Q2 2024 Kelly Services Inc Earnings Call

Good morning, and welcome to Kelly Services second 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, our second quarter webcast presence.

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

Operator: Today's call is being recorded at the request of Kelley Services. If anyone has any objections, they may disconnect at this time. The second quarter webcast presentation is also available on Kelley'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.

<unk> is also available on <unk> 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 second quarter Conference call.

Peter Quigley: Thank you, Greg. Hello, everyone, and welcome to Kelly's second 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, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

Peter Quigley: In addition, during the call, certain data will be discussed on a reported and an adjusted basis. Discussing items on an adjusted basis is a non-GAAP financial measure designed to give insight into certain trends in our operations.

Speaker Change: 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 may include forward looking statements about our expectations for future performance actual results could differ materially.

Speaker Change: No as suggested by our comments and we have no obligation to update the statements made on this call.

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

Speaker Change: 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, a presentation with information about Kelly's financial results for the quarter is available on our website. With that, I'll begin with remarks on Kelly's financial results. In the second quarter, we remained focused on what we could control as we continue to navigate uncertain market conditions. Large enterprises maintained a cautious approach to hiring, though demand began to stabilize, with positive signs emerging, in particular among our technology and life sciences customers. In our P&I business, revenues leveled off on a sequential basis.

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

Speaker Change: With that I'll begin with remarks on Kelly's financial results in the second quarter. We remained focused on what we can control as we continue to navigate uncertain market conditions large enterprises maintained a cautious approach to hiring though demand began to stabilize with positive signs emerging in particular.

Peter Quigley: This trend reflects stabilizing demand and the benefits of our enhanced localized delivery model. The combined strength of our network of physical branch locations and the Kelly Now mobile app continued to generate positive momentum in the quarter, with both clients and talent helping grow our pipeline of new industrial and commercial staffing business and drive a meaningful improvement to our fill rate and time to GP. At the enterprise level, our strategy to deliver the full suite of Kelly offerings to our largest customers has also gained traction.

Speaker Change: Among our technology and life Sciences customers.

Speaker Change: In our P&I business revenues leveled off on a sequential basis. This trend reflects stabilizing demand and the benefits of our enhanced localized delivery model.

Speaker Change: Combined combined strength of our network of physical branch locations and then Kelly now mobile App continued to generate positive momentum in the quarter with both clients and talent, helping grow our pipeline of new industrial and commercial staffing business and drive meaningful improvement to our fill rate and time to G. P.

Speaker Change: At the enterprise level, our strategy to deliver the full suite of Kelly offerings to our largest customers also gained traction within the initial focus accounts, where we have operationalized. This approach we've improved the efficiency and effectiveness with which we serve our largest customers. This progress is beginning to.

Peter Quigley: Within the initial focus accounts, where we have operationalized this approach, we've improved both the efficiency and effectiveness with which we serve our largest customers. This progress is beginning to drive gains in share of wallet with our large enterprise customers. Our growth initiatives are helping capture market share and build upon Kelly's position as one of the largest staffing firms in the U.S. According to staffing industry analysts' latest rankings, Kelly increased its position by the widest margin among the top 20 firms from 2022 to 2023.

Speaker Change: Drive gains in share of wallet with our large enterprise customers.

Speaker Change: Our growth initiatives are helping capture market share and build upon Kelly's position as one of the largest staffing firms in the U S. According to staffing industry analysts latest rankings Kelly increased its position by the widest margin among the top 20 firms from 'twenty to 'twenty two to 'twenty to 'twenty. Three this is a testament to our team's resilience.

Peter Quigley: This is a testament to our team's resilience in deftly navigating through uncertain market conditions. Amid encouraging developments in growth, we remain laser-focused on improving our ability to convert a greater share of top-line growth to bottom-line growth. This month marks one year since we shared with you the anticipated impact of the transformation initiatives we undertook to drive structural efficiencies across Kelly and significantly improve the company's profitability. Our message at that time was clear.

Speaker Change: Williams and definitely navigating through uncertain market conditions.

Speaker Change: Amid encouraging developments with growth, we remain laser focused on improving our ability to convert a greater share of topline growth to bottom line growth.

Speaker Change: This month marks one year since we shared with you the anticipated impact of the transformation initiatives, we undertook to drive structural efficiencies across Kelly and significantly improve the company's profitability.

Speaker Change: Our message at that time was clear Kelly would achieve a normalized adjusted EBITDA margin in the range of 3.3 to three 5% as soon as the first half of 2024.

Peter Quigley: Kelly would achieve a normalized adjusted EBITDA margin in the range of 3.3 to 3.5% as soon as the first half of 2024. Notwithstanding the challenging market conditions, we delivered a steady cadence of net margin expansion driven by sustained reductions to SG&A. One year later, I am pleased to share that we have achieved our initial expectations. In the first half of this year, Kelly attained an adjusted EBITDA margin of 3.4%, excluding the benefits of her acquisition of MRP. For more details on this and our results in the second quarter, I'll turn the call over to our Chief Financial Officer, Olivier Toureau.

Speaker Change: Notwithstanding the challenging market conditions, we delivered a steady cadence of net margin expansion driven by sustained reductions to SG&A. One year later I'm pleased to share that we have achieved our initial expectations in the first half of this year Kelly attained an adjusted EBITDA margin of three four per <unk>.

Speaker Change: Excluding the benefit of our acquisition of MRP.

Speaker Change: For more details on this and our results in the second quarter I will turn the call over to our Chief Financial Officer Olivier to row. Thank you Peter and good morning, everybody.

Olivier Toureau: Thank you, Peter, and good morning, everybody. As a reminder, Kelly's 2023 results include the European Staffing Business that was sold on January 2, 2024, and we are now including the results of Motion Recruitment Partners since the date of the acquisition, so just for the month of June 2024 this quarter, to provide greater visibility to trends in our operating results. I will also discuss year-over-year changes on a reported and also on an organic basis. References to organic information exclude the results of our European staffing business in 2023 and the impact of the acquisition of MRP in 2024.

Olivier: As a reminder, kitties 2023 results include the European staffing business that was sold on January the second of 2024, and we are now including the results of promotional recruitment partners. Since the date of the acquisition. So just for the months of June 2020 falls each quarter.

Speaker Change: To provide greater visibility into trends you know operating results I will also discuss year over year changes on a reported and also on an organic basis.

Speaker Change: References to organic and formation exclude the results of our European staffing business in 2023, and the impact of the acquisition of it must be in 2024.

Olivier Toureau: Revenue for the second quarter of 2024 totaled 1.06 billion compared to 1.22 billion in 2023, down 13.1 percent, resulting primarily from the sale of our European staffing business, although partially offset by the acquisition of a market. On an organic basis, year-over-year revenue improved 0.6% in the quarter, reflecting strong growth in education and a sequential stabilization of demand from Q1 to Q2 across much of our other businesses, despite market uncertainty in several specialties.

Speaker Change: Revenue for the second quarter of 2024 totaled one <unk> billion compared to $1 22 billion 'twenty 'twenty suite down.

Speaker Change: Down 13, 1%.

Speaker Change: Belting primary from the sale of four European staffing business, partially offset by the acquisition of there must be.

Speaker Change: And then not getting basis year over year revenue improved zero bond and 6% in the quarter.

Speaker Change: Afflicting the strong growth in education, a sequential stabilization of demand from Q1 to Q2 across much of our other businesses despite market uncertainty in several of our species.

Speaker Change: Reviewing results by segment education continued to grow revenue by double digits up 22% year over year in the quarter.

Olivier Toureau: Reviewing results by segment, education continues to grow revenue by double digits, up 22% year-over-year in the quarter. This strong and sustained growth reflects net new customer wins, increased demand from existing customers, and an improving field rate.

Speaker Change: He's cold and sustained growth, which like net new customer wins increased demand from existing customers and then improving ciena right.

Olivier Toureau: In the third segment, revenue was up 10% on a reported basis, which included the impact of the MRP acquisition. However, revenue was down 3% on an organic basis, and organic revenue trends were stable sequentially. Year-over-year organic revenue growth reflects lower staffing market demand, with revenue down 4% in our staffing specialties and down 1% in our outcome-based business. Permanent placement fees also declined by 20%.

Speaker Change: And the state segment revenue was up 10% on a reported basis, which includes the impact of the MSP acquisition.

Speaker Change: Revenue was down 3% on an organic basis and organic revenue trends were stable sequentially.

Speaker Change: Year over year organic revenue growth reflect lower staffing market demand with revenue down 4%, you know, what Stephanie specialties and down 1% you know.

Stephanie: Outcome based business.

Speaker Change: Permanent placement fees also declined by 20%.

Olivier Toureau: In our OCG segment, revenue increased by 3%. The increase in revenue was driven by our PPO specialty, where demand growth has continued. Year-over-year declines in RPO are due to slower hiring in certain market sectors, and MSP revenues decline in line with customers' contingent labor demands. But revenue in both MSP and RPO products were stable sequentially, and with our MSP product positioned to benefit from positive momentum going forward. Revenue in our professional and industrial segments declined 9% year-over-year in the quarter, but it also stabilized sequentially, including in the P&I staffing specialty. However, revenue from our staffing product declined 9%.

Speaker Change: You know what Wuxi segment revenue improved sweep of.

Speaker Change: The increase in revenues was driven by a video specialty where demand growth is continued year over year decline should not be you are new to slower hiring in certain market signals and MSP revenues declined in line with customers contingent label demands.

Speaker Change: But rather than green, both MSP and audio products were stable sequentially and with our MSP product positioned to benefit from positive momentum going forward.

Speaker Change: Revenue in our professional and then just real Sigma declined 9% year over year in the quarter, but also stabilized sequentially, including in the P&I staffing specialists.

Speaker Change: Revenue from our <unk> production declined 9% the segment's contact center or outcome based specialty revenue also declined year over year as you'd film She's easy segment, partially offsetting these declines other margin outcome based specialty revenue continued to grow.

Olivier Toureau: The segment's contact center outcome-based specialty revenue also declined year-over-year, as did PERM fees in this segment. Partially offsetting these declines, other higher-margin outcome-based specialty revenues continue to grow. Overall gross profit was 11.2% as reported, or 4.3% on an organic basis. Our gross profit rate was 20.2% compared to 19.8% in the second quarter of the prior year. Our GT rate reflects a 100 basis point improvement from the sale of our European staffing operations and an additional 40 basis points from the inclusion of the June results of MRP.

Speaker Change: Overall gross profit was up 11, 2% as we booked a $4 three person on an organic basis.

Speaker Change: Our gross profit rate was 22% compared to 19, 8% in the second quarter of the prior year.

Speaker Change: Our GP rate reflects a 100 basis points improvement from the sale of our European dispatching operations, and then Shannon and 40 basis points from the inclusion of the June results I'll say MRP.

Olivier Toureau: On an organic basis, the GP rate declined 100 basis points in Q2, 110 basis points due to unfavorable business mix, and 20 basis points due to lower perm fees, partially offset by 30 basis points of favorable and pre-related. The business mix impact reflects continued growth in specialties with lower GP rates, including education and PPE. SG&E expenses were down 17% year-over-year on a reported basis. Expenses for the second quarter of 2024 include $4.3 million of restructuring charges related to our ongoing transformation efforts, as well as $1.6 million of expenses primarily related to the sale of our European staffing operations, including transaction and also transition expenses. SG&A expenses in 2023 include 5.6 million in restructuring charges. Hence expenses declined by 18% on an adjusted basis or 10% on an adjusted organic basis.

Speaker Change: On an organic basis, the GP rate declined one basis point in Q2 110 basis points due to unfavorable business mix.

Speaker Change: And 20 basis points due to lower perm fees, partially offset by 30 basis points of favorable employee related cost.

Speaker Change: The business mix impact reflects continued growth in specialties with lower GP rate increase.

Speaker Change: Including education and PPO.

Speaker Change: Yeah.

Speaker Change: SG&A expenses were down 17% year over year on a reported basis.

Speaker Change: Expenses for the second quarter of 2024 includes $4 3 million of restructuring charges related to our ongoing transformation efforts as well as one 6 million of expenses primarily related to sale of four European stuffing operations, including collection and also transition expenses.

Speaker Change: SG&A expenses in 2023 include $5 6 million of restructuring charges. So expenses declined by 18% on an adjusted basis of 10% on an adjusted organic basis.

Olivier Toureau: So like-for-like, expenses were lower in Q2 of 2024 due to the positive impacts of our structural transformation efforts as well as lower performance incentive conversation expenses reflecting current top-line trends. As a reminder, beginning in the first quarter of 2024, we are reporting the operating results of our reportable segments utilizing revised business unit profit measures. We are also allocating a greater share of the costs we have previously reported as corporate costs to our business units. In addition, we are no longer including depreciation and amortization.

Speaker Change: So like for like expenses were lower in Q2 of 2024 due to the impact of our structural transformation efforts as well as lower performance incentive compensation expenses, reflecting current top line trends.

Speaker Change: As a reminder, beginning in the first quarter of 2024, we are reporting the operating results of our reportable segments utilizing Levi's business unit profit measures.

Speaker Change: We also are allocating a greater share of the costs. We have previously reported as corporate cost to our business units.

Speaker Change: <unk>, we are no longer including depreciation and amortization.

Olivier Toureau: In our business, you need profit measures. We believe this provides greater visibility into 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 second quarter were $12.2 million compared to $6.2 million in Q2 of 2023. On an adjusted basis, Q2 2024 earnings from operations were $28.1 million, nearly doubled from a year ago. The 15.9 million increase from reported earnings includes a loss on the sale of our European staffing operations, charges related to transformation actions and the sale of our European staffing operations, an impairment charge related to excess lease property, and a gain on the sale of assets related to the IRS.

Speaker Change: Business unit pushed measure.

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

Speaker Change: And how does it contribute to <unk> overall performance.

Speaker Change: On a consolidated basis, our Rebooking earnings from operations in the second quarter were $12 2 million compared to $6 2 million in Q2 of 2020 sweep.

Olivier Toureau: The acquisition of MRP added $1.5 million of earnings for variations in the second quarter of 2024. Adjusted earnings in the second quarter of 2023 were $14.2 million. The $8 million increase from reported earnings included transformation-related charges and an asset impairment charge. The European staffing operations produced $1 million of earnings from operations on an adjusted basis in the second quarter of 2023. I just said the BDM margin also improved 180 base points to 3.8%, reflecting 40 basis points of improvement from the sale of our European staffing operations, 10 basis points from the inclusion of the month of June result of MRP, and 130 base points of improvement from our ongoing transformation efforts. Income tax expense for the second quarter was $1.1 million compared to a benefit of $1.9 million in 2020. Our effective income tax rate was 19.4% into 2024.

Speaker Change: On an adjusted basis Q2, 2020 for earnings from operations were $28 1 million nearly doubled from a year ago.

Speaker Change: The $15 9 million increase from reported earnings includes a loss on the sale of four Europeans testing operations charges related transformation actions and the sale of our European station operations and impairment charges related to excess lease property and a gain on the sale of assets related to the <unk> group.

Speaker Change: The acquisition of the Marquis added $1 5 million of earnings formulations in the second quarter of 2024 adjust.

Speaker Change: Adjusted earnings in the second quarter of 2023 were $14 2 million.

Speaker Change: The 8 million increase from reported earnings included transformation related charges and then that's it impoundment shops.

Speaker Change: The European setting operations produced 1 million affirming full operations on an adjusted basis in the second quarter of 2023.

Speaker Change: Adjusted EBITDA margin also improved 180 basis points to three 8%.

Speaker Change: Reflecting 40 basis points of improvement from the sale of our Europe and studying operations then be spun from the inclusion of the months of June result of MLP and 130 basis points of improvement from our ongoing cost formation efforts.

Speaker Change: In the income tax expense for the second quarter was $1 1 million compared to a benefit of $1 9 million in 2023.

Speaker Change: Our effective income tax rate was 19, 4% in Q2 2024.

Olivier Toureau: Finally, reported earnings per share for the second quarter were $0.12 per share, compared to $0.20 in 2023. Earnings per share in 2024 include a loss related to the sale of all European staffing operations and a gain on the sale of the highest group transaction, as well as transaction costs related to the acquisition of MRP, restructuring charges related to our transformation, and an asset impairment charge. Earnings per share in 2023 included restructuring and an asset impairment charge, so on an adjusted basis.

Speaker Change: And finally reported earnings per share for the second quarter was 12 cents per share compared to 20 cents in 2023.

Speaker Change: Earnings per share in 2024 included a loss related to the sale of our European station operations and no gain on the sale of the <unk> group collection as well as transaction costs related to the acquisition of they must be called switching charges red dwarf transformation and an asset impairment shops.

Speaker Change: Earnings per share in 2020 suite includes yeah, let's structuring and then that's it and Belmond Charleston, Savannah and that just it basis Q2, 2024, EPS was <unk> 71.

Olivier Toureau: Q2 2024 EPS was $0.71, compared to $0.36 per share in Q2 of 2023, nearly doubling year-over-year. Now we're looking at the balance sheet. Following the acquisition of MRP, at Quaternary End, we had cash total $38 million, and we had $210 million of debt outstanding. Our debt to capital ratio is 14.1%. As of Quaternary End, as we leverage our balance sheet to acquire MRP, and as we disclosed at the time of the acquisition, we have amended our credit facilities to maintain the financial flexibility for additional organic and inorganic investment and to navigate an ongoing uncertain market environment.

Speaker Change: Compared to <unk> 36 cents per share in Q2 of 2023, nearly doubling year over year.

Speaker Change: Now, reflecting on the balance sheets.

Speaker Change: Following the acquisition of the Mafia at quarter end cash totaled $38 million.

Speaker Change: And we had $210 million of debt outstanding.

Speaker Change: Our debt to get that ratio is 14, 1% as of quarter end as we leverage our balance sheet to acquire MLP and as we disclosed at the time of the acquisition, we have amended our credit facilities to maintain the financial flexibility for additional organic and inorganic investment and to navigate an ongoing uncertain mark.

Speaker Change: It environment.

Speaker Change: At quarter end accounts receivable totaled $1 2 billion, including the receivables of MLP.

Olivier Toureau: At Quaterrand, accounts receivable amounted to $1.2 billion, including the receivables of Emma. Global GSO was 67 days, down two days from the year in 2023 and down four days from the second quarter of 2023. In the quarter, we generated $55 million of free cash flow compared to $32 million in the comparable prior year period.

Speaker Change: Global DSO was 57 days down two days from year end 2023, and then four days from the second quarter of 2023.

Speaker Change: In the quarter, we generated 55 million of free cash flow.

Speaker Change: <unk> to 32 million in the comparable prior year period.

Speaker Change: Looking ahead to operating results for the second half of the year. Our results will be impacted by several factors first we believe that staffing market conditions will remain relatively consistent with what we have expense in the first cell for the year and modest sequential revenue improvement in our.

Olivier Toureau: Looking ahead to operating results for the second half of the year, our results will be impacted by several factors. First, we believe that staffing market conditions will remain relatively consistent with what we experienced in the first half of the year, and modest sequential revenue improvement in our P&I, SET, and OCG segments will continue in the second half of 2024. Our education segment revenue will be impacted by the summer school holiday period in Q3, but it will continue to produce double-digit revenue.

Speaker Change: <unk> P and I sit in OCG segments will continue in this thing and therefore 2024.

Speaker Change: Our education segment revenue will be impacted by a severe school holiday period in Q3 that will continue to produce double digit revenues.

Olivier Toureau: Finally, the acquisition of MRT will deliver further improvements in both our growth and also volume metrics for the second half of 2024 on an organic basis. We expect revenue for the review period to be up 2.5 to 3.5%, with no significant FX impact, resulting in a midpoint revenue expectation of about $2 billion. In addition, we expect MRP to add an additional $260 million to $270 million of revenue in the second half of the year.

Speaker Change: Find them easy action of the Murphy will deliver further improvements in both our growth and also value metrics.

Speaker Change: For the second half of 2024.

Speaker Change: Organic basis, we expect revenue to be up two and a half to three and a half persons with no significant FX impact, resulting in a midpoint revenue expectation of about 2 billion.

Speaker Change: In addition, we expect the MLP to add an additional $260 million to $217 million of revenue in the second half of the year.

Olivier Toureau: We expect our organic GP rate to be between 20 and 20.2% in the second half. On a lag-for-lag basis, this is a 90-basis-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. MRP, with its higher-margin specialty profile, is expected to add an additional 100 basis points to our gross margin rate in the second half of the year.

Speaker Change: We expect our organic GP rate to be between 20% to 22% in the cigarettes.

Speaker Change: On the like for like Macy's is a 90 basis point decline at the midpoint of Orange, Let's say things are changing our business mix, primarily because of education. Our education business is expected to continue to deliver significant revenue growth.

Speaker Change: Must be with Wuxi with higher margin specialty profile is expected to add an additional 100 basis points to our gross margin rate in the second half of the year. So our all in GP rate in the second half of 'twenty 'twenty four is expected to be between 21 person to 21, 2%.

Operator: Good morning and welcome to Kelly Services' second quarter earnings conference call. All parties will be on a listen-only mode until the question and supportion of the presentation. Today's call is being recorded at the request of Kelly Services.

Olivier Toureau: So our all-in GP rate in the second half of 2024 is expected to be between 21% and 21.2%. Reflecting on SG&A, we expect to sustain the efficiency improvements that we gained from our transformation-related actions over the past year. The impact on year-over-year trends will moderate as we anniversary the execution of most of those actions. We expect that adjusted sDNA, excluding DNA, will be 3.5% to 4.5% lower than a year ago on an organic basis.

Speaker Change: Yeah.

Speaker Change: Reflecting on SG&A, we expect to sustain the efficiency improvements that we gain from our transformation related actions over the past year.

Operator: If anyone has any objections you may disconnect at this time. A second quarter webcast presentation is also available on Kelly's website for this morning's call.

Speaker Change: Impact on year over year trends will moderate as we anniversary the acquisition of most of those actions.

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

Speaker Change: We expect that adjusted SG&A, excluding DNA.

Peter Quigley: Hello everyone and welcome to Kelly's second 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, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance.

Speaker Change: We will be 3.5% to 4.5% lower than a year ago on an organic basis.

Olivier Toureau: And MRP will add about 60 million in expenses in the second half. All in, we expect approximately 28 million in deposition and amortization in H2 of 2024. We expect an adjusted organic ABD-MR genome of 3.2 to 3.3 percent.

Speaker Change: And then Mark <unk> will add about $60 million of expenses in the second half.

Mark: All in we expect approximately 28 million of depreciation and amortization in each to 2024.

Mark: We expect an adjusted organic EBITDA margin of three two to one 3% up 30 to 40 basis points year over year.

Peter Quigley: Absolutely 40 basis points here every year, and we believe that MRP will add an additional 30 basis points of net margin in the second half of 2024. And back to my earlier points regarding education seasonality, we expect that our adjusted EBDA margin will be closer to 3% or 2.6% organic in the third quarter during the school summer holiday period and then improve in Q4 as education's working days increase. And finally, we expect our effective tax rate to be in the low teens. And now, back to you. Thanks for those insights.

Mark: And we believe that MLP will add an additional 30 basis points of net margin in the second half of 2024.

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-gap financial measures designed to get insight into certain trends in our operations. Finally, a presentation with information about Kelly's financial results in the quarter is available on our website.

Mark: And back to my earlier point regarding education seasonality, we expect that our adjusted EBITDA margin will be closer to 3% of two 6% Oh Guinea.

Mark: The third quarter during the school summer holiday period, and then improve as in Q4 as educations working days increase.

Peter Quigley: With that, I'll begin with remarks on Kelly's financial results. In the second quarter, we remained focused on what we can control as we continue to navigate uncertain market conditions. Large enterprises maintained a cautious approach to hiring, though demand began to stabilize with positive signs emerging in particular among our technology and life sciences customers. In our P&I business, revenues leveled off on a sequential basis. This trend reflects stabilizing demand and the benefits of our enhanced localized delivery model.

Peter Quigley: And finally, we expect our effective tax rate to be in the low teens and now back to you Peter.

Peter Quigley: Thanks for those insights, Olivier. In May, I shared with you that 2024 would mark an inflection point on our strategic journey, and the actions and results we deliver this year will propel Kelly into a new era of growth. Reflecting on the significant progress we achieved in the second quarter, I'm confident that we're on track to realize those ambitions. Our transformational acquisition of Motion Recruitment Partners has strengthened the scale and capabilities of Kelly's staffing, consulting, and RPO solutions in attractive customer end markets, including technology, financial services, and health care. The highly complementary nature of MRP and Kelly's SET and OCG businesses, MRP's attractive financial profile, and its leadership team of recruiting industry veterans will contribute in a significant way to enhancing Kelly's revenue growth potential and driving continued EBITDA margin

Peter Quigley: Thanks for those insights Olivier.

Peter Quigley: In May I shared with you that 2024 would mark an inflection point on our strategic journey that the actions and results. We delivered this year will propel Kelly into a new era of growth.

Peter Quigley: Reflecting on the significant progress we achieved in the second quarter I'm confident that we're on track to realize those ambitions.

Peter Quigley: Our transformational acquisition of motion recruitment partners has strengthened the scale and capabilities of Kelly staffing consulting and RP O solutions in attractive customer end markets, including technology financial services and health care.

Peter Quigley: The combined strength of our network of physical branch locations and the Kelly now mobile app continued to generate positive momentum in the quarter with both clients and talent helping grow our pipeline of new industrial and commercial staffing business and drive a meaningful improvement to our fill rate and time to GP. At the enterprise level, our strategy to deliver the full suite of Kelly offerings to our largest customers also gained traction. Within the initial focus accounts where we have operationalized this approach, we've improved both the efficiency and effectiveness with which we serve our largest customers.

Peter Quigley: The highly complementary nature of MRP, and Kelly set and OCG businesses, Mrp's attractive financial profile and its leadership team of recruiting industry veterans will contribute in a significant way to enhancing kellan, the Kelly's revenue growth potential and driving continued EBITDA margin expansion.

Peter Quigley: <unk>.

Peter Quigley: The sale of Arris group further sharpen Kelly Ocg's focus on global RP O and MSP solutions, while unlocking incremental capital to redeploy towards Kelly's specialty strategy.

Peter Quigley: The sale of Ayers Group further sharpened Kelly OCG's focus on global RPO and MSP solutions while unlocking incremental capital to redeploy towards Kelly's specialty strategy. And we achieved our initial expectation for EBITDA margin expansion, which we established one year ago, demonstrating the capacity of our growth and efficiency initiatives to significantly improve Kelly's profitability over the long term. Of course, it's difficult to know the precise timeline of a recovery for our industry, and as Olivier noted, we expect the results in the second half of the year will continue to reflect uncertain market conditions.

Peter Quigley: This progress is beginning to drive gains in share of wallet with our large enterprise customers. Our growth initiatives are helping capture market share and build upon Kelly's position is one of the largest staffing firms in the US. According to staffing industry analyst, latest rankings, Kelly increased its position by the widest margin among the top 20 firms from 2022 to 2023. This is a testament to our team's resilience and definitely navigating through uncertain market conditions. Amid encouraging developments with growth, we remain laser focused on improving our ability to convert a greater share of top line growth to bottom line growth.

Peter Quigley: And we achieved our initial expectation for EBITDA margin expansion, which we established one year ago, demonstrating the capacity of our growth and efficiency initiatives to significantly improve kelly's profitability over the long term.

Peter Quigley: Of course, it's difficult to know the precise timeline of recovery for our industry and as Olivier noted we expect our results in the second half of the year. We will continue to reflect uncertain market conditions. Notwithstanding these dynamics I'm optimistic about the sequential stabilization, we saw across our business and I'm confident.

Peter Quigley: Notwithstanding these dynamics, I'm optimistic about the sequential stabilization we saw across our business, and I'm confident that our achievements in the second quarter, together with the progress we've delivered since we embarked on our specialty growth journey, position Kelly to capitalize when sequential stabilization gives way to a sustained increase in demand. I'm immensely proud of the work of each and every member of Team Kelly, including our newest colleagues at MRP, that has brought us to this point on our journey.

Peter Quigley: This month marks one year since we shared with you the anticipated impact of the transformation initiatives we undertook to drive structural efficiencies across Kelly and significantly improve the company's profitability. Our message at that time was clear. Kelly would achieve a normalized adjusted EBITDA margin in the range of 3.3 to 3.5 percent as soon as the first staff of 2024. Notwithstanding the challenging market conditions, we delivered a steady cadence of net margin expansion driven by sustained reductions to SG&A.

Peter Quigley: That our achievements in the second quarter together with the progress we've delivered since we embarked on our specialty growth journey position Kelly to capitalize when sequential stabilization gives way to a sustained increase in demand.

Peter Quigley: I'm immensely proud of the work of each and every member of team Kelly, including our newest colleagues at MRP that has brought us to this point in our journey their urgency agility and unwavering commitment to our clients and talent are the driving forces that continue to propel us to new heights.

Peter Quigley: Their urgency, agility, and unwavering commitment to our clients and talent are the driving forces that continue to propel us to new heights. With our team moving forward together, united by our noble purpose, I'm confident that the opportunities before us are limitless.

Peter Quigley: One year later, I'm pleased to share that we have achieved our initial expectations. In the first half of this year, Kelly attained an adjusted EBITDA margin of 3.4 percent excluding the benefit of her acquisition of MRP.

Peter Quigley: Our team moving forward together, United by our noble purpose I'm confident that the opportunities before us are limitless, Greg you can now open the call to questions.

Operator: Greg, you can now open the call to questions. Okay, 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 are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 and 0 at this time. And one moment, please, for your first question.

Greg: Okay, 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 command 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.

Olivier Tureau: For more details on this and our results in the second quarter, I'll turn the call over to our chief financial officer, Olivier Tureau. Thank you, Peter, and good morning, everybody. As a reminder, Kelly's 2023 results include the European staffing business that was sold on January 2nd of 2024, and we are now including the results of motion recruitment partners since the date of the acquisition, so just for the month of June 2024 this quarter.

Peter Quigley: Okay.

Speaker Change: Your first question comes from the line of Kartik Mehta from Northcoast Research. Please go ahead.

Questioner: Yeah, good morning. Olivia, first of all, it's been a pleasure working with you, and I wish you the best. You have some big shoes to fill, so thank you for everything. Thank you, Kev. Thank you very much. You're welcome. I was wondering if we could focus on the MRP business for a second, and just as you look at the fundamentals for that business, maybe so far in the second quarter, and you do look at your outlook for the second half, and you, you know, compare it to a year ago or maybe a quarter ago, you know, what's been the trend for that business?

Kartik Mehta: Good morning.

Kartik Mehta: First of all yeah, Olivia first of all it's been a pleasure.

Olivier Tureau: To provide greater visibility to trends in our operating results, I will also discuss year-over-year changes on a reported and also on an organic basis. References to organic information exclude the results of our European staffing business in 2023 and the impact of the acquisition of MRP in 2024. Revenue for the second quarter of 2024, totaled 1.06 billion compared to 1.22 billion in 2023, down 13.1 percent resulting primary from the sale of our European staffing business, partially offset by the acquisition of MRP.

Olivia: Pleasure working with you and.

Speaker Change: I wish it about.

Speaker Change: Do you have some big shoes to fill so thank you for everything.

Kathy: Thank you Kathy.

Kathy: Thank you very much.

Speaker Change: Hey, I was wondering.

Speaker Change: I'm wondering if we could focus on the MRP business for a second and just as you look at the fundamentals for that business.

Speaker Change: Maybe so far in the second quarter and you do look at your outlook in the second half.

Speaker Change: And you.

Speaker Change: Compared to a year ago, or maybe a quarter ago, what's been the trend for that business.

Olivier Toureau: Yeah, I will comment on a few numbers, and Peter can add more color on business trends and so on. You might have seen a graphic that we have issued, the so-called 8KA, and of course, the outlook for today, and you are going to see further information in our thank you on what we call the pro forma. If you use this information, you will see that in H1 of 2024, revenue was about 260 million, and if you take the mid-range of our guidance today, you are going to be at 265 million.

Speaker Change: Yeah, I wouldn't comment on schuh numbers and Peter can add more color on business trends and so on.

Olivier Tureau: On an organic basis, year-over-year revenue improved 0.6 percent in a quarter, reflecting strong growth in education, a sequential stabilization of demand from Q1 to Q2 across much of our other businesses despite of market uncertainty in several specialties. Reviewing results by segments, education continue to grow revenue by double digits up 22 percent year-over-year in the quarter. This strong and sustained growth reflects net-view customer wins, increased demand from existing customers and an improving feel-right.

Peter Quigley: You might have seen a kind of peak that we have issued.

Speaker Change: So call that 8-K E and of course, the outlook of today and you are going to see further information in our 10-Q, one what we call pro forma if you use the same formation you will see that each one of our 2024 of the revenue was about $260 million.

Speaker Change: And if you take the mid range of I won't guide on this today you are going to be at $165 million. So we expect similar to what we have said for Kelly.

Olivier Toureau: So we expect, similar to what we have said for Kelly organic, basically a slight improvement in the second half of the year. When you look at how it compares versus a year ago, H1 at 260 million is about minus 8% versus a prior year, which is consistent with the trends we have shared in June when we are talking specifically about MRP, and we expect, based on the change in comparables and a little bit of sequential improvement to turn H2 into flat to minus 1 minus 1 and a half percent versus a year ago.

Speaker Change: Organic basically a slight improvement beginning in the second half of the year. When you look at how does it compare versus a year ago. Each one at 260 million is about minus 8% versus the prior year over year, which is consistent with the trends we have shelled in June.

Olivier Tureau: In the set segment, revenue was up 10 percent on a reported basis, which include the impact of the MRP acquisition. Revenue was down 3 percent on an organic basis and organic revenue trends were stable sequentially. Year-over-year organic revenue growth reflects lower staffing market demand with revenue down 4 percent in our staffing specialties and down 1 percent in our outcome-based business. Permanent placement fees are also declined by 20 percent. In our OCD segment, revenue improved 3 percent.

Speaker Change: When we're talking specifically about the MLP.

Speaker Change: And we expect based on you know the.

Speaker Change: The change in comparable and a little bit of sequential improvement to down edge to into <unk>.

Speaker Change: Flat to minus one minus one and a half person versus a year ago and kartik longer term I mean, we continue to be very bullish on.

Peter Quigley: In Cardick's longer term, I mean, we continue to be very bullish on MRP in particular, but also the space that they're in, both on the staffing and solutions side, as well as on the RPO side. We've been very pleased with the partnership we've had with the MRP leadership to date and the significant complementary nature of our businesses, the lack of significant customer overlap, and complementary delivery models. So longer term, we're still very optimistic about the investment thesis in making the acquisition of MRP.

Olivier Tureau: The increase in revenues was driven by our PTO specialty, where demand growth has continued. Year of year declines in RPO are due to slower hiring in certain market sectors and MSP revenues decline in line with customers' contingent labor demand. But revenue in both MSP and RPO products were stable sequentially and with our MSP product positioned to benefit from positive momentum going forward. Revenue in our professional and industrial segment declined 9% year of year in the quarter but also stabilized sequentially, including in the PNI staffing specialty.

Speaker Change: An MRP in particular, but also the space that they're in.

Speaker Change: Both the.

Speaker Change: On the staffing and solutions side as well as on the RP O side, we've been very pleased with the.

Peter Quigley: Partnership we've had with the MRP leadership.

Speaker Change: To date and the significant complementary nature of our business is the lack of a significant customer overlap.

Speaker Change: Complementary delivery models, so longer term, we're still very optimistic about the.

Speaker Change: Investment thesis and making the acquisition of MRP.

Olivier Tureau: Revenue from our staffing product declined 9%. The segment's contact center outcome-based specialty revenue also declined year of year as it perishes in this segment. Partially offsetting these declines other higher margin outcome-based specialty revenue continued to grow. Overall growth profit was an 11.2% as reported or 4.3% on an organic basis. Our growth profit rate was 20.2% compared to 19.8% in the second quarter of the prior year. Our GDP rate reflect a 100-based point improvement from the sale of our European staffing operations and an additional 40 basis points from the inclusion of the June results of MRP.

Questioner: And then, as you just look at the overall business, maybe in each of the segments, I'm wondering what you're witnessing in terms of pricing. Have pricing trends or competition increased in any of the segments, or are they kind of where they were last quarter?

Speaker Change: And then if you just look at the overall business.

Speaker Change: Maybe in each of the segments I'm wondering what you're witnessing in terms of pricing or pricing trends or competition increase in any of those segments or are they kind of where they were last quarter.

Speaker Change: Well I think on.

Peter Quigley: Well, I think in this kind of uncertain environment, market conditions, you're always going to find outlier suppliers that are going to try to buy share. But it's not across the board. It's not an industry dynamic that we're seeing. In fact, we've been relatively pleased with our ability to maintain pricing discipline during these market conditions.

Speaker Change: In this kind of.

Speaker Change: Uncertain environment market conditions, you're always going to find outlier.

Speaker Change: Suppliers that are going to try to buy.

Speaker Change: By share, but it's not in.

Speaker Change: It's not across the board, it's not a industry dynamic that we're seeing in fact, we've been relatively pleased with the our ability to maintain our pricing discipline. During these market conditions. Yeah. Just when you look at the so called spread in P&I is completely stable.

Olivier Toureau: Just when you look at the so-called spread, in PNI, it's completely stable, in SET, flat to slightly up, in education, a little bit down, but it's more the customer mix than the real pricing conversation. So far, and this isn't an isolated quarter, Q2 of this year, we have not seen any change or any pressure on spreads. We continue to see, you know, that we are capable of keeping our spread and thus keeping our overall margin.

Olivier Tureau: On an organic basis, the GDP rate declined 100 basis points in Q2, 110 basis points due to unfavorable business mix and 20 basis points due to lower parentheses, partially offset by 30 basis points of several unfavorable related costs. The business makes impact, effects continue growth in specialties with lower GDP rate, including education and PPU. SGM expenses were done 17% year-over-year on a reported basis. Expenses for the second quarter of 2024 include 4.3 million of restructuring charges related to our ongoing transformation efforts, as well as 1.6 million of expenses, primarily related to the sale of our European staffing operations, including transaction and also transition expenses.

Speaker Change: Set.

Speaker Change: Like to flat to up slightly in education, a little bit down.

Speaker Change: But it's more the customer mix than meal pricing conversation. So so far and it's not an isolated quarter Q2 of this year, we have not seen any any change or any pressure on spreads.

Speaker Change: We continue to see a you know that we are capable of keeping our spreads.

Speaker Change: Keeping our overall margin.

MRP Wilhelm: And then just one last question you know as you go down this transformation journey, and obviously MRP Wilhelm.

Questioner: And then just one last question, you know, as you go down this transformation journey and obviously MRP will help, you know, as you look for the next acquisition, is the thought that you'd like to integrate MRP so you'd wait, or if an opportunity turned up, are you at a point where you could do another acquisition?

Speaker Change: As you look for the next acquisition is your thoughts that you'd like to integrate MLP, so you'd wait or if an opportunity turned out.

Speaker Change: You are at a point, where you could do another acquisition.

Olivier Tureau: SGM expenses in 2023 include 5.6 million of restructuring charges, so expenses declined by 18% on an adjusted basis or 10% on an adjusted organic basis. So like for lack, expenses were lower in Q2 of 2024 due to the positive impacts of our structural transformation efforts, as well as lower performance incentive conversation expenses, reflecting current applying trends. As a reminder, beginning in the first quarter of 2024, we are reporting the operating results of our reportable segments utilising revised business unit profit measures.

Peter Quigley: Well, I think, as we've said, MRP is going to continue to deliver its services and solutions through its operating companies and under its current brand. We'll, of course, be working with the MRP leadership on where it makes sense to integrate. I think our focus right now is on that as a priority, but we're not going to stand on the sidelines in terms of developing a pipeline for future acquisitions. The cycle time is, as you know, quite long, so we're preparing for the time when it would make sense for us to deploy additional capital in pursuit of high-margin, high-growth businesses, as I've said before, primarily in the science, engineering, technology, and telecom space or in our education practice.

Speaker Change: Well I think our as we've said MRP is going to continue to deliver its.

Speaker Change: Services and solutions through its operating companies under its current brand.

Speaker Change: We'll of course be working with the MRP leadership on.

Speaker Change: Where it makes sense integration I think.

Speaker Change: Our focus right now is is on that as a priority, but we're not.

Speaker Change: We're not going to stand on the sidelines in terms of developing a pipeline for future acquisitions and cycle time is as you know kartik quite long so.

Olivier Tureau: We also are locating a greater share of the cost we have previously reported as corporate cost to our business units. In addition, we are no longer including deposition and amortisation, in our business unit profit measure. We believe this provides greater visibility into the financial performance of each business unit and how they contribute to Kelly's overall performance. On the console, they did basis our reporting earnings from operations in the second quarter where 12.2 million compared to 6.2 million in due to of 2023.

Speaker Change: So we're.

Speaker Change: Preparing.

Speaker Change: For the time when it would make sense for us to deploy additional capital in pursuit of high margin high growth businesses as I've said before we're primarily in the science engineering technology and telecom space.

Speaker Change: In our education practice.

Speaker Change: Perfect. Thank you so much I appreciate it. Thank you kartik. Thank you Gavin.

Questioner: Perfect. Thank you so much. I appreciate it. Thank you, Carter. Thank you, Coby.

Operator: Thank you, Cardi. Thank you, Cardi. Your next question comes from the line of Kevin Steinke from Barrington Research. Please go ahead.

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

Kevin Stankey: Good morning, Kevin Good morning.

Kevin Stankey: Good morning.

Kevin Stankey: And wanted to start out by asking about.

Questioner: I want to start off by asking about generating some, you know, modest organic growth in the second quarter. It sounded like you were pleased with the progress of the organic growth initiatives that are part of the transformation effort. I mean, would you attribute the, you know, the return to organic growth as really being driven by those transformation-related organic growth initiatives? Yeah.

Olivier Tureau: On an adjusted basis, due to 2024 earnings from operations where 28.1 million nearly doubled from a year ago. The 15.9 million increase from reported earnings includes a loss on the sale of our European staffing operations, charges related transformation actions and the sale of our European staffing operations, and impairment charges related to excess lease property, and again on the sale of assets related to the Ayers group. The acquisition of the MRT added 1.5 million of earnings for operations in the second quarter of 2024.

Speaker Change: You're generating some yes.

Kevin Stankey: Modest organic growth in the second quarter. It sounded like you were pleased with the progress of Bob.

Speaker Change: The organic growth initiatives that are part of the transformation effort.

Speaker Change: I mean would you.

Speaker Change: Attribute the return to organic growth is really being driven by those.

Speaker Change: Transfer the transformation related organic growth initiatives.

Peter Quigley: I think so, Kevin. It's hard to pin it down precisely, but relative to what we're seeing from our competitors, we believe we're taking share across our businesses, and we spent a good portion of 2023 focused on efficiency, but as I said, at the beginning of the year, we were pivoting and turning our attention to growth. I think the progress we've made on our omni-channel strategy and professional industrial is beginning to show results.

Speaker Change: Yes, I think so Kevin.

Kevin Stankey: It's hard to beat.

Speaker Change: Pin it down precisely but relative to what we're seeing from our competitors. We believe we are.

Olivier Tureau: Adjusted earnings in the second quarter of 2023 were 14.2 million. The 8 million increase from reported earnings included transformation related charges and an asset impairment charge. The European staffing operations produced 1 million of earning from operations on an adjusted basis in the second quarter of 2023. Adjusted a BDM margin also improved 180 base points to 3.8 percent, reflecting 40 base point of improvement from the sale of our European staffing operations, 10 base points from the inclusion of the months of June result of MRT, and 130 base point of improvement from our ongoing transformation efforts.

Speaker Change: Taking share in across our businesses and we.

Speaker Change: We spent a good portion of 2023 focused on efficiency, but as I said at the beginning of the year, we were pivoting and turning our attention to growth.

Speaker Change: I think the progress we've made in our Omnichannel strategy and professional industrial is beginning to show results and our focus on.

Peter Quigley: And our focus on taking share within our large enterprise customers is also showing traction. And I think the combination of those two, plus obviously the continued growth in education and a focus on... high margin and areas that are a little bit more stable, we're pleased with the organic growth in the quarter.

Speaker Change: Taking share within our large enterprise customers is also.

Speaker Change: Showing traction and I think the combination of those two plus obviously the continued growth in education and.

Speaker Change: Our focus on.

Olivier Tureau: In the income tax expense for the second quarter was 1.1 million compared to the benefit of 1.9 million in 2023. Our effective income tax rate was 19.4 percent in due to 2024, and finally reported earnings per share for the second quarter was 12 cents per share, compared to 20 cents in 2023. Earning per share in 2024 include a loss related to the sale of our European staffing operations and a gain on the sale of the Ayers Group Transaction, as well as transaction costs related to the acquisition of MRT, restructuring charges related to our transformation, and an asset impairment charge.

Speaker Change: High margin in areas that are a little bit more.

Speaker Change: Stable.

Speaker Change: We're pleased with the organic growth in the quarter.

Speaker Change: Yeah.

Speaker Change: Okay, good and I guess related to that question.

Questioner: Okay, good. And it's related to that question. When we think about your forecast for organic revenue growth of 2.5% to 3.5% in the second half of 2024, you talked about assuming kind of a similar demand environment in the second half relative to what you've been seeing recently. You know, but you also mentioned some. Stability and demand sound like some improvement in technology and life sciences. I'm just trying to unpack how you get to that higher rate of organic growth in the second half if it's driven by the organic growth initiatives or assuming some sort of continued improvement or stabilization in just the overall demand environment to get to that growth and also the sequential improvements you mentioned you expect in P&I set and OCG.

Speaker Change: When we think about.

Speaker Change: Your forecast for organic revenue growth of two and a half to three 5% in the second half of 2024.

Speaker Change: You talked about assuming kind of a similar day.

Speaker Change: A manned environment in the second half relative to what you've been seeing recently.

Speaker Change: But also you mentioned some.

Olivier Tureau: Earning per share in 2023 include a restructuring and an asset impairment charge, so on an adjusted basis, Q22040PS was 71 cents, compared to 36 cents per share in Q22023, nearly doubling year-of-year. Now reflecting on the balance sheet, following the acquisition of MRT at quarter and cash total 38 million, and we had 210 million of debt outstanding. Our debt to capital ratio is 14.1 percent, as of quarter and as we leverage our balance sheet to acquire MRT.

Speaker Change: Stabilization in demand so it sounded like some improvement in technology and life Sciences, I'm, just trying to try to unpack.

Speaker Change: You know.

Speaker Change: How you get to that higher rate of organic growth in the second half.

Speaker Change: Driven by the organic growth initiatives or you're.

Speaker Change: I'm, assuming some sort of continued improvement or stabilization in that just the overall demand environment.

Speaker Change: To get to that growth and also the sequential improvements you mentioned you expect in <unk>.

Speaker Change: P&I set in OCG.

Olivier Toureau: Yeah, I mean, I'm gonna start and then Peter will add some color on the business side and so on. If you think about it, first of all, we did confirm today that we see education continuing to grow at a double-digit rate. Of course, you know Q3 is low seasonality, but we see the dynamic we have seen for a long, long time continuing. So that's one point.

Speaker Change: Yeah.

Olivier Tureau: And as we disclose at the time of the acquisition, we have amended our credit facilities to maintain the financial flexibility for additional organic and inorganic investment and to navigate an unboring on certain market and wine. At Quaterland accounts receivable total 1.2 billion including the receivables of MRP. Global DSO was 57 days down two days from year 2023 and down four days from the second quarter of 2023. In the quarter which generated 55 million of free cash flow compared to 32 million in the comparable prior year period.

Speaker Change: I'm going to start and then Peter will add some color on.

Speaker Change: Business silence on if you're seeing about it first of all we did confirm today that we see education continuing to grow.

Speaker Change: Is it right of course, you know Q3 is little seasonality, but we see as a dynamic we have seen for a long long time, continuing so that's one 1.2nd point cheese.

Olivier Toureau: The second point is when you put aside education sequentially from Q1 to Q2, excluding education, the rest of the business sequentially went up by about 1.5%. We expect similar modest improvements sequentially over the second half of the year. That is basically based on what we have seen sequentially from Q1 to Q2. Some areas are more stabilizing, like, for instance, P&I staffing. Others, it's really, you know, sequential growth, and I'm thinking about OCD and, to some extent, SET.

Speaker Change: When you put on the sides education sequentially from Q1 to Q2.

Speaker Change: In education, the rest of the business sequentially went up by about one 5%, we expect similar modest improvement sequentially.

Olivier Tureau: Looking ahead to operating results for the second half of the year, our results will be impacted by several factors. First, we believe that staffing market conditions will remain relatively consistent with what we have experienced in the first half of the year and modest sequential revenue improvement in our TNI set and OCD segments will continue in the second half of 2024. Our education segment revenue will be impacted by a summer school holiday period in Q3 but will continue to produce double digit revenues.

Speaker Change: Over of this thing I have for the year.

Speaker Change: And that is basically based on what we have seen sequentially from Q1 to Q2 summary, some areas. It's more of a stabilization like a choice of P&I stacking others, it's really.

Speaker Change: Sequential growth and I'm seeing humira <unk> and to some extent set we start to see some positive dynamics as Peter we're seeing in our legacy <unk> business and also our science that are moving up.

Olivier Toureau: We are starting to see some positive dynamics, as Peter was saying, in our legacy IT business and also science that are moving up. And on top of that, of course, the growth initiatives that Peter was mentioning that are part of this sequential improvement of 1.5% I was mentioning from Q1 to Q2 when you exclude education. And there is also the base impact, right? I mean the 2.5% to 3.5% is also basically reflecting the fact that our comparables are basically lower in H2 of 2023 than they were, you know, in the first half of this. And Kevin is too.

Peter Quigley: And on top of that of course, the growth initiatives that Peter was mentioning that off part of the sequential improvement of one and a half person I was mentioning from Q1 to Q2, when you exclude the education and the results. So the base impact right I mean.

Olivier Tureau: Finally, the accession of MRP will deliver further improvement in both our growth and also value metrics. For the second half of 2024, on an organic basis, we expect revenue to be up to 1.5 to 3.5%. With no significant effects impact, resulting in a midpoint revenue expectation of about 2 billion. In addition, we expect MRP to add an additional 260 to 270 million of revenue in the second half of the year. We expect our organic GP rate to be between 20 to 20.2% in the second half.

Speaker Change: The two and a half to three and a half is also basically reflecting on the fact that our comparables are basically lowering niche too.

Speaker Change: Of 2023 than they were you know in the first half of this year.

Peter Quigley: And Kevin, as I mentioned in my prepared remarks, we don't know when there will be a return to more normalized demand, but we are much better positioned to take advantage of that. And we're more prepared to take advantage of it when it happens than we were a couple years ago just because of all the steps we've taken to structurally improve the cost base and to be able to leverage it when demand returns in a meaningful way.

Kevin Stankey: Kevin is as I mentioned in my in my prepared remarks.

Kevin Stankey: We don't know when there will be returned to a more normalized demand, but we are.

Olivier Tureau: On the lag for like basis, this is a 90 basis point decline at the midpoint of our range affecting the change in our business mix, primarily because of education. Our education business is expected to continue to deliver significant revenue growth. MRP, with higher margin specialty profile, is expected to add an additional 100 basis point to our growth margin rate in the second half of the year. So our all in GP rate in the second half of 2024 is expected to be between 21% to 21.2%.

Kevin Stankey: Much better positioned.

Kevin Stankey: To take advantage of that and we're prepared to take advantage of it when it happens.

Kevin Stankey: Then we were.

Kevin Stankey: A couple of years ago, just because of all the steps we've taken to structurally improve the.

Kevin Stankey: On the cost base.

Speaker Change: And to be able to.

Speaker Change: Our leverage when demand returns and in a meaningful way, but we're not.

Peter Quigley: But we're not waiting for that, which is why I focused on the growth initiatives that I mentioned. We started to implement them in earnest at the beginning of the year, and we will continue to lean into those growth initiatives notwithstanding external market conditions.

Speaker Change: Waiting for that which is why I focused on the growth initiatives that I mentioned.

Speaker Change: Turn to in earnest at the beginning at the beginning of the year and we will continue to lean into those growth initiatives notwithstanding the external market conditions.

Olivier Tureau: With reflecting on SGNA, we expect to sustain the efficiency improvements that we gain from our transformation related actions over the past year. The impact on year-over-year trends will moderate, as we anniversary, the execution of most of those actions. We expect that adjusted SGNA, exuding DNA, will be 3.5 to 4.5% low than a year ago on an organic basis. And MRP will add about 60 million of expenses in the second half. All in, we expect approximately 28 million of deposition and amortization in H2 of 2024.

Speaker Change: Okay great.

Questioner: Okay. Great.

Questioner: I also want to ask about the trend in adjusted SDNA expenses. You mentioned you expect them to be down organically 3.5% to 4.5% year-over-year. Just trying to think about... You know, on a sequential basis, as we move into the second half of the year, how those will trend organically, you know, if we should think about those kind of being flattish sequentially, excluding MRP, or, you know, if they come down a little bit more. Yeah, I would.

Speaker Change: I also wanted to ask about the trend in adjusted SG&A expenses.

Speaker Change: You mentioned, you expect them to be down organically three five to four 5% year over year, just trying to think about.

Speaker Change: On a sequential basis as we move into the second half of the year.

Speaker Change: How those will trend.

Speaker Change: Organically.

Speaker Change: If we should think about those kind of being flattish sequentially, excluding MRP or.

Olivier Tureau: We expect an adjusted organic EBDMR, 3.2 to 3.3% up 30 to 40 basis points year-over-year. And we believe that MRP will add an additional 30 basis points of net margin in the second half of 2024. And back to my earlier points regarding education seasonality, we expect that our adjusted EBDMR will be closer to 3% or 2.6% organic in the third quarter during the school summer holiday period and then improve as in Q4 as education's working days, and finally we expect our effective tax rate to be in the low teens and I will back to you Peter.

Speaker Change: They come down a little bit more.

Olivier Toureau: Yeah, I would really continue to look at organic, meaning excluding our European staffing business and MRP. I think we gave today some specifics around the MRP expectation for SG&A, excluding DNA, by the way, for the second half of the year.

Speaker Change: Yeah, I would I would really continue to look at the organic meaning is clean.

Speaker Change: Our European searching business in MLP.

Speaker Change: We gave today some specific around the MRP expectation for G&A.

Speaker Change: Excluding DNA body to wait.

Speaker Change: For the second half of the year. So if you are seeing about Q2 trend. If you grew revenue on the adjusted organic.

Olivier Toureau: So if you think about a Q2 trend, if you really go on the adjusted organic, we're at about minus 10% like-for-like in Q2 versus a year ago. In Q1, we're at minus 11, so a very similar trend in the second quarter than in the first quarter. When we move to our guidance that you are mentioning for the second half, of course, the comparables are becoming more challenging, right, because a good portion of our efficiency initiatives were already visible in the second half of the year. This is why we go for this adjusted guidance.

Speaker Change: We're at about minus 10% like for like in Q2 versus a yugo.

Speaker Change: In Q1 were at minus 11, so very similar trend.

Speaker Change: In the second quarter than in the first quarter.

Speaker Change: When we move to.

Peter Quigley: Thanks for those insights Olivier. In May I shared with you that 2024 would mark an inflection point on our strategic journey that the actions and results we deliver this year will propel Kelly into a new era of growth reflecting on the significant progress we achieved in the second quarter, unconfident that we're on track to realize those ambitions. Our transformational acquisition of motion recruitment partners has strengthened the scale and capabilities of Kelly staffing, consulting and RPO solutions in attractive customer end markets including technology, financial services and healthcare.

Speaker Change: Our guidance.

Speaker Change: Mentioning for the Sig enough of cools, the comparables are becoming a more challenging one because.

Speaker Change: Function of our efficiency initiatives already VEBA in this is that for the year. So these why we go for these.

Speaker Change: Adjusted guidance, but if you think about it more sequentially.

Olivier Toureau: But if you think about it more sequentially, you will see that it's basically flat sequentially from first half to second half, or if you look at Q2 to Q3 and Q4. Yes, that's our expectation, and this is where we are trending now.

Speaker Change: <unk>.

Speaker Change: You will see that its basically flat sequentially from our first style to seeking alpha and she would get Q2.

Speaker Change: <unk>, yes, that's that's our expectation and this is where we are trending now.

Peter Quigley: The highly complimentary nature of MRP and Kelly set and OCG businesses. MRP's attractive financial profile and its leadership team of recruiting industry veterans will contribute in a significant way to enhancing Kelly's revenue growth potential and driving continued EBITDA margin expansion. The sale of AERS group further sharpened Kelly OCG's focus on global RPO and MSP solutions while unlocking incremental capital to redeploy towards Kelly's specialty strategy. We achieved our initial expectation for EBITDA margin expansion which we established one year ago demonstrating the capacity of our growth and efficiency initiatives to significantly improve Kelly's profitability over the long term.

Speaker Change: Okay. Thank you Olivier that was very helpful and I also wanted to.

Questioner: Okay. Thank you, Olivier. That was very helpful. And I also wanted to add my congratulations and best wishes for your upcoming retirement. And certainly, you know, it was a pleasure working with you over the years.

Speaker Change: Add my congratulations and best wishes for your upcoming retirement and certainly you know thank you.

Speaker Change: Pleasure working with you over the years.

Olivier Toureau: I'm gonna be around for a while now, right? So you're gonna hear from me for the next two quarters with pleasure. Oh, right. Okay.

Olivier: I'm going to stick around for a while now right.

Speaker Change: You're going to hear from me.

Olivier: For the next two quarters with pleasure Oh right Okay.

Operator: Right, okay. We'll look forward to it.

Speaker Change: Well look forward to talking to you then.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Joe Gomes from Noble capital markets. Please go ahead.

Operator: Your next question comes from the line of Joe Gomes from Noble Capital Markets. Please go ahead.

Joe: Good morning, Joe.

Operator: Morning, Joe. Morning. Josh is filling in for Joe. Oh, hey, Josh.

Speaker Change: I think bill and then for Joe Oh, Hey, Josh.

Questioner: And so now, you know, we're kind of a couple of months just into the completion of MRP. Can I, you know, can you guys describe to me how the integration of it's kind of coming along and some key takeaways so far? Has the company really picked up any new business ones from it so far? Well, as we explained, Josh, for the foreseeable future, we're going to continue to operate the businesses as they've been operating under their current delivery models and brands.

Joe: And so now you know what kind of a couple of months into the completion of MRP. You know cannot you know can you guys describe me how you know the integration or is it kind of coming along and some key takeaways. So.

Peter Quigley: Of course it's difficult to know the precise timeline of our recovery for our industry and as Olivier noted, we expect the results in the second half of the year will continue to reflect uncertain market conditions. Notwithstanding these dynamics, I'm optimistic about the sequential stabilization we saw across our business and I'm confident that our achievements in the second quarter together with the progress we've delivered since we embarked on our specialty growth journey, position Kelly to capitalize when sequential stabilization gives way to a sustained increase in demand.

Speaker Change: So far into it has the company really picked up any new business wins from it so far.

Speaker Change: Well as as we.

Josh: Explain Josh for the foreseeable.

Speaker Change: Foreseeable future, we're going to continue to operate.

Speaker Change: Yeah.

Josh: The businesses as as they have been operating under there.

Speaker Change: Current delivery.

Peter Quigley: I'm immensely proud of the work of each and every member of team Kelly, including our newest colleagues at MRT that has brought us to this point in our journey. Their urgency, agility, and unwavering commitment to our clients and talent are the driving forces that continue to propel us to new heights. With our team moving forward together, united by our noble purpose, I'm confident that the opportunities before us are limitless.

Speaker Change: Models and brands.

Questioner: That doesn't mean we're not spending a lot of time with the Motion Recruitment Partners leadership team working on ideas and plans for integration when it makes sense. We have been encouraged by the collaboration between the teams on both the staffing and solution side of the Motion Recruitment Partners business as well as within the 7-Step business. And there have been opportunities that we've taken advantage of where the combined forces of Kelly and MRP have proven to be an advantage.

Speaker Change: That doesn't mean, we're not spending a lot of time with the motion recruitment partners leadership team working on.

Speaker Change: Hum.

Speaker Change: Ideas and plans for integration.

Speaker Change: And when it makes sense.

Speaker Change: We have been encouraged by the collaboration between.

Speaker Change: The teams on both the staffing and solution side of the motion recruitment partners business as well as within the seven step business.

Greg: Greg, you can now open the call to questions. Okay, ladies and gentlemen, if you'd like to ask a question, please press one and zero on your telephone keypad. You may withdraw your question at any time by repeating the one zero command.

Speaker Change: There have been opportunities that we've taken advantage of that.

Operator: 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 and zero at this time and one moment please for your first question.

Speaker Change: Combined forces of Kelly.

Speaker Change: MRP has proven to be an.

Speaker Change: An advantage.

Questioner: It's still early, but we're encouraged by what we think is the market and customer reaction to the combination and partnership, and more to come on that as we further refine what the ideal or optimized operating model will be going forward.

Speaker Change: Still early but we're encouraged by what we think is the.

Cartic Mehta: Your first question comes from the line of Cartic Mehta from North Coast Research. Please go ahead. Yeah, good morning.

Speaker Change: Market and customer reaction to the combination.

Speaker Change: And partnership and.

Speaker Change: More to come on that as we are.

Peter Quigley: I leave you as first of all, it's been pleasure working with you and I wish you the best. You have some big shoes to build, so thank you for everything. Thank you, Kathy. Thank you very much. You're welcome. We're doing it. We could focus on the MRP business for a second and just as you look at the fundamentals for that business, maybe so far in the second quarter and you do look at your outlook in the second half, and you, you know, compared to a year ago or maybe a quarter ago, what's in the trend for that business?

Speaker Change: Further refine what the ideal are optimized.

Speaker Change: Operating model will be going forward.

Speaker Change: Okay. That's helpful. Thank you and.

Peter Quigley: Okay, that's helpful. Thank you.

Speaker Change: Yeah, you kind of touched on it on the M&A side, a little bit but.

Questioner: And yeah, you kind of touched on it on the M&A side a little bit. But, you know, you guys talked about in the previous quarter how, you know, there's kind of more discussion happening. Is that really still true now? Are there kind of more properties in the market that you're seeing? Or is it still roughly about the same? I'd say it's...

Speaker Change: You know you guys talked about in the previous quarter, how you know, there's kind of more discussion and discussion happening.

Speaker Change: That's really still true now as they're kind of more properties in the market that you're seeing or is it still roughly about the same.

Peter Quigley: I'd say it's roughly about the same Josh. There's, you know; it's still not what it was two or three years ago. I think companies are still a little bit cautious about coming off the sidelines, so the flow is not what it was at its height. But as you know, in our business, in particular, not everything comes to market, and so we continue to explore high-quality, high-growth, high-margin businesses and develop relationships that we think could potentially, at some point in the future, result in an acquisition similar to how we accomplished MRP.

Speaker Change: I'd say, it's roughly about the same Josh there is.

Josh: It's still not what it was two or three years ago.

Peter Quigley: Yeah, I will comment on few numbers and Peter can add more color on on business trends and so on. You might have seen a topic that we have issued a so-called 8KA and of course the outlook of today and you are going to see further information in our theme queue on what we call performance. If you use this information, you will see that H1 of 2024, the revenue was about 260 million and if you take the mid range of our guidance today, you're going to be at 265 million.

Speaker Change: I think companies are still a little bit cautious about come.

Josh: Coming off the sidelines so the flow is not.

Josh: What it was at its at its height.

Josh: But.

Josh: As you know in our business in particular, not everything comes to market and so we continue to explore high quality.

Josh: High growth high margin businesses and develop relationships that we.

Speaker Change: Thank god potentially at some point in the future.

Speaker Change: Result in a acquisition similar to how we are.

Peter Quigley: So we expect similar to what we have said for Kelly, organic, basically a slight improvement basically in the second half of the year. When you look at how does it compare versus a year ago, H1 at 260 million is about minus 8% versus the prior year, which is consistent with the trends we have shared in June when we are talking specifically about MRP and we expect based on, you know, the change in comparables and a little bit of sequential improvement to turn edge two into flat two minus one minus one and a half percent versus a year ago.

Speaker Change: Accomplished MRP.

Speaker Change: Okay. Thank you for the color and then last one from me you know it's been probably a couple of quarters you guys commented on the Kelly arc.

Questioner: Okay, thank you for the color. And then last one for me, you know, it's been probably a couple quarters since you guys commented on the Kelly arc. Can you guys kind of provide us with an update on that and kind of what's the interest been like in that program? Well, the interest is high.

Speaker Change: Are you guys kind of provided the update on that and kind of what's been the interest been like in that program.

Peter Quigley: Well, the interest is high, you know, the fact is that it's a platform solution that... On both the talent and customer side in an area of great demand in terms of AI and automation talent, as with any platform-driven solution. Adoption on both the talent side and the customer side takes time. But we have dozen plus customers on the platform and hundreds of AI automation professionals that are also partaking in the solution, and it's one of those solutions, again, a platform solution.

Speaker Change: Well the interest is high.

Speaker Change: Fact is that it's a.

Speaker Change: It's a platform solution.

Speaker Change: As both the talent and customer side.

Speaker Change: In an area of great.

Speaker Change: Great demand in terms of.

Speaker Change: AI and automation talent.

Speaker Change: As with any.

Peter Quigley: In cardic longer term, I mean we continue to be very bullish on MRP in particular but also the space that they're in, both on the staffing and solution side as well as on the RPO side. We've been very pleased with the, you know, partnership we've had with the MRP leadership to date and the significant complimentary nature of our businesses, the lack of significant customer overlap, complimentary delivery models. So longer term we're still very optimistic about the investment thesis in making the acquisition of MRP.

Speaker Change: Platform driven.

Speaker Change: Solution adoption on both the talent side and the customer side takes time.

Speaker Change: But we have.

Speaker Change:

Speaker Change: Dozen dozen plus customers on the platform and hundreds of them.

Speaker Change: AI automation professionals that are also part taking in the solution.

Speaker Change: And you know it's one of those.

Speaker Change: Solutions again, a platform solution.

Speaker Change: As individuals and customers begin to join.

Peter Quigley: As individuals and customers begin to join and register, it has a network effect as people hear about it and learn about it and refer other people to the platform. So we're still optimistic about the solution and the value it brings for both talent and customers, and we'll continue to invest our time and technology in it. Your next question comes from the line of Mark Riddick from Sidoti. Please go ahead.

Speaker Change: Join and register it has a network effect as people hear about it and learn about it and refer other people to the platform.

Peter Quigley: And then if you just look at the overall business, maybe in each of the segments, I'm wondering what you're witnessing in terms of pricing and pricing trends or competition increase in any of the segments or are they kind of where they are last year? Well, I think on a, you know, in this kind of uncertain environment, market conditions, you're always going to find outlier suppliers that are going to try to buy share.

Speaker Change: So we're we're still.

Speaker Change: I'm optimistic about the solution and the value it brings for both talent and customers and we.

Speaker Change: We will continue to <unk>.

Speaker Change: Invest our time and technology into it.

Speaker Change: Yeah.

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

Marc Riddick: Good morning, Mark wanting.

Peter Quigley: But it's not, you know, it's not across the board, it's not an industry dynamic that we're seeing. In fact, we've been relatively pleased with our ability to maintain pricing discipline during these market conditions. Yeah, just when you look at the so-called spread in PNI, it's completely stable. Instead, flat to up slightly, in education a little bit down, but it's more the customer mix than real, you know, pricing conversation. So so far, and it's not an isolated quarrel, Q2 is here. We have not seen any change or any pressure on spreads. We continue to see, you know, that we are capable of keeping our spread, thus keeping our overall market.

Marc Riddick: Good morning, Good morning, Olivia I'm glad you're here with us today, so we'd be certainly appreciate that.

Questioner: Good morning, good morning. And Olivia, I'm glad you're with us today. So, we certainly appreciate that. I wanted to touch a little bit on sort of maybe piggybacking on the acquisition pipeline and opportunities that you see there. I was wondering if you thought about maybe shifting a little bit towards sort of comfort levels with that and leverage and sort of how that plays into the thought process of the future acquisition pipeline. Yeah, I mean...

Marc Riddick: I wanted to touch a little bit on so sort of maybe piggybacking on the.

Marc Riddick: The acquisition pipeline and opportunities that you see there I was wondering if you talk maybe shifting a little bit sort of usage.

Speaker Change: <unk>.

Speaker Change: Sort of.

Speaker Change: <unk> levels.

Speaker Change: With that and leverage and sort of how that plays into their thought process.

Speaker Change: The future acquisition pipeline.

Olivier Toureau: If you remember, at the time of the MRP acquisition, our debt level was $263 million, to be very precise. We are already at $210 million now. If you use what I like to use, amongst many other metrics, the multiple of EBDA, and I'm using the last 12 months of EBDA, that is the calculation we use in our bond governance, we are now at about 1.7 debt to EBDA. So we are making progress. You have seen that our free cash flow for the quarter was over $50 million.

Speaker Change: Yeah, I mean, if you if you remember at the time of the <unk> acquisition.

Speaker Change: Our debt level was.

Speaker Change: 263 million to be very precise.

Speaker Change: We are already in our 210.

Speaker Change: If you use what I like to use amongst many other metrics.

Peter Quigley: And then just one last question, you know as you go down this transformation journey and obviously MRP will help, you know, as you look for the next acquisition, there's a thought that you'd like to integrate MRP, so you'd wait or if an opportunity turned up, you are at a point where you could do another acquisition. Well, I think our, as we've said, MRP is going to continue to deliver its services and solutions through its operating companies under its current brand.

Speaker Change: <unk>.

Speaker Change: Multiple of EBITDA and I'm using the last 12 months EBITDA that is the calculation we use in our.

Speaker Change: Bank covenants, we are now at about one seven.

Speaker Change: Debt to EBITDA.

Speaker Change:

Speaker Change: So we are making progress you have seen in our free cash flow for the quarter was over $50 million, So I feel comfortable that over time.

Olivier Toureau: So I feel comfortable that, over time, not this year, but I think we are going to continue to basically de-leverage as much as we can and as quickly as possible. It's going to take, of course, more than the next 12 months, but I feel that we are on the right track. When you see our working capital, I'm glad to confirm that our DSO is now at 57 days, which is, I would say, a big progress versus where we were before.

Peter Quigley: We'll of course be working with the MRP leadership on where it makes sense integration. I think, you know, our focus right now is on that as a priority, but we're not going to stand on the sidelines in terms of developing a pipeline for future acquisitions. The cycle time is, as you know, cardic quite long, so we're preparing for the time when it would make sense for us to deploy additional capital in pursuit of high margin, high growth businesses, as I've said before, primarily in the science, engineering, technology, and telecom space or in our education practice.

Speaker Change: Not not this year, but I think when we are going to continue to basically de leverage as much as we can and as quickly as possible.

Speaker Change: It's going to take of course more than the next 12 months, but I feel that we're on the right track when you see.

Speaker Change: Our working capital.

Speaker Change: Glad to confirm that our DSO now is at 57 days, which is.

Speaker Change: I'd say, a big progress versus where we are before and we are going to be.

Olivier Toureau: And we are in a business where the best way to manage your capital is basically to manage your DSO. So I feel comfortable that what we see in terms of metrics, balance sheet leverage, we are comfortable that we can continue to de-leverage and are comfortable to basically go for an acquisition whenever we are ready to do it and whenever we have attractive properties.

Speaker Change: And it's where the best way to manage your get.

Speaker Change: <unk> is basically to NGL DSO, so I feel comfortable that well.

Speaker Change: We've seen them of matrix balance sheet leverage we are comfortable with that.

Speaker Change: We can continue to deleverage and comfortable too.

Cartic Mehta: Perfect, thank you so much, I appreciate it. Thank you, Cardic.

Speaker Change: And basically go for an acquisition whenever we are ready to do it and whenever we have attractive properties.

Kevin Steinke: Your next question comes from the line of Kevin Steinke from Barrington Research. Please go ahead. Morning, Kevin. Good morning. I want to start off by asking about generating some, you know, modest organic growth in the second quarter. It sounded like you were pleased with the progress of the organic growth initiatives that are part of the transformation effort. I mean, would you attribute the return to organic growth as really being driven by those transformation-related organic growth initiatives?

Speaker Change: Okay, Great and then I guess, one quick little follow up is there sort of a general ballpark range, we're looking at for.

Questioner: Okay, great. And then, I guess one quick little follow-up. Is there sort of a general ballpark range we're looking at for any potential technology investments, maybe CapEx for this year? Are there any sort of investments that you see coming, whether it was in conjunction with MRP, but just maybe enterprise-wide would be great?

Speaker Change: Any particular technology investments, maybe capex for this year.

Speaker Change: Any sort of investments that you see coming.

Speaker Change: Whether it was.

Speaker Change: In conjunction with MLP, but just maybe on enterprise wide would be it would be.

Speaker Change: Great.

Olivier Toureau: I mean, of course, you can assess our CapEx at least on the cash flow by looking at our cash flow statement. Most of our CapEx over time has been on technology, and it will continue to be the case. You need to think about something in the region of $20-25 million on a recurring basis. Of course, that does not take into account the technology integration of MRP that, as Peter was mentioning, is going to happen as soon as we have the earn-out behind us.

Speaker Change: I mean of course, you can that you can assess our capex at least on the on the cash flow by looking at you know.

Speaker Change: Our cash flow statement.

Speaker Change: Most of our Capex over time has been I've been on the technology.

Kevin Steinke: Yeah, I think so, Kevin. You know, it's hard to be, you know, pin it down precisely, but relative to what we're seeing from our competitors, we believe we're taking share in across our businesses. And we spent a good portion of 2023 focused on efficiency, but as I said at the beginning of the year, we were pivoting and turning our attention to growth. I think the progress we've made in our omnichannel strategy and professional industrial is beginning to show results and our focus on taking share within our large enterprise customers is also showing traction.

Speaker Change: It will continue to be the case you need to think about it you know something in the region of 2000 $25 million on a recurring basis.

Speaker Change: That does not take into account.

Speaker Change: Technology integration of it must be that as Peter was mentioning is going to happen as soon as we we have the earn out are behind us. So after Q1 of next year. We are planning for it now and each will possibly move the $20 million to $25 million up four times.

Olivier Toureau: So after Q1 of next year, we are planning for it now, and it will possibly move the $20-25 million up for a temporary period. That's something that, knowing our free cash flow generation, I feel comfortable that we can absorb, you know, higher capital expenses and the $20-25 million, at least for a limited period of time, which may happen through this integration of technology for MRT.

Speaker Change: Retail yard.

Speaker Change: But that's what I'm seeing that.

Speaker Change: Knowing our free cash flow generation.

Speaker Change: I feel comfortable that we can absorb higher capital expenses in the 2000 $25 million at least floating at that period of time, which may happen through this integration of technology.

Kevin Steinke: And I think the combination of those two plus obviously the continued growth in education and a focus on high margin and areas that are a little bit more stable. Now, we're pleased with the organic growth in the quarter. Okay, good. And it's related to that question. When we think about your forecast for organic revenue growth of 2.5 to 3.5% and the second half of 2024, you talked about assuming kind of a similar demand environment in the second half relative to what you've been seeing recently.

Speaker Change: For MLP.

Speaker Change: Okay, great. Thank you very much.

Questioner: Great. Thank you very much. Thank you. Thank you, Mark.

Mark: Thank you Mark.

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

Operator: If there are any additional questions, please press 1 and 0. And at this time, there are no further questions. OK, Greg, I think we can end the call. Thank you very much. Thank you, Greg. 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: And at this time there are no further questions.

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

Mark: Okay, Greg I think we can end the call. Thank you very much. Thank you Greg thank.

Speaker Change: 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.

Kevin Steinke: You know, but also you mentioned some stabilization in demand, some like some improvement in technology and life sciences, I'm just trying to unpack, you know, how you get to that higher rate of organic growth in the second half if it's driven by the organic growth initiatives or some assuming some sort of continued improvement or stabilization in just the overall demand environment, you know, to get to that growth and also the sequential improvements you mentioned. Do you expect in P and I set and OCEG?

Kevin Steinke: Yeah, I mean, I'm going to start and then Peter will add some color on the business side and so on. If you think about it, first of all, we did confirm today that we see education continuing to grow at the digit rate. Of course, you know, Q3 is low seasonality, but we see the dynamic we have seen for a long, long time continuing. So that's one point. Second point is when you put on the side education sequentially from Q1 to Q2, extending education, the rest of the business sequentially went up by about 1.5%.

Kevin Steinke: We expect similar modest improvement sequentially over the second half of the year. That is basically based on what we have seen sequentially from Q1 to Q2. Summary, as it's more stabilization, like from a sense P and I staffing. Others, it's really, you know, sequential growth. And I'm thinking about OCEG and to some extent set. We start to see some positive dynamics as Peter was seeing in our legacy IT business and also science that are moving up.

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

Kevin Steinke: And on top of that, of course, the growth initiative that Peter was mentioning, that are part of this second-shame improvement of 1.5% I was mentioning from Q1 to Q2 when you extrude education. And there is also the basic back, right? I mean, the 2.5 to 3.5 is also basically reflecting on the fact that our comparables are basically lower in H2 of 2023 than they were, you know, in the first half of this year.

Kevin Steinke: And Kevin, as I mentioned in my preparatory remarks, we don't know when there will be a return to a more normalized demand. But we are much better positioned to take advantage of that. And we're prepared to take advantage of it when it happens. Then we were a couple of years ago, just because of all the steps we've taken to structurally improve the cost-base and to be able to leverage when demand returns in a meaningful way.

Kevin Steinke: But we're not waiting for that, which is why I focused on the growth initiatives that I mentioned. We turned to an earnest at the beginning of the year and we will continue to lean into those growth initiatives, notwithstanding the external market conditions. Okay, great. I also wanted to ask about the trend and adjusted SDNA expenses. You mentioned you expect them to be known organically 3.5 to 4.5% year-over-year. Just try and think about, you know, on a sequential basis as we move into the second half of the year, how those old trend organically, you know, if we should think about those kind of being flatish, sequentially excluding MRP or, you know, take down a little bit more.

Kevin Steinke: Yeah, I would really continue to look at organic, meaning, excluding our European staffing business and MRP. I think we gave today some specific around MRP expectations for SDNA, excluding DNA, by the way, for the second half of the year. So, if you think about a Q2 trend, if you go really on adjusted organic, where about minus 10% like for like in Q2 versus a year ago, into one where at minus 11, so very similar trend in the second quarter than in the first quarter, when we move to our guidance that you are mentioning for the second half, of course the comparables are becoming more challenging, right, because a good portion of our efficiency initiative will already be available in the second half of the year.

Kevin Steinke: So, this is why we go for adjusted guidance, but if you think about it more sequentially, you will see that it's basically a flat sequentially from first half to second half, or if you would get Q2 out of Q3 and Q4. Yes, that's our expectation, and this is where we are turning now. Okay, thank you Olivier, that was very helpful, and I also wanted to add my congratulations, and best wishes for your upcoming retirement, and certainly, you know, thank you.

Kevin Steinke: It was a pleasure working with you over the years. I'm going to be still around for a while now, right, so you're going to hear from me for the next two quarters. We's pleasure. Oh, right, okay. Well, we'll look forward to talking to that. Thank you.

Joe Gomes: Your next question comes from the line of Joe Gomes from Noble Capital Markets. Please go ahead.

Josh: What are you going to do? What are you going to do for Joe? Oh, hey, Josh. So now, you know, we're kind of a couple of months just into the completion of MRP Can you guys describe me how the integration of it's kind of coming along and some key takeaways so far into it? Has the company really picked up any new business plans from it so far? Well, as we explain Josh for the foreseeable future, we're going to continue to operate.

Josh: The businesses as they've been operating under their current delivery models and brands. That doesn't mean we're not spending a lot of time with the motion recruitment partners leadership team working on ideas and plans for integration when it makes sense. We have been encouraged by the collaboration between the teams on both the staffing and solution side of the motion recruitment partners business as well as within the seven step business. And there have been opportunities that we've taken advantage of that combined forces of Kelly and MRP has proven to be an advantage.

Josh: It's still early but we're encouraged by what we think is the market and customer reaction to the combination and partnership and more to come on that as we further refine what the ideal or optimized operating model will be going forward.

Josh: Okay, that's helpful, thank you. You kind of touched on the M&A side a little bit but you guys talked about in the previous quarter how this kind of more discussion happening. Is that really still true now? Is there more properties in the market that you're seeing or is it still roughly about the same? I'd say it's roughly about the same, Josh. There's, you know, it's still not what it was two or three years ago.

Josh: I think companies are still a little bit cautious about coming off the sidelines so that the flow is not what it was at its height. But, you know, as you know, in our business in particular, not everything comes to market and so we continue to explore high quality, high growth, high margin businesses and develop relationships that we think could potentially, at some point in the future, result in an acquisition similar to how we accomplished MRP.

Peter Quigley: Okay, thank you for the color. And then last one from me, you know, it's been probably a couple quarters you guys commented on the Kelly Arc. Can you guys kind of provide us with the update on that and kind of what's been the interest been like in that program? Well, the interest is high, you know, the fact is that it's a platform solution that has both the talent and customer side, in an area of great demand in terms of AI and automation talent, as with any platform driven solution adoption on both the talent side and the customer side takes time.

Peter Quigley: But we have a dozen, dozen plus customers on the platform and hundreds of AI automation professionals that are also partaking in the solution. And, you know, it's one of those solutions, again, a platform solution as individuals and customers begin to join and register. It has a network effect as people hear about it and learn about it and refer other people to the platform. So we're still optimistic about the solution and the value it brings for both talent and customers.

Peter Quigley: And will it will continue to invest our time and technology into it?

Mark Riddick: Your next question comes from the line of Mark Riddick from Siddoti, please go ahead. Morning, Mark. Good morning.

Olivier Tureau: Good morning, and I live here with us today, so we would appreciate that. I wanted to touch a little bit on, so maybe piggybacking on the acquisition pipeline. I'll pipeline it and opportunities that you see there. I was wanting to talk maybe shifting a little bit sort of use of the sort of comfort levels with that and leverage and sort of how that plays into the thought process of the future acquisition pipeline.

Olivier Tureau: Yeah, I mean, if you remember at the time of the MRP acquisition, our debt level was 263 million to be very precise. We are already now at 2.10. If you use what I like to use amongst many of the metrics, multiple of ABDA, and I'm using the last 12 months ABDA that is the calculation we use in our bank governance, we are now at about 1.7 debt to ABDA. So we are making progress.

Olivier Tureau: You have seen that our free cash flow for the quarter was over 50 million. So I feel comfortable that over time, not this year, but I think we are going to continue to basically deliver as much as we can and as quickly as possible. It's going to take, of course, more than the next 12 months, but I feel that we are on the right track. When you see our working capital, I'm glad to confirm that our DSO now is at 57 days, which is, I would say, a big progress where we are before and we are in a business where the best way to manage your capital is basically to manage your DSO.

Olivier Tureau: So I feel comfortable that what's within terms of metrics, balance and leverage, we are comfortable that we can continue to deliver as and comfortable to basically go for an acquisition whenever we are ready to do it and whenever we have attractive properties.

Olivier Tureau: Okay, great. And then I guess one quick little follow up. Is there sort of a general ballpark range we are looking at for any potential technology investments, maybe CAPEX for this year? Are there any sort of investments that you see coming, whether it was in conjunction with MRP, but just maybe enterprise-wide would be great. Of course, you can assess our CAPEX at least on the cash flow by looking at our cash flow statement.

Olivier Tureau: Most of our CAPEX, over time, have been on technology and it will continue to be the case. You need to think about something in the region of 20, 25 million on a recurring basis. Of course, that does not take into account technology integration of MRP, that as Peter was mentioning is going to happen as soon as we have the urn out behind us. So after Q1 of next year, we are planning for it now, and it will possibly move the 20 to 25 million off for a temporary period.

Olivier Tureau: But that's something that knowing our free cash flow generation I feel comfortable that we can absorb, you know, higher capital expenses and the 20-25 million at least for limited period of time, which which may happen through this integration of technology for MRT.

Mark Riddick: Great, thank you very much. Thank you. Thank you, Mark. Mark, if there are any additional questions, please press one and zero. And at this time, there are no further questions.

Greg: Okay, Greg, I think we can end the call. Thank you very much. Thank you, Greg.

Operator: 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.

Operator: Thank you.