point what is in your expectation of one point <unk>.
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Olivier Tiro: For clarity OA Spectation do not include any impact from a rock musician or promotional recruitment button nose, as we await regulatory approval and the completion of the customer including conditions.
Olivier Tiro: For the second quarter, we expect our GP rate to be between 20.1 and 20.3%. 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.
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Olivier Tiro: At the point of all runge, reflecting the changes you know all these nice to meet primary because that will education business is expected to continue to deliver significant revenue growth.
Olivier Tiro: Also we expect to continue to deliver a sustained improvements in efficiency.
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Olivier Tiro: On your legs for like basis, we expect it just it is jeannie SDN expenses to be similar to Q1 2024.
Olivier Tiro: Overall, we expect an adjusted EBDA margin of about 3.3%, an improvement of 120 basis points versus Q2 of last year, or 80 basis points on an organic farm. 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.
Olivier Tiro: Overall, we expect adjusted EBITDA mountain of about Sweet Sweet person and improvement of 120 basis points, that's Q2 of last year or 80 basis points on and off.
Olivier Tiro: And we'd believes that twins market week overs will be well positioned to take further advantage of all input ephesians we.
Olivier Tiro: We expect <unk> 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're delivering on our commitment. 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.
Operator: Thanks for those insights, Olivier.
Speaker Change: Thanks for those insights Olivier when.
Speaker Change: When we initiated this transformation last year I committed that we would implement structural sustainable improvements store a business that would benefit all our stakeholders.
Operator: Through the progress we have achieved today I am pleased to say, we're delivering on our commitments.
Operator: We said, we would significantly improve kelly's profitability and we have increasing the company's EBIT margin to 3.2% in the first quarter. This is a step change from a 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.
Operator: 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 redeploy capital to a business with highly attractive financial provider profile seasoned leadership and valuable assets in which Kelly is well positioned to invest and grow over the long term we <unk>.
Peter Quigley: Said, we would find new avenues of growth and we have as both are localized delivery model and P&I and large enterprise accounts strategy continued to deliver encouraging early results positioning Kelly to 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. 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.
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 perk.
Peter Quigley: <unk> as their guide their ongoing commitment to excellence is reflected in Kelly being named number one on Forbes' 20 twenty-three list of America's top temporary staffing companies and 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: 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 then 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.
Greg: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press one linzer on your telephone keypad you may withdraw your question at anytime by repeating the one zero command, if you're using a speaker phone. 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 then 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.
Joe Gomes: Your first question comes from the line of Joe Gums from mobile capital. Please go ahead.
Joe Gomes: Good morning. Thanks for taking my questions.
Joe Gomes: Good morning, Thank you for taking my questions.
Operator: Good morning Joe. Good morning Joe.
Joe Gomes: 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, contribution, and adjusted EBITDA margins? Obviously, they should be higher than Kelly's existing ones since you say it should increase Kelly's overall margins. What kind of growth rates has this business been seeing recently in terms of customer concentration, and top management planning on staying with the business, or do you see some of the management leaving here? Any more detail on the acquisition would be greatly appreciated.
Joe Gomes: So first I'm Gonna hit you up with questions on the acquisition and see what more detail we can get can.
Joe Gomes: Can you give us any kind of indication of <unk>.
Joe Gomes: Revenue contribution.
Joe Gomes: Justin EBITDA margins, obviously, they should be higher than Kelly's existing since you say it should increase Kelly's overall margins.
Joe Gomes: What kind of growth rates.
Joe Gomes: This business been seeing recently and types customer concentration.
Joe Gomes: You know top management planning on staying with the business or do you see some of the management.
Joe Gomes: Leaving here any any more detail on the acquisition would be greatly appreciate it.
Olivier Tiro: Yeah, I think, Joe. Thank you for your question. Of course, you know that we are still to close the deal.
Speaker Change: Yeah, I think Joe. Thank you for your question of course, you knew that we.
Speaker Change: To close the deal I think he is going to be neutral. So cute too. Soon is there is not so much we can provide the D stage, what I would say in Denver kiln numbers <unk>.
Olivier Tiro: I think it's going to be in the course of Q2. So there is not so much we can provide at this stage, what I would say in terms of pure numbers. 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.
Olivier Tiro: <unk> is in excess of $500 million. So that's of course I snooky information in terms of impact future impact on the Kitty Bruce and value profile I still was seen the gross and net bulging profile of this acquisition.
Olivier Tiro: Acquisition.
Olivier Tiro: Will enhance.
Olivier Tiro: <unk>.
Olivier Tiro: The value will fight, including the next mountain, we will be in a position.
Olivier Tiro: We will be in a position to give more information when we close. That's in the course of Q2. And probably, Peter, you can comment a little bit more on complementarity, acquisitions, new capabilities, and size in various areas. Yeah, thanks, Olivier.
Olivier Tiro: All information when we close.
Speaker Change: In the course of two two and Puliafito you can come in on.
Peter Quigley: On the complimentary key accretions new capabilities.
Peter Quigley: In size and values areas, yeah. Thanks to alleviate jail, we really like the financial and business profile of emotion recruitment partners the capabilities that they bring to Kelly across the technology.
Peter Quigley: 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, strong leadership team, excellent business processes, and I think a very compatible culture. 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, and we will work diligently after the deal closes to work with their management team on the plentiful value creation opportunities that we see.
Peter Quigley: Government telecom and <unk> and MSP spaces.
Peter Quigley: Customers set.
Peter Quigley: Very complimentary to cost to Kelly's customers said very little overlap strong leadership team.
Peter Quigley: Excellent excellent business processes, and I think a very compatible culture.
Peter Quigley: So we're very excited we're gonna continue as I said to operate they're very successful businesses under the current operating entities and brands.
Peter Quigley: And we will work diligently after clothes do.
Peter Quigley: Work with their management team on on the plentiful value creation opportunities that we see.
Joe Gomes: 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.
Speaker Change: Great. Thank you for that and Olivia.
Joe Gomes: Just that might've missed I thought I heard you say you did not.
Joe Gomes: Back to see any additional earn out from the sale of the European staffing business.
Olivier Tiro: That's correct. But 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 turned out. 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's correct. If you are referring to our EMEA searching these days no because now we have basically you know as a condition, where certain things should matrix to be achieved in 2023, and we have the confirmation of that.
Olivier Tiro: And that.
Olivier Tiro: Now what what is it now as I stated <unk> to wait and cheated we.
Olivier Tiro: Finalize it all action you know litu sweet looking at that tweak ashbury and networking kept it <unk>.
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 that we should receive.
Olivier Tiro: We expect the woman based on what we knew and what he is measurable.
Olivier Tiro: Some cash in the region of 27 to 28 million that would come basically only two sweet that's how all basically teammate of hold a moment may change a little bit when we know more about especially about the networking gets better judgment, but.
Olivier Tiro: Bloated each should be around 28 million eventually caz that's.
Olivier Tiro: Again early too sweet.
Joe Gomes: Okay, thank you for that clarification. Peter, just want to maybe give us a little additional color on the environment, especially on, you know, talent supply and ability to get people to fill whatever roles that you're trying to fill.
Speaker Change: Okay. Thank you for that clarification.
Speaker Change: Appeared just wanted maybe you can give us a little.
Peter Quigley: Digital color you know kind of on the environment, especially on you know talent supply and the ability to get people to fill.
Joe Gomes: Roles that that you're trying to fill.
Peter Quigley: 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, some other key labor factors, they're all pretty flat compared to what they've been in the past few quarters. 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.
Peter Quigley: Yeah July.
Speaker Change: Thank the macro environment has not changed significantly from the past couple of quarters in terms of.
Joe Gomes: Great. Thank you for that. And one last one for me. I'll get back in queue.
Peter Quigley: Availability of Talon. If you you know take a look at the labor force participation rate quit rates some other.
Speaker Change: Key key labor factors.
Joe Gomes: They're all pretty flat to what they've been in the past few.
Joe Gomes: Quarters. So we don't anticipate the and Q2 that we're going to see any significant change I will say I'm I'm pleased with the ability of the Kelly team in the face of sluggish.
Speaker Change: Sluggish demand to improve our fill rates and.
Joe Gomes: Continued to find ways to shorten cycle times and.
Speaker Change: Take take market share, where it's available without compromising price.
Joe Gomes: Okay.
Speaker Change: Great. Thanks for that one last one for me I'll get back in queue.
Joe Gomes: You know, one of the other acquisitions that occurred, you know, had some struggles going on, Rocket Power, and I just wanted to maybe give us a little update. I know you've been talking about doing a lot of different things to try and improve, you know, some of their operations. And I was just trying to maybe give us some update on how all of that progress is going.
Joe Gomes: You know one of the other acquisitions.
Joe Gomes: Occurred.
Joe Gomes:
Joe Gomes: Some struggles going on rocket power and give us a little update I know you've been you've talked about doing a lot of different things to try and.
Joe Gomes: Prove you know some of their operations and it was just trying to get maybe give us an update on how all of that progress is progressing.
Peter Quigley: Yeah, we're very pleased, Joe, with the, I would say, the foundational and structural improvements at RocketPower because they're in the RPO space like many Operations in RPO, they've faced some headwinds, but we're beginning to see, particularly in the technology space, some, I would refer to green shoots in Rocket Power'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 uh... you know or we have, We're optimistic about the potential for rocket power going forward as part of the larger Kelly OCG RPO practice.
Speaker Change: Yeah, we're very pleased Joe with the I would say the foundational and structural improvements at rocket power.
Peter Quigley: Because they're in the <unk> space like many.
Peter Quigley: Operations in <unk>, they've faced some headwinds, but we're beginning to see particularly in the technology space. Some I would refer to green shoots in rocket Power's book of business and the steps that we've.
Peter Quigley: We've taken between the time, we acquired them and now we think position them well too <unk>.
Peter Quigley: Capitalize on any rebound and in that space and.
Peter Quigley: The.
Peter Quigley: We have we.
Peter Quigley: We are optimistic about the potential for rocket power going forward as part of the larger <unk> practice I would just add that.
Olivier Tiro: I would just add one data point: when you look at revenue from rocket power in Q1 versus Q4, so sequentially, we have seen an improvement of about 27%. So we are starting to see some good traction, and a better pipeline, as Peter was mentioning.
Peter Quigley: <unk> at that point when you get revenue of look at Boeing Q1, two false will sequentially. We have seen an improvement about 27%. So we stopped to see some good traction better pipeline as there was mentioned.
Joe Gomes: Great, that's awesome news for that business. I'll get back in queue. Thanks for taking my questions. Really looking forward to seeing how the MRP acquisition unfolds here. Thank you.
Olivier Tiro: Great it's off the news for that business.
Speaker Change: I'll get back in queue. Thanks for taking my questions are you looking forward to see how the MRP acquisition unfolds here. Thank you.
Speaker Change: Thank you Joe.
Operator: Your next question comes from the line of Kevin Steinke from Barentine Research. Please go ahead.
Joe Gomes: Your next question comes from the line of Kevin Stankey from Parenting Research. Please go ahead.
Kevin Steinke: Morning, Kevin. Good morning. So following up on the Motion Recruitment Partners acquisition, the one piece 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.
Kevin Steinke: Good morning, Kevin Good morning.
Kevin Steinke: So I'm following up on the most of the recruitment partners acquisition.
Kevin Steinke: The one piece you did give there was the revenue size.
Kevin Steinke: Yeah, I don't know.
Kevin Steinke: Able to give more detail just in terms of the breakdown between the various areas technology Telecom Doberman R. P. O M. S. P just to.
Kevin Steinke: Maybe give us a sense of you know how much scale will be added to those various pieces of your business from from this transaction.
Olivier Tiro: Yeah, I think we are going to give you a high-level percentage. So if you think about seven-step RPO, MSP on one side, and I would say the 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. Although, again, I think the RPO ad is very interesting, not only with the well-known brand name, seven-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 IT, whether it's IT staffing or consulting and equipment. Yeah.
Kevin Steinke: I think what we are going to give you a high level.
Olivier Tiro: So if you're seeing about seven state and.
Olivier Tiro: U M S. P on one side and I would say.
Olivier Tiro: The I T decor, and say, they're a business.
Olivier Tiro: According to the World. These now she's about 90% of the revenue so he's heavyweight eating too.
Olivier Tiro: I won't say the business.
Olivier Tiro: Well again, I think the <unk> not on a well known brand names have instead, but also in depth coverage.
Olivier Tiro: <unk> and so on and <unk> basically the said business Lodge in my jewelry.
Olivier Tiro: And she's basically.
Olivier Tiro: Whether it's <unk>.
Olivier Tiro: Or a consulting any grievance yeah.
Peter Quigley: 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, 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, MRP's businesses are highly complementary to Kelly's, as opposed to overlapping, 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 in telecom, so very nice adjacencies within the MRP portfolio, businesses that in addition to scale, we think they're going to bring some really significant capabilities to our portfolio.
Speaker Change: Kevin I'd add from a qualitative standpoint.
Peter Quigley: Particularly in the technology space. The addition of a substantial technology business Repositions Kelly when added to.
Kevin Steinke: Okay, thank you. That was a very helpful insight.
Kevin Steinke: Our existing technology practice, including soft world and the legacy.
Kevin Steinke: Kelly.
Kevin Steinke: Business.
Kevin Steinke: We're we're substantially repositioned in the 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.
Kevin Steinke: M. R. PS businesses are highly complimentary to Kelly's as opposed to overlapping so in government, while we're very strong as a prime contractor.
Kevin Steinke: <unk> has some excellent relationships.
Kevin Steinke: As a subcontractor, which is not something that Kelly currently participates in in in the telecom space very little overlap in terms of customers, but excellent addition of particularly technology capabilities in the telecom space from.
Kevin Steinke: MRP that whereas Kelly is tends to be stronger in the engineering in telecom, so very nice adjacencies within the MRP portfolio of.
Kevin Steinke: Business is that in addition to scale, we think they're gonna bring some really significant capabilities to to our portfolio.
Kevin Steinke: Okay. Thank you that was very helpful insight.
Kevin Steinke: 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, you know, it was 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, you know, the trend in perm placement or any other areas you might point to? Kevin, there is no change.
Kevin Steinke: In terms of the.
Kevin Steinke: Organic revenue trend in the first quarter.
Kevin Steinke: You mentioned you didn't see a whole lot of.
Kevin Steinke: And the macro environment.
Kevin Steinke:
Kevin Steinke: A bit more of a decline then just saw on the fourth quarter I guess, maybe not materially so but you know any meaningful change in terms of you know the the trend in perm placement or or any other.
Kevin Steinke: You might point too.
Peter Quigley: Kevin, no change in the continued results from education growth, which is, you know, ongoing. And again, I repeat myself that we're very bullish on the pipeline.
Kevin Steinke: Kevin No change in the continued results from education growth, which is you know continues and again I repeat myself that we're very.
Peter Quigley: Bullish on the on.
Peter Quigley: On the pipeline.
Peter Quigley: New wins, growth in existing customers, and improved operation performance. Perm placement has been where it's been. We haven't seen any significant change among perm placements.
Peter Quigley: New wins growth an existing customers.
Peter Quigley: Improved operation performance.
Peter Quigley: Firm placement has been you know where it's been we don't haven't seen any significant change among per emplacements. We have seen some as Olivier mentioned in rocket power has some ah signs that there is.
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.
Peter Quigley: And the technology space and I would say, we're seeing <unk>.
Peter Quigley: Similar green shoots in our in our self World and legacy Kelly Technology business. It's still early but you know those businesses are going to recover at some point and but as Olivier mentioned regarding Q do we don't foresee any significant change.
Peter Quigley: In the next few months.
Kevin Steinke: Okay, thank you. I did have one other question I wanted to circle back 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 that you built a relationship with over time. Just kind of curious about that aspect.
Speaker Change: Okay. Thank you I I did have one other question I wanted to circle back with an motion recruitment partners maybe just.
Kevin Steinke: If it's possible to give us a sense as to.
Kevin Steinke: How the the deal came together if it was.
Kevin Steinke: Business that was up for sale or if it's someone you build a relationship with over time, just kind of curious about that aspect.
Peter Quigley: 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 partnership 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, very pleased with the process and the result.
Speaker Change: Yeah, we we developed a relationship with.
Peter Quigley: With.
Peter Quigley: With MRP over the course of the period of time and I think on both.
Peter Quigley: <unk> sighed as well as within Kelly, we were strongly attracted to the complimentary nature of these two businesses and.
Peter Quigley: Saw significant upside potential by.
Peter Quigley: Partnering in in towards growth in the future and all of our discussions up to the signing a couple of weeks ago did.
Peter Quigley: Did nothing but to reinforce that so.
Peter Quigley: We're we're very very pleased with the process and the 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, which is consistent with what you said before, would you attribute that to some of your transformation-related growth initiatives gaining traction? And then, you know, secondly, just if you can give any insight on, you know, just the change in the gross margin outlook relative to what you had previously discussed. Thanks.
Speaker Change: Okay just.
Speaker Change: A couple more here, which I'll try and combined into one question, but.
Kevin Steinke: You know your projection or organic growth in the second quarter.
Kevin Steinke: That's consistent with what you said before 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.
Speaker Change: No just the change in the the gross margin outlook relative to what you had previously discussed thanks, Yeah I think Kevin.
Peter Quigley: Yeah, 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 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.
Kevin Steinke: The first part of the question about revenue we are as I said in my notes or 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: 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.
Olivier Tiro: When the when the macroeconomic environment for our industry improves we're very well positioned to <unk>.
Olivier Tiro: Continued to.
Peter Quigley: <unk> success in those two areas I'll turn it over to Olivier on the gross margin question just on the gross margin.
Olivier Tiro: Yeah, just on the gross margin, I would say, as we said for Q1, and we anticipate something very similar in Q2, the mix. The main mix being, you know, education versus the rest of the business.
Olivier Tiro: I would say as we said Q.
Olivier Tiro: Q1, and we anticipate something there.
Olivier Tiro: Mix.
Olivier Tiro: The main <unk>, you know education <unk>, the rest of the business.
Olivier Tiro: We see that as something that is going to continue until our top line growth is more balanced. What I can tell you is, when you look at, and I look at spread, whether it's in P&I, in education, or in SET, our spread was moving up, especially in SET, to some extent in P&I, 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, you know, this mix 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: He's at as.
Olivier Tiro: Something that is going to continue and <unk> I walked up line growth is more balanced.
Olivier Tiro: What I can tell you he's when you look at and you'll get spread with 18 P&I in education.
Olivier Tiro: <unk>.
Olivier Tiro: Said I will spread was moving up especially insects to some extent in P&I is now flat, but not that <unk>, which is a sign that basically don't C. D.
Olivier Tiro: Pricing pressure and we don't sacrifice that will price.
Olivier Tiro: That was T D and we will continue to suffer really beats about even though the sneaks fact, all that is needed to I worked up blind dynamic that should evolve as soon as you know we get them all balance top line growth.
Olivier Tiro: If you ask me why we believe that we are going to move from 19.7% gross margin rate in Q1 to a mid-range of 20.2% in Q2, one of the points is education seasonality, meaning education. We see good traction in terms of our BPO business in P&I, and that 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 start to see in technology, which usually has a better margin profile than the average.
Speaker Change: Asking me why we believe that we are going to move from 19.7 books then.
Olivier Tiro: <unk> one to meet the range of 22 in queue to one of the appointees education seasonality, meaning education, usually gets island <unk> starting to settle down.
Olivier Tiro: Because of <unk> and some.
Olivier Tiro: Type of.
Olivier Tiro: Even.
Olivier Tiro: We see good traction.
Olivier Tiro: I will detail business P&I that would help us.
Olivier Tiro:
Olivier Tiro: And also as beta was mentioning we anticipate.
Olivier Tiro: More favorable meeting set because of this action or staff technology, it's usually better than <unk> than the average Suzy a few factors that should help us to go to something along 22. This is 19 <unk> seven but as I mentioned.
Olivier Tiro: 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 still going to be 60 basis points on an organic basis versus a year ago, and the main driver is going to continue to be mixed pressure.
Olivier Tiro: And at 22, we are going to be 260 basis points on a all getting <unk> and the main driver he's going to continue to be unique special.
Kevin Steinke: Okay, that's very helpful. I'll turn it back over. Thanks for taking the questions.
Speaker Change: Okay. That's very helpful. All turn it back over thanks for taking questions.
Speaker Change: Thanks <unk>.
Operator: Your next question comes from the line of Karthik Mehta from North Coast Research. Please go ahead.
Kevin Steinke: Your next question comes from the line of Kartik meta from North Coast Research. Please go ahead.
Karthik Mehta: 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.
Karthik Mehta: He could meet good morning, Peter <unk> Good morning, Peter <unk> on trends in April I'm, assuming from.
Peter Quigley: Not really. I would say that it was pretty consistent when we look at the monthly performance, the sequential, you know, 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...
Peter Quigley: Commentary you gave the trend in April were very similar to what you saw in the first quarter, but I'm curious to understand.
Peter Quigley: If you look at throughout the first quarter. If you saw any change in trend.
Peter Quigley: Not really I would say that it was a pretty 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, probably littler 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.
Olivier Tiro: 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 any significant changes that would lead us to say there is something changing in market conditions.
Peter Quigley: And then I agree I mean, if I need to get that all nalchik Detroit, we are basically.
Olivier Tiro: On file.
Olivier Tiro: <unk> Q1 trend so far we have not seen any.
Olivier Tiro: <unk> that would.
Olivier Tiro: He does to say there is something changing in.
Olivier Tiro: In the market conditions.
Karthik Mehta: And I guess from a similar standpoint, Peter, what are your conversations with customers about? Are they, you know, just markets 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, kind of accepting where we are and, you know, this is kind of the bottom?
Olivier Tiro: And they get that from a similar standpoint, Peter I.
Karthik Mehta: <unk> Congress Asians with customers are they.
Karthik Mehta: Just market by changing do you think.
Karthik Mehta: Talk to other people in the industry or your customers have they come to this area where.
Karthik Mehta: The market is kind of what it is and it's black and they're 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 you know this is kind of Nevada.
Peter Quigley: 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, but customers are still optimistic and looking for ways to optimize their talent supply chain, optimize their expense structure, and all of that, you know, 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 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: Yeah I think.
Peter Quigley: What we what we hear from customers is is not doom and gloom, it's not that they're discouraged by their their prospects for business growth going forward, probably the period of time that they're expecting it to to happen maybe.
Peter Quigley: Be pushed out a little bit from say December of last year, but customers are still optimistic and looking for ways to optimize their talent supply chain optimize the their expense structure and all of that you know <unk>.
Peter Quigley: Longterm 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 tan.
Peter Quigley: Talent strategies and supply.
Peter Quigley: The talent that they need to deliver their their products and services. So I would say no significant change still positive on the future and maybe.
Peter Quigley: A little bit more optimistic or or less pessimistic about a possible downturn.
Karthik Mehta: And then just one last question, Peter. As you look to transform Kelly, 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, or are you still looking, and are there still opportunities that you'd like to pursue?
Speaker Change: And then just one last question Peter as you look to transform Kelly.
Karthik Mehta: Made a pretty large acquisition an M R P and I'm wondering.
Peter Quigley: Does that mean for now or until you Digest. This acquisition that you know more acquisitions are you still looking and are there until opportunity that you would 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, avoiding a... The bidding process takes time, and it 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.
Peter Quigley: Well I think we've got a we've got a large acquisition too.
Peter Quigley: To manage in the near term, but that doesn't mean, we're gonna stop continuing to develop relationships and look for high quality.
Peter Quigley: Assets that could potentially compliment that kelly portfolio of businesses are.
Peter Quigley: We understand that the cycle time to lead time actually have finding high quality properties develop developing a relationship.
Peter Quigley: Avoiding a bidding.
Peter Quigley: Bidding process takes time takes a lot of you know hard work to do that and we will not let up on that regardless of the amount of work that we will also put in to making sure that the acquisition of motion recruitment partners lives up to its very significant upside.
Karthik Mehta: Thank you very much. I appreciate it. Thank you. Thank you.
Speaker Change: Thank you very much I appreciate it.
Speaker Change: Thank you. Thank you.
Mark Critic: Your next question comes from the line of Mark critic from Sidoti. Please go ahead.
Speaker Change: Good morning, Mark good morning.
Operator: Morning, John, so I wanted to sort of maybe follow up on
Speaker Change: One gentleman so I wanted to start with maybe a follow up on on the last question to some degree it was sort of curious as G. 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 comfort as far as leverage levels.
Speaker Change: You know financial flexibility and and the like.
Olivier Tiro: As we speak, we have $201 million of cash and about $300 million of additional financing capabilities, so half a billion in liquidity. If you look at the projections we have post-acquisition, we are going to go to probably $2.3, $2.4 to a BDA for a few quarters, but rapidly going below $2.0 and then below $1.5. We still have a strong balance sheet, and I think we still have opportunities, if we de-leverage as planned, to go back to acquisitions, knowing the lag time you have between, you know, starting some relationships and when some of them may come into fruition.
Speaker Change: Okay. So as we speak you have 201 million of cash.
Olivier Tiro:
Olivier Tiro: Out.
Olivier Tiro: It's $400 million a fictional financing.
Olivier Tiro: So.
Olivier Tiro: How does have union liquidity.
Olivier Tiro: Get.
Olivier Tiro: Projections, we have you know the first acquisition.
Olivier Tiro: We are going to go to <unk> to <unk> suite 2.4.
Olivier Tiro: <unk> for a few quarters.
Olivier Tiro: But it'll be going <unk>.
Olivier Tiro: Two and then you wanted to have.
Olivier Tiro: We should have his tone balance sheet and and I think we should have a fucking teeth.
Olivier Tiro: Deleverage as plan to go back to.
Olivier Tiro: Conditions.
Olivier Tiro: Knowing the lag time, you have between you know starting some relationship and when some of them may I mean tuition, but by then she twice in cash we have now the fact that the <unk> now he's at 68 days, which I think is great news good.
Olivier Tiro: But balance sheet-wise, I mean, the cash we have now, the fact that our DSO is now 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 with getting 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 in-organic journey, I think pretty quickly.
Olivier Tiro: Management of walking <unk>.
Olivier Tiro:
Olivier Tiro: Cash flow generation I see when we have consulted.
Olivier Tiro: Multiple nothing <unk> to to get to the call action, we use you'll take funding you can cash in the restaurant.
Olivier Tiro: But we believe that we should have opportunities up does that to continue on that you don't get you Joni.
Olivier Tiro: Typed.
Operator: Okay, that's very helpful. Thank you. 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. Give us an update as to what you're seeing out there beyond the transaction you've already got on your plate. Yeah, thanks, Mark. I wouldn't say the
Speaker Change: Okay. That's that's very helpful. Thank you and then may be sort of as a tangent to that outside of this this transaction are there sort of 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.
Operator: Competition levels from private equity and maybe just the the availability of attractive targets.
Operator: Give us an update as to what you're seeing out there beyond.
Mark: The transaction you've already got on your plate.
Peter Quigley: Yeah, thanks, 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.
Speaker Change: Yeah, Thanks, Mark I.
Speaker Change: I wouldn't say the land.
Peter Quigley: Landscape has changed significantly we haven't reached maybe what I would call a thigh and you know the <unk>.
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. 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.
Peter Quigley: Prior 12 to 18 months are still fewer properties on the market and those that are.
Operator: 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.
Peter Quigley: Not always carrying a quality but.
Operator: I would say there is more discussions happening there is more companies that are at least beginning to entertain discussions around possible combinations or exits what have you private equity is.
Operator: Still.
Operator: 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.
Operator: And whatever the duration of this current.
Operator: Industry environment is it's not gonna last forever and there is likely going to be a fairly significant upturn at some point and I think companies recognize it now is a great time to consider.
Operator: Adding high quality assets to their portfolio.
Operator: Like we just did.
Speaker Change: Okay. Thank you very much thanks.
Speaker Change: Thanks Mark.
Operator: If there are any additional questions. Please press one than zero.
Operator: And at this time there are no further questions.
Operator: Okay, great. Thank you very much for your help and.
Speaker Change: We can end the call. Thank you.
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: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation in for using AT&T teleconference. You may now disconnect.
Operator: We're sorry, your conference is ending now. Please hang up.
Operator: We're sorry, you conference is ending.
Operator: Now please hang up.