Q4 2024 Kelly Services Inc Earnings Call - Q&A
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Operator: Good morning. Welcome to Kelly Services' Q4 earnings conference call. All parties will be on listen only until the question and answer portion of the presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's Head of Investor Relations. Please go ahead.
Speaker Change: Good morning, and welcome to Kelly services fourth quarter earnings Conference call.
Speaker Change: Parties will be on listen only until the question and that's a portion of the presentation.
Speaker Change: This call is being recorded at the request of Kelly services.
Speaker Change: If anyone has any objections you may disconnect at this time.
Scott Thomas: I would now like to turn the meeting over to your host Mr. Scott Thomas Kelly's head of Investor Relations. Please go ahead.
Scott Thomas: Thank you, Liv. Good morning, and welcome to Kelly Services' Q4 and full year conference call. With me today are Kelly Services' President and Chief Executive Officer, Peter Quigley, and our Chief Financial Officer, Troy Anderson. Before we begin, I will remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, we will discuss certain data 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.
Speaker Change: Thank you Liz good morning, and welcome to pick up his fourth quarter and full year conference call.
Speaker Change: With me today are Kelly's President and Chief Executive Officer, Peter Quigley, and our Chief Financial Officer Troy Anderson.
Speaker Change: Before we begin I'll remind you that the comments made during today's call, including the Q&A session may include forward looking statements about our expectations for future performance.
Speaker Change: Actual results could differ materially from those suggested by our comments, we do not assume any 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, we will discuss certain data on a reported and on an adjusted basis.
Speaker Change: Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.
Scott Thomas: For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation, and once filed, Form 10-K, all of which can be accessed through our investor relations website at ir.kellyservices.com. I will now turn the call over to Kelly's President and Chief Executive Officer, Peter Quigley.
Speaker Change: For more information regarding non-GAAP measures and other required disclosures. Please refer to our earnings press release presentation and once filed Form 10-K, all of which can be accessed through our investor relations website at IR Dot Kelly services Dot com.
I will now turn the call over to Kelly's President and Chief Executive Officer, Peter quickly.
Peter Quigley: Thank you, Scott. Good morning, everyone. Before I share my reflections on our Q4 and full year performance, I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After 22 years with Kelly, I intend to retire as President and CEO by the end of this year. The board has initiated a process to identify my successor, engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates. I plan to continue serving in my current role until the board of directors appoints Kelly's next CEO, and we can facilitate a smooth transition. Over the past few years, we have made meaningful strides on our specialty growth journey, and Kelly is well-positioned to realize the value creation opportunities that lie ahead.
Peter Quigley: Thank you Scott and good morning, everyone before I share my reflections on our fourth quarter and full year performance I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After 22 years with Kelly I intend to retire as president and CEO by the end of this.
Peter Quigley: This year the board has initiated a process to identify my successor engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates.
Peter Quigley: We plan to continue serving in my current role until the board of directors appoints Kelly's next CEO and we can facilitate a smooth transition.
Peter Quigley: Over the past few years, we have made meaningful strides on our specialty growth journey, and Kelly is well positioned to realize the value creation opportunities that lie ahead I'm proud of the progress we have made and I look forward to concluding my tenure with a strong 2025 defined by continued growth in.
Peter Quigley: I'm proud of the progress we have made, and I look forward to concluding my tenure with a strong 2025, defined by continued growth and strategic evolution. With new leadership and as market conditions improve, the board and I are confident that Kelly will reach new heights and create even more value for our clients, talent, employees, and shareholders. With that, let's review the highlights from our performance in Q4 and full year. In Q4, Kelly delivered both top and bottom-line growth on a year-over-year basis, increasing organic revenue by more than 4% and adjusted EBITDA by 34%. This reflects strong profitability for the quarter as we delivered 110 basis points of margin expansion through targeted organic and inorganic initiatives. Total company performance exceeded the outlook we provided in November and continued to outpace the market.
Speaker Change: Strategic evolution with new leadership and as market conditions improve the board and I are confident they'd Kelly will reach new heights, and create even more value for our clients talent employees and shareholders.
Speaker Change: With that let's review the highlights from our performance in the fourth quarter and full year.
Speaker Change: In the fourth quarter, Kelly delivered both top and bottom line growth on a year over year basis, increasing organic revenue by more than 4% and adjusted EBITDA by 34%.
Speaker Change: This reflects strong profitability for the quarter as we delivered a 110 basis points of margin expansion through targeted organic and inorganic initiatives total company performance exceeded the outlook. We provided in November and continued to outpace the market at the segment level education delivered another.
Peter Quigley: At the segment level, Education delivered another Q of double-digit revenue growth and accelerated the expansion of our higher-margin therapy business through the acquisition of Children's Therapy Center. In SET, the revenue deceleration we experienced early in Q3 subsided in Q4, and we captured growing demand for our life sciences specialty and our higher margin statementworX solutions. Both OCG and P&I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share. Our positive performance in Q4 bookended a year of significant strategic progress. Last February, I said that 2024 would be an inflection point in Kelly's journey by capturing a greater share of customer demand and by more effectively converting top-line growth to bottom-line profitability. Today, I'm pleased to say that we delivered on our commitments and are poised to continue doing so in 2025.
Speaker Change: Order of double digit revenue growth and accelerated the expansion of our higher margin therapy business through the acquisition of children's therapy Center.
Speaker Change: Set the revenue deceleration we experienced early in Q3 subsided in Q4, and we captured growing demand for our life Sciences specialty and our higher margin statement works solutions.
Speaker Change: Both OCG and P&I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share.
Speaker Change: Our positive performance in the fourth quarter book ended a year of significant strategic progress.
Speaker Change: Last February I said that 2024 would be an inflection point in Kelly's journey by capturing a greater share of customer demand and by more effectively converting topline growth to bottom line profitability.
Speaker Change: Today I am pleased to say that we delivered on our commitments and are poised to continue doing so in 2025.
Peter Quigley: We continued to accelerate profitable growth, delivering positive organic revenue growth on a year-over-year basis and outperforming the market across our specialties. We remained laser-focused on improving profitability as well, delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full year EBITDA margin to 3.3% on an adjusted basis. This represents a significant increase over our recent historical average of approximately 2%. We unlocked additional value-creating opportunities and further streamlined Kelly's operating model, completing the sale of our European staffing business for more than $100 million. We also completed the sale of Ayers Group in June, enabling OCG to sharpen its focus on global RPO and MSP solutions. Finally, we redeployed capital in pursuit of inorganic investments in higher margin, higher growth specialties with the transformational acquisition of Motion Recruitment Partners.
Speaker Change: We continue to accelerate profitable growth delivering positive organic revenue growth on a year over year basis, and outperforming the market across our specialties.
Speaker Change: We remained laser focused on improving profitability as well delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full year EBITDA margin to three 3% on an adjusted basis. This represents a significant increase over our recent.
Speaker Change: Historical average of approximately 2%.
Speaker Change: We unlocked additional value, creating opportunities and further streamline Kelly's operating model completing the sale of our European staffing business for more than $100 million. We also completed the sale of Arris group in June enabling OCG to sharpen its focus on global <unk> and MSP solutions.
Speaker Change: Finally, we redeployed capital in pursuit of inorganic investments in higher margin higher growth specialties with the transformational acquisition of motion recruitment partners. The addition of MRP has strengthened the scale and capabilities of our staffing consulting and Rps salute.
Peter Quigley: The addition of MRP has strengthened the scale and capabilities of our staffing, consulting, and RPO solutions in attractive customer end markets. We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in-demand specialties in which Kelly is well-positioned to compete and win. I'll share more later on how we'll leverage our momentum to propel us forward on the next leg of our specialty journey. First, I'll turn it over to Troy Anderson, who will lead the financial discussion on the call today, having completed a successful transition with Troy Anderson in December into the role of Chief Financial Officer. Troy, over to you for more details on our results in Q4 and full year.
Speaker Change: <unk>, an attractive customer end markets we.
Speaker Change: We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in demand specialties.
Speaker Change: And which Kelly is well positioned to compete and win.
Speaker Change: Share more later on how we'll leverage our momentum to propel us forward on the next leg of our specialty journey.
Speaker Change: First I will turn it over to Troy Anderson, who will lead the financial discussion on the call today, having completed a successful transition with Olivier T. Rowe in December into the role of Chief Financial Officer.
Speaker Change: Troy over to you for more details on our results in the fourth quarter and full year.
Troy Anderson: Thank you, Peter. Good morning, everybody. Before I get into the results, I want to thank the Kelly team for such a warm welcome during my Q1 with the company. It's been a pleasure diving into the business and seeing this team's dedication and commitment. I'm incredibly excited to execute on the opportunities in front of us to drive more value for our shareholders, customers, talent, and employees in 2025. As Peter said, we're pleased with our strong Q4 and full-year results and encouraged by the momentum we're building across our segments. As a reminder, for comparison, our reported results for 2023 included the European staffing business that was sold on 2 January 2024, and for 2024, include Motion Recruitment Partners since the 31 May acquisition date.
Speaker Change: Thank you Peter and good morning, everybody.
Speaker Change: Before I get into the results I want to thank the Kelly team for such a warm welcome during my first quarter with the company it.
Speaker Change: It's been a pleasure diving into the business and seeing this team's dedication and commitment I'm incredibly excited to execute on the opportunities in front of us to drive more value for our shareholders customers talent and employees in 2025.
Speaker Change: As Peter said, we're pleased with our strong fourth quarter and full year results and encouraged by the momentum we're building across our segments.
Speaker Change: As a reminder for comparison our reported results for 2023 included the European staffing business that was sold on January <unk> 2024, and for 2024 include motion recruitment partners. Since the May 31 acquisition date to provide greater visibility into the underlying trends in our operating results I will discuss year over year.
Troy Anderson: To provide greater visibility into the underlying trends in our operating results, I will discuss year-over-year changes on a reported and on an organic basis with the organic information excluding these items. Revenue for Q4 2024 totaled $1.19 billion, a decrease of 3.3% versus Q4 last year. On an organic basis, year-over-year revenue was up 4.4%. This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook. In the quarter, staffing revenue trended up positively, and we saw moderating declines in perm fees, which have a higher gross margin rate. Our outcome-based offerings, which on an organic basis is just over a third of our revenue in P&I and SET, and an even greater portion of gross profit also trended up positively.
Speaker Change: Year changes on a reported and on an organic basis with the organic information excluding these items.
Speaker Change: Revenue for the fourth quarter of 2024 totaled $1, one 9 billion a decrease of three 3% versus Q4 last year.
Speaker Change: On an organic basis year over year revenue was up four 4%.
Speaker Change: This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook.
Speaker Change: In the quarter staffing revenue trended up positively and we saw moderating declines in perm fees, which have a higher gross margin rate.
Speaker Change: Our outcome based offerings, which on an organic basis is just over a third of our revenue and P&I and set.
Speaker Change: An even greater portion of gross profit also trended up positively.
Troy Anderson: Drilling down into revenue results by segment, I will start with Kelly Education, which was up 12% year over year in the quarter, continuing its trend of double-digit revenue growth. The growth in the quarter reflects ongoing fill rate improvement and higher bill rates in our existing business, as well as net new customer wins. In the SET segment, revenue was up 38% on a reported basis, driven by the acquisition of MRP. SET organic revenue was down 4%, which was an improvement versus the prior quarter and outperformed the market despite the continued challenging environment. SET's organic revenue decline for the quarter reflects lower staffing market demand, with revenue down 5% across the staffing specialties, consistent with the Q3 decline, and down 2% in the outcome-based solutions, which improved relative to the Q3 and was down overall, primarily due to lower demand in certain industry verticals, such as telecom.
Speaker Change: Drilling down into revenue results by segment I'll start with the education, which was up 12% year over year in the quarter continuing its trend of double digit revenue growth the growth in the quarter reflects ongoing fill rate improvement and higher bill rates in our existing business as well as net new customer wins.
Speaker Change: In the <unk> segment revenue was up 38% on a reported basis driven by the acquisition of MRP.
Speaker Change: Organic revenue was down 4%, which was an improvement versus the prior quarter and outperformed the market. Despite the continued challenging environment.
Speaker Change: Set the organic revenue decline for the quarter reflects lower staffing market demand with revenue down 5% across the staffing specialties consistent with the third quarter decline and down 2% and the outcome based solutions, which improved relative to the third quarter and was down overall, primarily due to lower demand in certain industry verticals such as telecom.
Troy Anderson: We continue to see the outcome-based business, including our statementworX suite of solutions, as a growing portion of the market where we are driving our focus and continuing to innovate. In the OCG segment, revenue grew by 9%, driven by continued strong performance in the PPO specialty. Year-over-year declines in RPO and MSP reflect reduced hiring and contingent labor demand with our customers. Adding lower margin PPO revenue pressured gross in that margin for the OCG segment as a whole again this quarter. Going forward, OCG is well-positioned to drive revenue growth in both the MSP and RPO offerings, which have measurably higher gross margins as recent wins are implemented during the year and momentum in the sales pipeline is realized later in the year. Revenue in the Professional & Industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends.
We continue to see the outcome based business, including our statement works suite of solutions as a growing portion of the market, we are driving our focus and continuing to innovate.
Speaker Change: And the OCG segment revenue grew by 9% driven by continued strong performance in the PPO specialty.
Speaker Change: Year over year declines in <unk>, and MSP reflect reduced hiring and contingent labor demand with our customers.
Speaker Change: Adding lower margin PPO revenue pressured gross and net margin for the <unk> segment as a whole again this quarter.
Speaker Change: Forward OCG is well positioned to drive revenue growth in both the MSP and <unk> offerings, which have measurably higher gross margins as recent wins are implemented during the year and momentum in the sales pipeline is realized later in the year.
Speaker Change: Revenue in the professional industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends.
Troy Anderson: Revenue from staffing improved 3.7% year over year and reflects the success of our omni-channel strategy. Revenue in the outcome-based specialties was up 5.9%, driven by strong demand in semiconductors, logistics, manufacturing, and distribution. Consistent with SET, P&I is seeing stronger demand for its innovative portfolio of outcome-based solutions that meet clients' talent needs across a variety of skill sets. Reported gross profit was $241.5 million, reflecting a gross profit rate of 20.3%, an improvement of 100 basis points compared to the prior year quarter. On an organic basis, the GP rate declined 80 basis points in the quarter, with 70 basis points from business mix and 10 basis points from lower perm fees. The business mix impact showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates.
Speaker Change: Revenue from staffing improved three 7% year over year and reflects the success of our Omnichannel strategy.
Speaker Change: Revenue in the outcome based specialties was up five 9% driven by strong demand in semiconductors logistics manufacturing and distribution.
Speaker Change: Consistent with set P&I seeing stronger demand for its innovative portfolio of outcome based solutions that meet client's talent needs across a variety of skill sets.
Speaker Change: Reported gross profit was $241 5 million, reflecting a gross profit rate of 23% an improvement of 100 basis points compared to the prior year quarter.
Speaker Change: On an organic basis, the GP rate declined 80 basis points in the quarter was 70 basis points from business mix and 10 basis points from lower Perm fees.
Speaker Change: The business mix impacts showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates.
Troy Anderson: During the quarter, we saw GP rate improvement in SET as a result of the MRP acquisition, modest declines in Education and P&I, and a more significant decrease in OCG, reflecting the growth in PPO in the quarter. We continued improving our SG&A expense profile in the quarter with reported SG&A expenses of $217.4 million, down 6% year over year. On an adjusted organic basis, SG&A expense declined 4%. This decrease reflects our focused efforts to improve productivity and better align resource levels with volumes, as well as the impact of lower performance-related incentive compensation expenses. You'll note in our financials that we had some impairment activity during the quarter. As a result of positive subleasing activity for unused floors in our leased headquarters facility, we recognized an $8 million non-cash impairment charge for certain right-of-use assets related to the facility.
Speaker Change: During the quarter, we saw GP rate improvement and set as a result of the MRP acquisition modest declines in education and P&I.
Speaker Change: In a more significant decrease in OCG, reflecting the growth in PPO in the quarter.
Speaker Change: We continued improving our SG&A expense profile in the quarter with reported SG&A expenses of $217 4 million down 6% year over year.
Speaker Change: On an adjusted organic basis SG&A expense declined 4%.
Speaker Change: This decrease reflects our focused efforts to improve productivity and better align resource levels with volumes as well as the impact of lower performance related incentive compensation expenses.
Speaker Change: Youll note in our financials that we had some impairment activity during the quarter.
Speaker Change: As a result of positive sub leasing activity for unused floors in our leased headquarters facility, we recognized an $8 million noncash impairment charge for certain right of use assets related to the facility.
Troy Anderson: Additionally, we recognized a $72.8 million non-cash goodwill impairment charge related to the Softworld acquisition that we completed in 2021. While Softworld delivered revenue growth in 2024, measurably outperforming the market, its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year. We firmly believe that Softworld's specialty IT staffing, statement of work, and its outcome-based clinical science offerings are well-positioned to generate additional value as demand improves. Peter will provide more insight shortly into how we plan to accelerate that value capture in 2025 as we further integrate MRP with SET's portfolio of specialty businesses, including Softworld. Reported loss per share for Q4 was $0.90 compared to earnings per share of $0.31 in Q4 2023. On an adjusted basis, earnings per share was $0.82 compared to $0.93 in the prior year quarter.
Speaker Change: Additionally, we recognized a $72 8 million noncash goodwill impairment charge related to the software acquisition that we completed in 2021.
Speaker Change: While software delivered revenue growth in 2024, measurably outperforming the market its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year.
Speaker Change: We firmly believe that software of specialty staffing statement of work and its outcome based clinical science offerings are well positioned to generate additional value as demand improves.
Peter will provide more insight shortly into how we plan to accelerate that value capture in 2025, as we further integrate MRP with sets portfolio of specialty businesses, including software.
Speaker Change: Reported loss per share for the fourth quarter was <unk> 90 compared to earnings per share of <unk> 31 in Q4 2023.
Speaker Change: On an adjusted basis earnings per share was <unk> 82, compared to <unk> 93 in the prior year quarter.
Troy Anderson: The decline versus the prior year reflects increased net interest expense of $0.12 following the MRP acquisition and a one-time deferred income tax valuation allowance for lease benefit in 2023 of $0.25. Adjusted EBITDA was $43.5 million, an increase of 34% versus the prior year period, while adjusted EBITDA margin improved 110 basis points to 3.7%, beating our expectations for both measures. The 110 basis points of margin expansion includes a 50 basis point organic improvement. All 4 segments improved their organic adjusted EBITDA margin in the quarter versus last year. Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years. Before we look ahead, I'll reflect briefly on our full year results. Revenue was $4.3 billion, down 10.4%.
Speaker Change: The decline versus the prior year reflects increased net interest expense of 12.
Speaker Change: Following the MRP acquisition, and a onetime deferred income tax valuation allowance release benefit in 2023 of 25.
Speaker Change: Adjusted EBITDA was $43 5 million, an increase of 34% versus the prior year period.
Speaker Change: While adjusted EBITDA margin improved 110 basis points to three 7% beating.
Speaker Change: Beating our expectations for both measures.
Speaker Change: The 110 basis points of margin expansion includes a 50 basis point organic improvement.
Speaker Change: All four segments improved their organic adjusted EBITDA margin in the quarter versus last year.
Speaker Change: Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years.
Speaker Change: Before we look ahead I'll reflect briefly on our full year results.
Speaker Change: Revenue was $4 3 billion down 10, 4%.
Troy Anderson: However, organic revenue grew 0.5% for the year, reflecting solid execution and market share gains amid persistent market headwinds and overall double-digit market declines according to major industry analysts. Our 2024 GP rate improved 50 basis points. On an organic basis, our GP rate declined 110 basis points due to business mix and lower perm fees. We reported a loss from operations of $15.1 million for the full year, primarily due to $86.3 million of non-cash impairment charges. Adjusted EBITDA was $143.5 million, up 31%, and our adjusted EBITDA margin improved 100 basis points to 3.3%. We had a reported loss per share of $0.02 and earnings per share of $2.34 on an adjusted basis, an increase of $0.14. We ended the year with total available liquidity of $154 million, comprising $39 million in cash and $115 million of available liquidity on our credit facilities.
Speaker Change: Organic revenue grew 5% for the year, reflecting solid execution and market share gains amid persistent market headwinds.
Speaker Change: And overall double digit market declines according to major industry analysts.
Speaker Change: Our 2020 for GP rate improved 50 basis points on.
Speaker Change: On an organic basis, our GP rate declined 110 basis points due to business mix and lower perm fees.
Speaker Change: We reported a loss from operations of $15 1 million for the full year, primarily due to $86 3 million of noncash impairment charges.
Speaker Change: Adjusted EBITDA was $143 5 million up 31% and our adjusted EBITDA margin improved 100 basis points to three 3%.
Speaker Change: We had a reported loss per share of <unk> <unk> and earnings per share of $2 34 on an adjusted basis an.
Speaker Change: An increase of 14.
Speaker Change: We ended the year with total available liquidity of $154 million.
Speaker Change: Comprising $39 million in cash and $115 million of available liquidity on our credit facilities.
Troy Anderson: Total borrowing was $239 million at the end of the year, reflecting an adjusted EBITDA leverage ratio of 1.7. We'll continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns. Indicative of that, in Q4, we completed $10 million of our $50 million Class A share repurchase authorization, leaving us with 31.6 million Class A shares outstanding at the end of the quarter. Our operating cash flow and available liquidity give us ample financial flexibility to fund our operations and capitalize on attractive organic and inorganic investment opportunities. For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we have experienced the past few quarters and expect to see modest improvements in market conditions as we progress through the year.
Speaker Change: Total borrowing was $239 million at the end of the year, reflecting an adjusted EBITDA leverage ratio of one seven.
Speaker Change: We will continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns.
Indicative of that in the fourth quarter, we completed $10 million of our $50 million of class a share repurchase authorization.
Speaker Change: Leaving us with $31 6 million class a shares outstanding at the end of the quarter.
Speaker Change: Our operating cash flow and available liquidity give us ample financial flexibility to fund our operations and capitalize on attractive organic and inorganic investment opportunities.
Speaker Change: For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we've experienced the past few quarters.
Speaker Change: And expect to see modest improvements in market conditions as we progress through the year.
Troy Anderson: Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth. We also expect to continue to expand our net margin and ultimately cash flow by efficiently converting more of our top-line growth to bottom-line profitability. Our initial outlook will be for the H1 of the year, where we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition, with modest organic revenue growth. The MRP benefit will be slightly higher in Q1 than in Q2, given the 31 May 2024 acquisition date. The H1 growth will largely be driven by the Education segment, although their year-over-year quarterly growth rates won't be double digits like they were throughout 2024 as a result of their strong performance during the year. We expect the other segments to range from flat to showing a few points of decline.
Speaker Change: Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth.
Speaker Change: We also expect to continue to expand our net margin and ultimately cash flow by efficiently converting more of our topline growth the bottomline profitability.
Speaker Change: Our initial outlook will be for the first half of the year, where we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition with modest organic revenue growth.
Speaker Change: The MRP benefit will be slightly higher in Q1 than in Q2, given the May 31, 2020 for acquisition date.
Speaker Change: The first half growth will largely be driven by the education segment, although their year over year quarterly growth rates won't be double digits like they were throughout 2024 as a result of their strong performance during the year.
Speaker Change: We expect the other segments to range from flat to showing a few points of decline.
Troy Anderson: Moving on to gross profit, overall, we expect to see GP rate improvement of approximately 80 basis points in H1 of the year, reflecting the benefit of the MRP acquisition. We expect the organic GP rate to be roughly flat with Q1 down slightly. This is measurably improved relative to the 110 basis point organic decline for all of 2024. The improved GP rate performance reflects our expectation of overall mix improvement with outcome-based solutions and higher margin specialty offerings. Reflecting on SG&A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation-related actions over the past 2 years, and we'll continue to actively manage resources in line with revenue trends in each segment.
Speaker Change: Moving onto gross profit overall, we expect to see GP rate improvement of approximately 80 basis points in the first half of the year, reflecting the benefit of the MRP acquisition.
Speaker Change: We expect the organic GP rate to be roughly flat with Q1 down slightly this is measurably improved relative to the 110 basis point organic decline for all of 2020 for.
Speaker Change: The improved GP rate performance reflects our expectation of overall mix improvement with outcome based solutions and higher margin specialty offerings.
Speaker Change: Reflecting on SG&A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation related actions over the past two years.
Speaker Change: <unk> actively managed resources in line with revenue trends in each segment.
Troy Anderson: Total adjusted expenses will increase gradually in Q1 and Q2 relative to Q4 2024, in conjunction with revenue and the normal payroll tax and performance incentive resets at the beginning of the year. For depreciation and amortization, all in, we expect approximately $13.5 million each quarter. Given all the above, we expect adjusted EBITDA margin to improve roughly 10 basis points for H1 to approximately 3.6%, with Q1 being slightly lower and Q2 higher. We expect our effective tax rate to be in the upper teens for H1 2025. Finally, we expect to increase our CapEx and software development spending in 2025 as a result of the MRP integration and our overall enterprise technology modernization plans.
Speaker Change: Total adjusted expenses will increase gradually in the first and second quarters relative to the fourth quarter of 2024.
Speaker Change: In conjunction with revenue and the normal payroll tax and performance incentive resets at the beginning of the year.
Speaker Change: For depreciation and amortization all in we expect approximately $13 5 million each quarter.
Speaker Change: Given all of the above we expect adjusted EBITDA margin to improve roughly 10 basis points for the first half of the year to approximately three 6% with Q1 being slightly lower in Q2 higher.
Speaker Change: We expect our effective tax rate to be in the upper teens for the first half of 2025.
Speaker Change: And finally, we expect to increase our Capex and software development spending in 2025 as a result of the MRP integration and our overall enterprise technology modernization plans.
Troy Anderson: In closing, I want to thank our teams for the strong performance during the year and their dedication and commitment to the company overall, as well as our customers for giving us the opportunity to support them and for their continued partnership. With that, I'll turn the call back to Peter for his closing remarks.
Speaker Change: In closing I want to thank our teams for their strong performance during the year and their dedication and commitment to the company overall as well as our customers for giving us the opportunity to support them and for their continued partnership.
Peter Quigley: With that I'll turn the call back to Peter for his closing remarks.
Peter Quigley: Thanks for those insights, Troy. We move forward into 2025 propelled by positive momentum from our recent achievements and well-positioned to accelerate profitable growth as staffing demand rebounds. Our priorities for the year are clear. First, we'll deliver top-line growth by continuing to increase scale in our chosen specialties. To this end, we'll continue to execute our organic growth initiatives, including our omni-channel delivery strategy in P&I and our large enterprise account strategy, both of which we expect will continue to deliver gains in market share. In addition to these initiatives, our primary focus is the integration of MRP. Since completing the acquisition, we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business.
Peter Quigley: Thanks for those insights Troy, we move forward into 2025 propelled by positive momentum from our recent achievements and well positioned to accelerate profitable growth as staffing demand rebounds, our priorities for the year are clear.
First we will deliver topline growth by continuing to increase scale in our chosen specialties to this end, we will continue to execute our organic growth initiatives, including our omnichannel delivery strategy and P&I and our large enterprise account strategy both of which we expect will continue to deliver.
Peter Quigley: Gains in market share.
Peter Quigley: In addition to these initiatives our primary focus is the integration of MRP since completing the acquisition we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business at the core of the value case for this deal is the <unk>.
Peter Quigley: At the core of the value case for this deal is the highly complementary nature of MRP's portfolio of businesses and our SET and OCG businesses, respectively. To maximize value creation, we're integrating each of its respective business lines within our SET and OCG segments. We'll combine Motion Recruitment's IT staffing and consulting business with SET's technology specialty, which includes Softworld. This significantly increases the scale of our IT staffing and consulting business, propelling Kelly into the top 10 providers in the category. TG Federal will come together with SET's government specialty. This builds upon the life sciences and engineering workforce solutions we currently bring to our public sector partners and adds a strong IT solutions capability. Motion Recruitment's telecom staffing and SOW managed services business will integrate with SET's telecom specialty, enhancing our market-leading staffing and solutions provider in the telecom market.
Peter Quigley: Really complementary nature of Mrp's portfolio of businesses, and our SaaS and OCG businesses, respectively.
Peter Quigley: To maximize value creation, we're integrating each of its respective business lines within our set in OCG segments will combine motion recruitment it staffing and consulting business with <unk> technology specialty which include soft world. This significantly increases the scale of our staff.
Peter Quigley: And consulting business propelling Kelly into the top 10 providers in the category.
Peter Quigley: <unk> federal will come together with certain government specialty this builds upon the life Sciences and engineering workforce solutions. We currently bring to our public sector partners and adds a strong IP solutions capability motion recruitment telecom staffing nsfw managed services business.
Peter Quigley: Integrate with sets telecom specialty enhancing our market, leading staffing and solutions provider in the telecom market.
Peter Quigley: Finally, we'll combine MRP's Sevenstep business with KellyOCG's global RPO specialty. Differentiated by innovative technology, they'll create a leading talent solutions offering that will rank among the top five globally. Each of the combined business lines will be ready to go to market beginning in Q2 following the conclusion of the earn-out period included as part of the MRP transaction. Among the leaders we have designated for each of the combined businesses are members of the deep experienced management bench at MRP. By leveraging the unique strengths of each business, we're creating a clear pathway toward achieving revenue and cost synergies. We expect synergies to ramp throughout 2025 and into 2026, culminating in an EBITDA benefit of approximately $10 million. Second, we'll continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness.
Peter Quigley: Finally, we'll combine MRP seven step business with Kelly OCG as global RP O specialty differentiated by innovative technology. They will create a leading talent solutions offering that will rank among the top five globally.
Peter Quigley: Each of the combined business lines will be ready to go to market beginning in Q2. Following the conclusion of the earn out period included as part of the MRP transaction among.
Peter Quigley: Among the leaders we have designated for each of the combined businesses are members of the deep experienced management bench at MRP.
Peter Quigley: By leveraging the unique strengths of each business, we're creating a clear pathway towards achieving revenue and cost synergies, we expect synergies to ramp throughout 2025 and into 2026, culminating in an EBITDA benefit of approximately $10 million.
Peter Quigley: Second we will continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness.
Peter Quigley: To this end, in Q1 2025, we're bringing together KellyOCG and P&I under common operational management. This decision reflects shifting buying preferences among large enterprise customers as demand grows for integrated end-to-end workforce solutions that bundle traditional staffing services with advanced outsourcing and consulting capabilities. Unifying OCG and P&I positions Kelly to address these preferences more effectively by simplifying our go-to-market approach and unlocks new value-creating opportunities. The combined OCG and P&I business, along with our SET and Education businesses, will underpin the more streamlined operating model designed to accelerate profitable growth. Finally, we're laser-focused on driving incremental EBITDA margin expansion. The integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026. In addition, we'll continue to shift our business mix towards higher margin, higher growth areas, including outcome-based solutions.
Peter Quigley: To this end in the first quarter of 2025, we're bringing together Kelly OCG and P&I under common operational management.
Peter Quigley: This decision reflects shifting buying preferences, among large enterprise customers as demand grows for integrated end to end workforce solutions that bundled traditional staffing services with advanced outsourcing and consulting capabilities.
Peter Quigley: Unifying OCG and P&I positions Kelly to address these preferences more effectively by simplifying our go to market approach and unlocks new value, creating opportunities the combined OCG and P&I business, along with our set and education businesses will underpin the more streamlined.
Peter Quigley: <unk> model designed to accelerate profitable growth.
Peter Quigley: Finally, we are laser focused on driving incremental EBITDA margin expansion the integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026.
Peter Quigley: In addition, we will continue to shift our business mix towards higher margin higher growth areas, including outcome based solutions with strategic initiatives targeting both growth and efficiency, we're positioned to deliver top and bottom line results that outperformed the market on a consistent basis reinforcing.
Peter Quigley: With strategic initiatives targeting both growth and efficiency, we're positioned to deliver top and bottom-line results that outperform the market on a consistent basis, reinforcing that this is a different Kelly. I have great confidence in our team's capacity to execute against these ambitious priorities and achieve our performance expectations for the full year. With our team focused on our specialty growth strategy and guided by our noble purpose, I look forward to building on the positive momentum we created in 2024. Together, we'll deliver long-term value to all our stakeholders, connecting our talent and customers to limitless opportunities and rewarding our shareholders for placing their trust in our company. We're grateful for their support as we move forward on our journey to unleash Kelly's full potential. Liv, you can now open the call to questions.
Peter Quigley: That this is a different kelly.
Peter Quigley: I have great confidence in our team's capacity to execute against these ambitious priorities and achieve our performance expectations for the full year with our team focused on our specialty growth strategy and guided by our noble purpose I look forward to building on the positive momentum we created in 2024.
Peter Quigley: Together, we will deliver long term value to all our stakeholders connecting our talent and customers the limitless opportunities and rewarding our shareholders for placing their trust in our company.
Peter Quigley: We're grateful for their support as we move forward on our journey to unleash <unk> full potential.
Peter Quigley: Live with you can now open the call to questions.
Operator: Certainly. Ladies and gentlemen, if you wish to ask a question, please press star one one on your telephone keypad. You may withdraw your question by repeating the star one one command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press star one one at this time. Our first question will go to Joe Gomes with Noble Capital. Your line is now open.
Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad, mainly Chile. Your question by repeating just bought one one coming.
Speaker Change: Youre using a speakerphone, please pick up the handset before pressing the numbers.
Speaker Change: Once again, if you have a question you May press star one at this time.
Speaker Change: Our first question will go to Joe Gomes with Noble capital. Your line is now open.
Joe Gomes: Good morning.
Joe Gomes: Good morning, Nice morning, Gerrick, Thanks for taking my questions.
Peter Quigley: Morning, Joe.
Joe Gomes: Nice quarter. Thanks for taking my questions. I wanted to start off on the Kelly Education segment. Again, really strong revenues were up by over 12%, that was down. If you look at the full year, I think they were up 15.5%. Anything unusual? Were you expecting more in the Kelly Education segment? Was it in line with your expectations for the quarter?
Joe Gomes: I wanted to start off on the education segment again.
Joe Gomes: Strong revenues were up by over 12%, but that was down if you look at the full year I think they were up 15, 5%.
Joe Gomes: Anything unusual whether you're expecting more in the education segment was that in line with your expectations.
Joe Gomes: For the quarter.
Peter Quigley: Yeah. Thanks, Joe. The Kelly Education segment in Q4 was impacted significantly by the two hurricanes in the end of September, early October timeframe. That was not anticipated. While a hurricane can be common, the fact that there were two back-to-back created significant disruption in school districts in markets in which we participate. That was a significant contributing factor to the performance of Kelly Education in Q4.
Joe Gomes: Yes, Thanks, Joe.
Joe Gomes: The education segment in Q4 was impacted significantly by the.
Joe Gomes: Two hurricanes in the.
Joe Gomes: End of September early October timeframe.
Joe Gomes: That was not anticipated, while a hurricane can be com.
Joe Gomes: And the fact that there were two back to back created.
Joe Gomes: Significant disruption in school districts in markets in which we participate so that was a significant contributing factor to the performance of education in Q4.
Joe Gomes: Okay. Even with those, it still grew over 12%. That's fantastic there.
Joe Gomes: Okay.
Joe Gomes: Still grew 12 over 12% so that's fantastic.
Peter Quigley: Yeah.
Joe Gomes: In the release, you talked about some new customer wins and the sales pipeline momentum. Peter, just wondering if you could give us a little more color on that, the number of wins or growth in the pipeline. What more could you add to that statement that you had in the press release?
Joe Gomes: And then.
Joe Gomes: Your release, you talked about some new customer wins in the sales pipeline momentum.
Speaker Change: And Peter I, just wanted to give us a little more color on that.
Speaker Change: Kind of a number of wins or growth in the pipeline.
Speaker Change: What would you add to that statement that you had in the press release.
Peter Quigley: Well, in terms of education specifically, Joe, based on staffing industry analyst market share numbers, we continue to take share. We're taking share not just because we're competing on price, but we're competing on value. We're the market leader for a reason. We deliver higher fill rates and better performance for school districts across the country, and they recognize that value. We're very confident in our ability to continue to win more than our fair share of schools. We also are very encouraged by the performance of our therapy business in combination with our traditional K-12 core education business. We expect in the quarters to come to see meaningful contributions from the combination of traditional K-12 and therapy.
Joe Gomes: Well in terms of education, specifically, Joe we have.
Speaker Change: Based on staffing industry analysts market share numbers we.
Joe Gomes: Continuing to take share.
Speaker Change: And we're taking share not just because we're competing.
On on price, but we're competing on value. We are the market leader for a reason we deliver a <unk>.
Speaker Change: Higher fill rates.
Speaker Change: And better performance for school districts across the country and they recognize that value and so we're very confident in.
Speaker Change: Our ability to continue to win more than our fair share of of schools. We also are very encouraged by the.
Speaker Change: Performance of our therapy business in combination with our traditional K.
Speaker Change: <unk> core education business, and we expect in the quarters to come to see.
Speaker Change: Meaningful contributions from the combination of.
Speaker Change: Traditional K 12 and therapy.
Joe Gomes: Okay. On the M&A front, anything there? How's the market, I guess, or pricing? Is it kind of trending in your favor? Are there more opportunities coming across the sill there? Maybe give us a little more color on that also.
Speaker Change: Okay.
Speaker Change: On the M&A front.
Speaker Change: Seeing there how the market gas our pricing is it kind of trending in your favor.
Speaker Change: More opportunities coming across.
Speaker Change: The sale, there maybe give us a little more color on that also.
Peter Quigley: Yeah, Joe, it hasn't changed meaningfully in terms of the deal flow. It's still in a bit of a trough, I would say, relative to prior periods. The anticipated or hoped-for realignment of sellers' expectations about valuations is not immediately evident. There still appears to be some disconnect between valuation expectations and performance. We're actively monitoring the deal flow and actively engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.
Joe Gomes: Yeah, Joe It Hasnt changed meaningfully in terms of the deal flow.
Joe Gomes: It's still it's still in a bit of a <unk>.
Joe Gomes: Trough I would say relative to prior periods.
Joe Gomes: And the.
Joe Gomes: Anticipated or hoped for realignment of sellers' expectations about valuations is not is not immediately evident.
There is still.
Joe Gomes: Appears to be some disconnect between valuation expectations.
Joe Gomes: And performance.
Joe Gomes: But we're we're actively monitoring the.
Joe Gomes: Deal flow and actively.
Joe Gomes: <unk> engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.
Joe Gomes: Great. I'll get back in queue. Peter, it's been great working with you. I know it's early, and you're going to be here hopefully to the end of the year, but I just wanted to congratulate you on the career.
Joe Gomes: Great I'll get back in queue, Peter it's been great working with you I know its early and youre going to be here hopefully to the end of the year, but I just want to thank you.
Speaker Change: I congratulate you on the career.
Peter Quigley: Thank you. Thank you, Joe. I appreciate it, and likewise. Been a pleasure to work with you.
Peter: Thank you. Thank you Joe I appreciate it and likewise pleasure.
Speaker Change: Pleasure to work with you.
Operator: Thank you. Our next question coming from the line of Will Brunemann with Northcoast Research. Your line is now open.
Peter: Thank you.
Peter: Next question coming from the line of.
Peter: Well Benjamin with Northcoast Research your line is now open.
Will Brunemann: Hey, guys. How's it going?
Speaker Change: Hey, guys how has it gone.
Joe Gomes: Good, Will. How are you?
Speaker Change: Well how are you good morning.
Joe Gomes: Good morning.
Will Brunemann: I'm good. You said staffing revenue trended higher, and maybe you already gave a little bit of color on this, but you said staffing revenue trended higher in Q4. Was that mostly demand, or is that more so on the pricing side? If you could give me some insight on demand for perm and temp staffing and how that sort of progressed throughout Q4.
Speaker Change: Good.
Speaker Change: So you said staffing revenue trended higher and maybe you already gave a little bit color on this but you said staffing revenue trended higher in the fourth quarter.
Was that mostly demand or is that more so on the pricing side and then if you could give me some insight on demand for Perm.
Speaker Change: And temp staffing and how that sort of progressed throughout the quarter.
Troy Anderson: Yeah, sure. This is Troy. Good to talk to you, Will. Thanks for the question. The staffing, P&I was where we saw the strong demand on staffing in the quarter. They do tend to have a seasonal uptick in Q4, tend to progressively grow through the year and have a seasonal uptick, where I have been talking about the improvements in P&I throughout the year with their omni-channel strategy, along with their large account strategy and the outcome-based solutions. They had a good quarter, up 3%, 3.7% on staffing and up 5% on outcome-based. It was pretty consistent throughout the quarter. I mean, they finished strong in December, you start to get some anomalies with the holidays and weather and things like that.
Troy Anderson: Yes sure this is Troy.
Speaker Change: Good to talk to you will.
Speaker Change: For the question the staffing so P&I was where we saw the strong demand on staffing in the quarter. They do tend to have a seasonal uptick in the fourth quarter tend to progressively grow through the year and have a seasonal uptick.
Speaker Change: <unk> have been talking about the improvements in P&I throughout the year.
Speaker Change: With their omnichannel strategy, along with their large account strategy and the outcome based solutions. So they had a good quarter.
Speaker Change: Up 3% three 7% on staffing and up 5% on outcome based.
Speaker Change: And it was pretty consistent throughout the quarter I mean, they finished strong.
Speaker Change: In December but.
Speaker Change: You start to get some anomalies with the holidays and.
Speaker Change: And weather and things like that but but overall it was it was consistent performance that we've seen consistent performance.
Troy Anderson: Overall it was consistent performance, and we've seen consistent performance, improving performance throughout the year on the P&I side. SET, the staffing was pretty much consistent with Q3. Some ebbs and flows across the months, but down 5% in Q3 and down 5% in Q4. We saw some good improvement on the outcome-based side with SET, which helped them pull back a little bit from their Q3 decline.
Improving performance throughout the year the P&I side set the staffing was was pretty much consistent with Q3, some ebbs and flows across the months.
Speaker Change: But down 5% in Q3 and down five in Q4, we saw some good improvement on the outcome based side with set which helped them pullback.
Speaker Change: Pull back a little bit from their Q3 decline.
Will Brunemann: Okay, great. That's all. Thank you.
Speaker Change: Okay, Great. That's all thank you.
Speaker Change: Okay.
Peter Quigley: Thanks, Will.
Speaker Change: Thanks, Paul.
Operator: Thank you. Our next question coming from the line of Kevin Steinke with Barrington Research. Your line is now open.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Kevin Spanky with Barrington Research. Your line is now open.
Kevin Steinke: Good morning.
Kevin Spanky: Hey, good morning.
Troy Anderson: Morning, Kevin.
Speaker Change: Good morning, Kevin.
Peter Quigley: Morning.
Speaker Change: Good morning.
Kevin Steinke: Morning. Just wanted to start off by asking about overall customer sentiment and as you talked about your outlook for the H1 of 2025, you mentioned that you, I think you just expect the environment to be similar to what it has been. Are we just kind of still seeing general cautiousness? How are customers, in your view, thinking about the overall macroeconomic environment and how that might be impacting their plans and overall demand? Thanks.
Speaker Change: Good morning, just wanted to start off by asking about.
Speaker Change: Overall customer sentiment.
Speaker Change: As you talked about your outlook for the first half of 2025 you.
Speaker Change: You mentioned that you think you just expect the environment to be similar.
Speaker Change: To what it has been.
Speaker Change: So are we just kind of still seeing general cautiousness.
Speaker Change: How are customers in your view thinking about.
Speaker Change: The overall macro.
Speaker Change: Economic environment, and how that might be.
Speaker Change: Packaging.
Speaker Change: There.
Speaker Change: Their plans.
Speaker Change: Overall demand thanks.
Peter Quigley: Yeah, Kevin. Post the election, there was clearly a shift, I would say, towards more optimistic points of view from our customers in terms of the future business environment, tax policy, tax changes, relaxing of certain regulatory restrictions. As the administration took over and with a flurry of executive orders, I would say companies are taking a little bit more cautious approach, a wait-and-see, to understand the downstream impacts of some of the executive orders that have come out, as well as the pending legislation around budget and tax policy, et cetera. That's why we've landed on the H1 of the year being a continuation of what we've seen in the prior few quarters. Again, we're pleased with the fact that we're continuing to take share across our specialties and we will execute with that end in mind.
Speaker Change: Yes, Kevin.
Speaker Change: So post the election, there was clearly a.
Speaker Change: A shift I would say towards more optimistic point of view.
Speaker Change: From our customers in terms of.
Speaker Change: The future business environment.
Speaker Change: <unk> policy a tax changes.
Speaker Change: Relaxing of certain regulatory restrictions.
Speaker Change: But.
Speaker Change: As the administration.
Speaker Change: Took over and with a flurry of executive orders I.
Speaker Change: I would say companies are taking a little bit more of a cautious approach a wait and see.
Speaker Change: To understand the downstream impacts of some of the executive orders that have come out as well as the.
Speaker Change: Pending legislation.
Speaker Change: That around.
Speaker Change: Budget and tax policy et cetera.
Speaker Change: So thats why.
Speaker Change: We've.
Speaker Change: Landed on.
Speaker Change: The first half of the year being a continuation of what we've seen in the prior few quarters and again were.
Speaker Change: We're pleased the fact that we're continuing to take share across our specialties.
Speaker Change: We will execute.
Speaker Change: With that end in mind.
Kevin Steinke: Okay. That makes sense. Yeah. Just with regard to the organic growth outlook for H1 2025, you talked about Education continuing to grow nicely, although probably not at double digits. I assume that's just kind of a comp issue. Then on the other segments, I think you said flat to down modestly. Maybe if you could touch on the other segments in terms of the assumptions there as well. You've had some pretty nice momentum going here in Professional & Industrial and also outsourcing consulting. Maybe just talk about by segment, what you're factoring in terms of that outlook for H1 2025.
Speaker Change: Okay that makes sense.
Speaker Change: Yes.
Speaker Change: With regard to the organic growth outlook for the first half of 2025.
Speaker Change: You talked about education continue to grow nice continuing to grow nicely although.
Speaker Change: Yes.
Speaker Change: Probably not at double digits I assume that's just kind of a comp issue.
Speaker Change: And then on the other segments I think you said flat to down modestly.
Speaker Change: Maybe if you could touch on the other segments in terms of the assumptions there as well.
Speaker Change: <unk> had some pretty nice momentum going here in professional and industrial.
Speaker Change: And.
Speaker Change: Also.
<unk> and consulting so maybe.
Speaker Change: Just talked about.
Speaker Change: By segment.
Speaker Change: Sure.
Speaker Change: Factoring in in terms of.
Speaker Change: That outlook for the first half of 2025.
Troy Anderson: Yeah, sure. Kevin, this is Troy. Appreciate the question. Our H1 up approximately 10 with MRP and then roughly flat or modest growth on organic is not significantly different than our H2 performance from 2024. We were up about 2, if you look at the H2. When you think about the market conditions as we were just discussing and the customer sentiment, again, it's not entirely different. Then you do get some of the dynamics you mentioned. Education, yes, is predominantly on the compares. Keep in mind, they operate more on a school year basis, so their new wins come in in the spring and summer. They're implementing going into September. The benefit of any new wins we've entirely captured at this point in the revenue performance.
Kevin Spanky: Yes, sure Kevin destroy.
Speaker Change: I appreciate the question.
Speaker Change: Our first half.
Speaker Change: Up 10.
Speaker Change: 10, with MRP and then.
Speaker Change: Roughly flat or modest growth on organic.
Speaker Change: Significantly different than our <unk> performance from 'twenty four we were up about two if you look at second half. So when you think about the market conditions as we were just discussing in the customer sentiment.
Speaker Change: Again, it's not entirely different and then you do get some of the dynamics you mentioned education, Yes is predominantly on the compares keep in mind. They operate more on a school year basis. So they are new wins come in in the spring and summer they are implementing going into September.
Speaker Change: So the benefit of any new wins, we've entirely captured at this point in the revenue performance.
Troy Anderson: We'll see that uptick in the H2 of the year as we capture more share and expand into greenfield areas on the education side. I would expect not double digits in the H1, but maybe some uptick in the H2. On P&I, a little bit of a pullback maybe. Again, very strong Q4. Outcome-based, again, drove a good bit of that. There was a little bit of a favorable compare on outcome-based versus Q4 of the prior year, where we had a bit of a pullback and some seasonality. P&I probably in the more roughly flat range SET. Again, coming off -3% Q2, -5% Q3, -4% Q4.
Speaker Change: <unk>.
Speaker Change: We will see that uptick in the back half of the year as we as we capture more share and expand into greenfield areas on the education side, So I would expect.
Speaker Change: <unk>.
Speaker Change: Not double digits in first half, but maybe some uptick in the back half on P&I.
Speaker Change: A little bit of a pullback maybe relative again, a very strong Q4.
Speaker Change: Outcome based again drove a good bit of that there was a little bit of a favorable compare on outcome based versus Q4 of the prior year, where we had a bit of a pullback.
Speaker Change: Some seasonality so.
P&I, probably in the more roughly flat range set again coming off of.
Speaker Change: Minus three in Q2 minus <unk> three minus four.
Speaker Change: Q4, good performance and outcome based but.
Troy Anderson: Good performance in outcome-based, but still a lot of challenge in the IT market, and I think as you've seen probably in some of the peers and just some of the industry data that's come out, probably a little bit of a pullback here earlier in January and looking for some better performance as the quarter progresses. Probably down, not inconsistent with Q4, maybe a little bit better than that. Then OCG, a dynamic going on there. The growth in 2024 was driven entirely by PPO, and as we've talked about all year and you've seen in the GP rates, that puts a lot of pressure on the GP side. We're looking for more of a remix in 2025. We've talked about the pipeline and new wins there, which takes a while for those to implement.
Speaker Change: Still a lot of challenge in the.
Speaker Change: Market and I think as <unk> seen probably in some of the peers and just the.
Speaker Change: Some of the industry data that's come out probably a little bit of a pullback here earlier in January and looking for.
Speaker Change: Some better performance as the quarter progresses, so probably down.
Speaker Change: Not in consistent with Q4, maybe a little bit better than that.
Speaker Change: And then OCG dynamic going on there the growth in 24 was was driven entirely by PPO and as we've talked about all year and you've seen in the in the GP rates that puts a lot of pressure on the on the GP side.
Speaker Change: And we're looking for more of a remix in 2025, we've talked about the pipeline and new wins, there, which which takes a while for those to implement so we see a lot of MSP and <unk>.
Troy Anderson: We see a lot of MSP and RPO opportunities that have been won and are implementing. PPO is a bit of a counter-cyclical. In softer markets, people will go more to the payrolling route of contractors they've had before versus going out for net new. Really you'll see a remix on OCG, where we have lower PPO growth, but being replaced by MSP and RPO growth, which will net benefit us from a margin perspective. You won't see the growth rates in OCG in 2025 that you've seen this year.
Speaker Change: Opportunities that are or have been won and are implementing.
And <unk> is a bit of a counter cyclical in softer markets.
Speaker Change: We will go more to the payroll route of contractors, they've had before versus going out for net new.
Speaker Change: So really youll see a remix on OCG, where we have.
Speaker Change: Lower PPA growth, but being replaced by MSP, and <unk> growth, which will net benefit us from a margin perspective, but.
Speaker Change: You won't see the growth rates in OCG and 25 that.
Speaker Change: <unk> seen this year.
Kevin Steinke: All right. Thank you. That's helpful color. When you were talking about bringing together Professional & Industrial and Outsourcing & Consulting under common operational management, is that also going to be brought together from a segment reporting perspective? Or how will you approach that going forward?
Speaker Change: Alright, thank you.
Speaker Change: Helpful color.
Speaker Change: And when you.
Speaker Change: You were talking about.
Speaker Change: Bringing together professional and industrial.
Speaker Change: And outsourcing outsourcing and consulting under.
Speaker Change: Common operational management.
Speaker Change: Is that also.
Speaker Change: It's going to be brought together from a <unk>.
Speaker Change: Segment reporting perspective.
Speaker Change: Or how will you approach that.
Troy Anderson: Sure. We're going through the segment reporting for 2025, the analysis associated with that as we speak. We haven't made any definitive conclusions yet. We have some other elements of customer accounts and some offerings and the like that we're looking at making some changes with as well. We'll have a full readout in the Q1, and of course, bridge you all very clearly from our reporting structure for 2024 to any changes in 2025.
Speaker Change: For sure we're going through the segment reporting for 'twenty five the analysis associated with that as we speak. So we haven't made any definitive conclusions yet we had some other.
Speaker Change: Elements of customer accounts, and some offerings and the like that we're looking at <unk>.
Speaker Change: Making some changes with as well so we will have a full read out in the Q1 and of course Bridge Bridge you all very clearly from.
Speaker Change: Our reporting structure for 24% any any changes in 'twenty five.
Kevin Steinke: Okay, sounds good. Thanks for taking the questions. I'll turn it over.
Speaker Change: Okay sounds good thanks for taking our questions I'll turn it over.
Troy Anderson: Thanks, Kevin.
Speaker Change: Thanks, Kevin Thanks, Kevin.
Operator: Thank you. Our next question coming from the lineup, Marc Riddick with Sidoti. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Marc Riddick with Sidoti. Your line is now open.
Marc Riddick: Hey, good morning.
Speaker Change: Hey, good morning.
Peter Quigley: Morning, Marc.
Speaker Change: Good morning, Mark good morning.
Peter Quigley: Good morning.
Marc Riddick: First of all, Peter, I just want to say it's been a pleasure working with you and looking forward to working with you through the remainder of the year at least. Troy, welcome. Looking forward-
Speaker Change: First of all Peter.
Speaker Change: It's been a pleasure working with you and looking forward to working with you through the remainder of the year at least.
Speaker Change: Welcome.
Speaker Change: Yes.
Troy Anderson: Thank you, Marc.
Speaker Change: And looking at.
Marc Riddick: to working with you going forward as well.
Speaker Change: Going forward as well.
Troy Anderson: Appreciate it.
Marc Riddick: I did want to touch a little bit on the Actually, no. I wanted to go back for a moment. You did have a smaller acquisition that was announced back in November in the education space. Maybe spend just a little time talking about that and sort of how that opportunity came about with Children's Therapy Center.
Speaker Change: So I did want to touch a little bit.
Speaker Change: The.
Speaker Change: Actually no I wanted to go back for a moment.
Speaker Change: You did have a smaller acquisition.
Speaker Change: That was announced back in November.
Speaker Change: Jason Space, maybe just maybe spend a little time talking about that.
Speaker Change: Sort of how that opportunity came about with children's therapy Center.
Troy Anderson: Thanks, Marc. Small acquisition, a little over $3 million, Children's Therapy Center. Very interesting space for the therapy business part of Kelly Education because CTC operates brick-and-mortar clinics that complement the in-school therapy that PTS provides to our school dist customers. Because they're clinics, they're not bound only to school hours or even the school calendar. It provides us with an opportunity to provide services outside of school time and even during the summer months. That can be very attractive to therapists that want a more regular schedule. We're very excited to essentially pilot this complement to our PTS business. So far, we're very pleased with how the integration is going. As you know, the therapy business commands significantly higher gross margins than our traditional K-12 business does. We're excited about the possibility to further expand our therapy practice through CTC.
Speaker Change: Yes.
Thanks Mark.
Speaker Change: Small acquisition, a little over $3 million.
Speaker Change: Children therapy Center.
Speaker Change: Barry.
Speaker Change: Interesting space for that therapy business part of Kelly education because.
Speaker Change: CTC operates.
Speaker Change: Brick and mortar clinics that complement the in school.
Speaker Change: Therapy that Pts.
Speaker Change: <unk> provides to our school.
Speaker Change: <unk> customers.
Speaker Change: And because their clinics, they're not bound.
Speaker Change: Only two school hours or even the calendar school calendar so.
Speaker Change: It provides us with an opportunity to.
Speaker Change: Provide services outside of school time, and even during the summer months.
Speaker Change: It can be very attractive to therapists that one or more.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Schedule.
Speaker Change: So we're very excited to essentially pilot.
Speaker Change: <unk>.
Speaker Change: Complement to our Pts business and so far we're very pleased with how the integration is going and as.
Speaker Change: You know the therapy business.
Speaker Change: Commands significantly higher gross margins than our traditional K 12 business does so we're we're.
Speaker Change: Excited about the possibility to further expand our therapy practice through CTC.
Marc Riddick: Excellent. Shifting gears, as far as the sort of cash usage and the like of it, we did sort of notice in prepared remarks around the share repurchase activity during Q4. I wanted to sort of touch a little bit on that appetite going forward as well as it seems as though there seems to be some comfort, at least with the prepared remarks that you already had regarding the valuation gulf, I suppose. Maybe if you could talk a little bit about what acquisition prioritization you may have now and if that's shifted at all over the last year or so.
Speaker Change: Excellent and then shifting gears as far as the.
Speaker Change: Sort of cash usage and the likely did sort of.
Speaker Change: And.
Speaker Change: In prepared remarks around the.
Speaker Change: Share repurchase activity during the fourth quarter.
Speaker Change: I wanted to touch a little bit on sort of.
Speaker Change: That appetite going forward as well as it seems as though.
Speaker Change: There seems to be some comfort at least.
Speaker Change: The prepared remarks that you already have regarding the.
Speaker Change: The valuation Gulf I, suppose, but maybe if you could talk a little bit about what what acquisition prioritization you may have now and if that's shifted at all over the last year or so.
Speaker Change: Thank you.
Troy Anderson: Yeah, sure. Thanks, Marc. This is Troy. Yes, completed the $10 million share repurchase in Q4. It's a 2-year authorization. Clearly there was a pretty significant disconnect in Q4 on the share price coming out of the Q3 report. We felt it was important to be in the market there. We continue to believe very strongly in the Kelly strategy and our ability to execute against that in 2025 and over the coming years and still believe there's a disconnect. We also want to make sure that we're focused on investing in the business to support that strategy, drive growth both organically and inorganically, maintain the dividend, and of course look for opportunities for debt repayment.
Speaker Change: Yeah sure Thanks, Marc destroyed.
Speaker Change: Yes completed the 10 million share repurchased $10 million share repurchase in Q4. It is a two year authorization.
Speaker Change: Clearly there was a pretty significant disconnect in the fourth quarter on the share price coming out of the Q3 report.
Speaker Change: And so we felt it was important to be in the market there.
Speaker Change: We continue to.
Speaker Change: We believe very strongly in the Kelly strategy and our ability to execute against that.
Speaker Change: 25% over the coming years and still believe there is a disconnect but.
Speaker Change: We also want to make sure that we're focused on investing in the business to support that strategy drive growth both organically and Inorganically.
Speaker Change: Maintaining the dividend and of course look.
Speaker Change: For opportunities for debt repayment and our net debt went up about $4 million in the quarter, but that included the $10 million of share repurchase plus the $3 million or so that Peter referenced with CTC.
Troy Anderson: Our net debt went up about $4 million in the quarter. That included the $10 million of share repurchase plus the $3 million or so that Peter referenced with CTC. I think our bias probably in the near term is a little bit more toward the repayment and investing in growth to drive further shareholder value creation. We have the authorization available there and we'll continue to look at return to shareholder as an option throughout that time horizon.
Speaker Change: So I think our bias probably in the near term is a little bit more toward the repayment and investing in growth to drive further shareholder value creation, but we have the authorization available there and we will continue to look at return to shareholder as an option throughout that time horizon.
Marc Riddick: Great. Thank you very much.
Speaker Change: Great. Thank you very much.
Peter Quigley: Thanks, Marc.
Mark: Thanks Mark.
Operator: Thank you. I see there are no further questions in the queue at this time. I will now turn the call back over to Mr. Peter Quigley for any closing remarks.
Mark: Thank you.
Speaker Change: That said there are no further questions in the queue. At this time I will now turn the call back over to Mr. Peter Quigley for any closing remarks.
Peter Quigley: Yeah, thanks, Liv. I think we can conclude the call. Thank you everybody for your time this morning and appreciate your participation. Thank you, Liv.
Peter Quigley: Yes. Thanks.
Speaker Change: I think we can I think we can conclude the call and thank you everybody for your time this morning and.
Peter Quigley: I appreciate your participation. Thank you. Thank you.
Troy Anderson: Thank you.
Operator: Good morning, and welcome to Kelly Services' Q4 Earnings Conference Call. All parties will be on listen only until the question and answer portion of the presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's Head of Investor Relations. Please go ahead.
Speaker Change: Ladies and gentlemen, thank you for your participation.
Peter Quigley: This concludes today's conference call you may now disconnect.
Peter Quigley: Yes.
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Peter Quigley: [music].
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Peter Quigley: [music].
Speaker Change: Good morning, and welcome to Kelly services fourth quarter earnings Conference call.
Speaker Change: All parties will be on listen only until the question and is a portion of the presentation.
Speaker Change: Today's call is being recorded at the request of Kelly services.
Speaker Change: Anyone has any objections you may disconnect at this time.
I would now like to turn the meeting over to your host Mr. Scott Thomas Kelly's head of Investor Relations. Please go ahead.
Scott Thomas: Thank you, Liv. Good morning, and welcome to Kelly Services' Q4 and full year conference call. With me today are Kelly Services' President and Chief Executive Officer, Peter Quigley, and our Chief Financial Officer, Troy Anderson. Before we begin, I will remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. In addition, we will discuss certain data 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.
Speaker Change: Thank you Lynn good.
Speaker Change: And welcome to Kelly's fourth quarter and full year conference call.
Speaker Change: With me today are Kelly's President and Chief Executive Officer, Peter Quigley, and our Chief Financial Officer Troy Anderson.
Speaker Change: Before we begin I'll remind you that the comments made during today's call, including the Q&A session may include forward looking statements about our expectations for future performance.
Speaker Change: Actual results could differ materially from those suggested by our comments, we do not assume any 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, we will discuss certain data on a reported and on an adjusted basis.
Speaker Change: Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations.
Scott Thomas: For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation, and once filed, Form 10-K, all of which can be accessed through our investor relations website at ir.kellyservices.com. I will now turn the call over to Kelly's President and Chief Executive Officer, Peter Quigley.
Speaker Change: For more information regarding non-GAAP measures and other required disclosures. Please refer to our earnings press release presentation and once filed Form 10-K, all of which can be accessed through our investor relations website at IR Dot Kelly services Dot com.
I will now turn the call over to Kelly, President and Chief Executive Officer, Peter quickly.
Peter Quigley: Thank you, Scott. Good morning, everyone. Before I share my reflections on our Q4 and full year performance, I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After 22 years with Kelly, I intend to retire as President and CEO by the end of this year. The board has initiated a process to identify my successor, engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates. I plan to continue serving in my current role until the board of directors appoints Kelly's next CEO, and we can facilitate a smooth transition. Over the past few years, we have made meaningful strides on our specialty growth journey, and Kelly is well-positioned to realize the value creation opportunities that lie ahead.
Peter Quigley: Thank you Scott and good morning, everyone.
Kelly: Before I share my reflections on our fourth quarter and full year performance I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After 22 years with Kelly I intend to retire as president and CEO by the end of this year. The board has initiated a process.
Kelly: Just to amplify my successor, engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates I plan to continue serving in my current role until the board of directors appoints Kelly's next CEO and we can facilitate a smooth transition.
Kelly: Over the past few years, we have made meaningful strides on our specialty growth journey, and Kelly is well positioned to realize the value creation opportunities that lie ahead I'm proud of the progress we have made and I look forward to concluding my tenure with a strong 2025 defined by continued.
Peter Quigley: I'm proud of the progress we have made, and I look forward to concluding my tenure with a strong 2025 defined by continued growth and strategic evolution. With new leadership and as market conditions improve, the board and I are confident that Kelly will reach new heights and create even more value for our clients, talent, employees, and shareholders. With that, let's review the highlights from our performance in Q4 and full year. In Q4, Kelly delivered both top and bottom-line growth on a year-over-year basis, increasing organic revenue by more than 4% and adjusted EBITDA by 34%. This reflects strong profitability for the quarter as we delivered 110 basis points of margin expansion through targeted organic and inorganic initiatives. Total company performance exceeded the outlook we provided in November and continued to outpace the market.
Kelly: Road and strategic evolution.
Speaker Change: With new leadership and as market conditions improve the board and I are confident that Kelly will reach new heights, and create even more value for our clients talent employees and shareholders with that let's review the highlights from our performance in the fourth quarter and full year.
Speaker Change: In the fourth quarter, Kelly delivered both top and bottom line growth on a year over year basis, increasing organic revenue by more than 4% and adjusted EBITDA by 34%.
Speaker Change: This reflects strong profitability for the quarter as we delivered 110 basis points of margin expansion through targeted organic and inorganic initiatives total company performance exceeded the outlook. We provided in November and continued to outpace the market at the segment level education delivered another.
Peter Quigley: At the segment level, Education delivered another quarter of double-digit revenue growth and accelerated the expansion of our higher-margin therapy business through the acquisition of Children's Therapy Center. In SET, the revenue deceleration we experienced early in Q3 subsided in Q4, and we captured growing demand for our life sciences specialty and our higher-margin statementworX solutions. Both OCG and P&I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share. Our positive performance in Q4 bookended a year of significant strategic progress. Last February, I said that 2024 would be an inflection point in Kelly's journey by capturing a greater share of customer demand and by more effectively converting top-line growth to bottom-line profitability. Today, I'm pleased to say that we delivered on our commitments and are poised to continue doing so in 2025.
Speaker Change: Quarter of double digit revenue growth and accelerated the expansion of our higher margin therapy business through the acquisition of children's therapy Center.
Speaker Change: And set the revenue deceleration we experienced early in Q3 subsided in Q4, and we captured growing demand for our life Sciences specialty and our higher margin statement works solutions.
Speaker Change: Both OCG and P&I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share.
Speaker Change: Our positive performance in the fourth quarter book ended a year of significant strategic progress.
Speaker Change: Last February I said that 2024 would be an inflection point in Kelly's journey by capturing a greater share of customer demand and by more effectively converting topline growth to bottom line profitability.
Speaker Change: Today I am pleased to say that we delivered on our commitments and are poised to continue doing so in 2025.
Peter Quigley: We continued to accelerate profitable growth, delivering positive organic revenue growth on a year-over-year basis and outperforming the market across our specialties. We remained laser-focused on improving profitability as well, delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full-year EBITDA margin to 3.3% on an adjusted basis. This represents a significant increase over our recent historical average of approximately 2%. We unlocked additional value creating opportunities and further streamlined Kelly's operating model, completing the sale of our European staffing business for more than $100 million. We also completed the sale of Ayers Group in June, enabling OCG to sharpen its focus on global RPO and MSP solutions. Finally, we redeployed capital in pursuit of inorganic investments in higher margin, higher growth specialties with the transformational acquisition of Motion Recruitment Partners.
Speaker Change: We continued to accelerate profitable growth delivering positive organic revenue growth on a year over year basis, and outperforming the market across our specialties.
Speaker Change: We remain laser focused on improving profitability as well delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full year EBITDA margin to three 3% on an adjusted basis. This represents a significant increase over our recent.
Speaker Change: Historical average of approximately 2%.
Speaker Change: We unlocked additional value, creating opportunities and further streamline Kelly's operating model completing the sale of our European staffing business for more than $100 million. We also completed the sale of Arris group in June enabling OCG to sharpen its focus on global <unk> and MSP solutions.
Speaker Change: Finally, we redeployed capital in pursuit of inorganic investments in higher margin higher growth specialties with the transformational acquisition of motion recruitment partners. The addition of MRP has strengthened the scale and capabilities of our staffing consulting and <unk> solutions.
Peter Quigley: The addition of MRP has strengthened the scale and capabilities of our staffing, consulting, and RPO solutions in attractive customer end markets. We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in-demand specialties in which Kelly is well positioned to compete and win. I'll share more later on how we'll leverage our momentum to propel us forward on the next leg of our specialty journey. First, I'll turn it over to Troy Anderson, who will lead the financial discussion on the call today, having completed a successful transition with Olivier Thirot in December into the role of chief financial officer. Troy, over to you for more details on our results in the Q4 and full year.
Speaker Change: <unk>, an attractive customer end markets we.
We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in demand specialties.
Speaker Change: And which Kelly is well positioned to compete and win.
Speaker Change: Share more later on how we'll leverage our momentum to propel us forward on the next leg of our specialty journey.
Speaker Change: First I will turn it over to Troy Anderson, who will lead the financial discussion on the call today, having completed a successful transition with Olivier T. Rowe in December into the role of Chief Financial Officer Troy.
Speaker Change: Troy over to you for more details on our results in the fourth quarter and full year.
Troy Anderson: Thank you, Peter, and good morning, everybody. Before I get into the results, I want to thank the Kelly team for such a warm welcome during my first quarter with the company. It's been a pleasure diving into the business and seeing this team's dedication and commitment. I'm incredibly excited to execute on the opportunities in front of us to drive more value for our shareholders, customers, talent, and employees in 2025. As Peter said, we are pleased with our strong Q4 and full year results and encouraged by the momentum we are building across our segments. As a reminder, for comparison, our reported results for 2023 included the European staffing business that was sold on 2 January 2024, and for 2024 include Motion Recruitment Partners since the 31 May acquisition date.
Speaker Change: Thank you Peter and good morning, everybody before I get into the results I want to thank the Kelly team for such a warm welcome during my first quarter with the company.
Speaker Change: It's been a pleasure diving into the business and seeing this team's dedication and commitment I'm incredibly.
Speaker Change: Excited to execute on the opportunities in front of us to drive more value for our shareholders customers talent and employees in 2025.
Speaker Change: As Peter said, we're pleased with our strong fourth quarter and full year results and encouraged by the momentum we're building across our segments.
As a reminder for comparison our reported results for 2023 included the European staffing business that was sold on January <unk> 2024, and for 2024 include motion recruitment partners. Since the May 31 acquisition date to provide greater visibility into the underlying trends in our operating results I will discuss year over year.
Troy Anderson: To provide greater visibility into the underlying trends in our operating results, I'll discuss year-over-year changes on a reported and on an organic basis with the organic information excluding these items. Revenue for Q4 2024 totaled $1.19 billion, a decrease of 3.3% versus Q4 2023. On an organic basis, year-over-year revenue was up 4.4%. This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook. In the quarter, staffing revenue trended up positively, and we saw moderating declines in perm fees, which have a higher gross margin rate. Our outcome-based offerings, which on an organic basis is just over a third of our revenue in P&I and SET, and an even greater portion of gross profit, also trended up positively.
Speaker Change: Our changes on a reported and on an organic basis with the organic information excluding these items.
Speaker Change: Revenue for the fourth quarter of 2024 totaled $1 $1 9 billion, a decrease of three 3% versus Q4 last year.
Speaker Change: On an organic basis year over year revenue was up four 4%.
Speaker Change: This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook.
Speaker Change: In the quarter staffing revenue trended up positively and we saw moderating declines in perm fees, which have a higher gross margin rate.
Speaker Change: Our outcome based offerings, which on an organic basis is just over a third of our revenue and P&I and set.
Speaker Change: In even greater portion of gross profit also trended up positively.
Troy Anderson: Drilling down into revenue results by segment, I will start with Kelly Education, which was up 12% year over year in the quarter, continuing its trend of double-digit revenue growth. The growth in the quarter reflects ongoing fill rate improvement and higher bill rates in our existing business, as well as net new customer wins. In the SET segment, revenue was up 38% on a reported basis, driven by the acquisition of MRP. SET organic revenue was down 4%, which was an improvement versus the prior quarter and outperformed the market despite the continued challenging environment. SET's organic revenue decline for the quarter reflects lower staffing market demand, with revenue down 5% across the staffing specialties, consistent with the Q3 decline, and down 2% in the outcome-based solutions, which improved relative to the Q3 and was down overall, primarily due to lower demand in certain industry verticals, such as telecom.
Speaker Change: Drilling down into revenue results by segment I'll start with education, which was up 12% year over year in the quarter continuing its trend of double digit revenue growth the growth in the quarter reflects ongoing fill rate improvement and higher bill rates in our existing business as well as net new customer wins.
Speaker Change: And the <unk> segment revenue was up 38% on a reported basis driven by the acquisition of MRP.
Speaker Change: Organic revenue was down 4%, which was an improvement versus the prior quarter and outperformed the market. Despite the continued challenging environment.
Speaker Change: Set the organic revenue decline for the quarter reflects lower staffing market demand with revenue down 5% across the staffing specialties consistent with the third quarter decline and down 2% and the outcome based solutions, which improved relative to the third quarter and was down overall, primarily due to lower demand in certain industry verticals such as telecom.
Troy Anderson: We continue to see the outcome-based business, including our statementworX suite of solutions, as a growing portion of the market where we are driving our focus and continuing to innovate. In the OCG segment, revenue grew by 9%, driven by continued strong performance in the PPO specialty. Year-over-year declines in RPO and MSP reflect reduced hiring and contingent labor demand with our customers. Adding lower margin PPO revenue pressured gross margin for the OCG segment as a whole again this quarter. Going forward, OCG is well positioned to drive revenue growth in both the MSP and RPO offerings, which have measurably higher gross margins as recent wins are implemented during the year and momentum in the sales pipeline is realized later in the year.
Speaker Change: We continue to see the outcome based business, including our statement works suite of solutions as a growing portion of the market, we are driving our focus and continuing to innovate.
Speaker Change: And the OCG segment revenue grew by 9% driven by continued strong performance in the PPO specialty.
Speaker Change: Year over year declines in <unk>, and MSP reflect reduced hiring and contingent labor demand with our customers.
Speaker Change: Adding lower margin PPO revenue pressured gross in that margin for the <unk> segment as a whole again this quarter.
Speaker Change: Going forward OCG is well positioned to drive revenue growth in both the MSP and <unk> offerings, which have measurably higher gross margins as recent wins are implemented during the year and momentum in our sales pipeline is realized later in the year.
Troy Anderson: Revenue in the Professional & Industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends. Revenue from staffing improved 3.7% year over year and reflects the success of our omni-channel strategy. Revenue in the outcome-based specialties was up 5.9%, driven by strong demand in semiconductors, logistics, manufacturing, and distribution. Consistent with SET, P&I is seeing stronger demand for its innovative portfolio of outcome-based solutions that meet clients' talent needs across a variety of skill sets. Reported gross profit was $241.5 million, reflecting a gross profit rate of 20.3%, an improvement of 100 basis points compared to the prior year quarter. On an organic basis, the GP rate declined 80 basis points in the quarter, with 70 basis points from business mix and 10 basis points from lower perm fees.
Speaker Change: Revenue in the professional industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends.
Speaker Change: From staffing improved three 7% year over year and reflects the success of our Omnichannel strategy.
Speaker Change: Revenue in the outcome based specialties was up five 9% driven by strong demand in semiconductors logistics manufacturing and distribution.
Speaker Change: Consistent with set P&I seeing stronger demand for its innovative portfolio of outcome based solutions that meet client's talent needs across a variety of skill sets.
Speaker Change: Reported gross profit was $241 5 million.
Speaker Change: Collecting a gross profit rate of 23% an improvement of 100 basis points compared to the prior year quarter.
On an organic basis, the GP rate declined 80 basis points in the quarter was 70 basis points from business mix and 10 basis points from lower Perm fees.
Troy Anderson: The business mix impact showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates. During the quarter, we saw GP rate improvement in SET as a result of the MRP acquisition, modest declines in Education and P&I, and a more significant decrease in OCG, reflecting the growth in PPO in the quarter. We continued improving our SG&A expense profile in the quarter with reported SG&A expenses of $217.4 million, down 6% year over year. On an adjusted organic basis, SG&A expense declined 4%. This decrease reflects our focused efforts to improve productivity and better align resource levels with volumes, as well as the impact of lower performance-related incentive compensation expenses. You'll note in our financials that we had some impairment activity during the quarter.
Speaker Change: The business mix impact showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates during the quarter, we saw GP rate improvement and set as a result of the MRP acquisition modest declines in education and P&I.
Speaker Change: And a more significant decrease in OCG, reflecting the growth in PPO in the quarter.
Speaker Change: We continued improving our SG&A expense profile in the quarter with reported SG&A expenses of $217 4 million down 6% year over year.
Speaker Change: On an adjusted organic basis SG&A expense declined 4%.
Speaker Change: This decrease.
Speaker Change: This reflects our focused efforts to improve productivity and better align resource levels with volumes as well as the impact of lower performance related incentive compensation expenses.
Speaker Change: You'll note in our financials that we had some impairment activity during the quarter.
Troy Anderson: As a result of positive subleasing activity for unused floors in our leased headquarters facility, we recognized an $8 million non-cash impairment charge for certain right-of-use assets related to the facility. Additionally, we recognized a $72.8 million non-cash goodwill impairment charge related to the Softworld acquisition that we completed in 2021. While Softworld delivered revenue growth in 2024, measurably outperforming the market, its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year. We firmly believe that Softworld's specialty IT staffing, statement of work, and its outcome-based clinical science offerings are well-positioned to generate additional value as demand improves. Peter will provide more insight shortly into how we plan to accelerate that value capture in 2025 as we further integrate MRP with SET's portfolio of specialty businesses, including Softworld.
Speaker Change: As a result of positive sub leasing activity for unused floors in our leased headquarters facility.
Speaker Change: We recognized an $8 million noncash impairment charge for certain right of use assets related to the facility.
Speaker Change: Additionally, we recognized a $72 8 million noncash goodwill impairment charge related to the software or the acquisition that we completed in 2021.
Speaker Change: While software delivered revenue growth in 2024, measurably outperforming the market its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year.
Speaker Change: We firmly believe that software of specialty staffing statement of work and its outcome based clinical science offerings are well positioned to generate additional value as demand improves.
Speaker Change: Peter will provide more insight shortly into how we plan to accelerate that value capture in 2025, as we further integrate MRP with sets portfolio of specialty businesses, including soft role.
Troy Anderson: Reported loss per share for Q4 was $0.90 compared to earnings per share of $0.31 in Q4 2023. On an adjusted basis, earnings per share was $0.82 compared to $0.93 in the prior year quarter. The decline versus the prior year reflects increased net interest expense of $0.12 following the MRP acquisition and a one-time deferred income tax valuation allowance for lease benefit in 2023 of $0.25. Adjusted EBITDA was $43.5 million, an increase of 34% versus the prior year period, while adjusted EBITDA margin improved 110 basis points to 3.7%, beating our expectations for both measures. The 110 basis points of margin expansion includes a 50 basis point organic improvement. All four segments improved their organic adjusted EBITDA margin in Q4 versus last year.
Speaker Change: Reported loss per share for the fourth quarter was <unk> 90 compared to earnings per share up <unk> 31 in Q4 2023.
Speaker Change: On an adjusted basis earnings per share was <unk> 82, compared to <unk> 93 in the prior year quarter.
Speaker Change: The decline versus the prior year reflects increased net interest expense of 12.
Speaker Change: Following the MRP acquisition, and a onetime deferred income tax valuation allowance release benefit in 2023 of 25.
Speaker Change: Adjusted EBITDA was $43 5 million, an increase of 34% versus the prior year period.
Speaker Change: While adjusted EBITDA margin improved 110 basis points to three 7% beating.
Speaker Change: Beating our expectations for both measures.
Speaker Change: The 110 basis points of margin expansion includes a 50 basis point organic improvement.
Speaker Change: All four segments improved their organic adjusted EBITDA margin in the quarter versus last year.
Troy Anderson: Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years. Before we look ahead, I will reflect briefly on our full-year results. Revenue was $4.3 billion, down 10.4%. Organic revenue grew 0.5% for the year, reflecting solid execution and market share gains amid persistent market headwinds and overall double-digit market declines according to major industry analysts. Our 2024 GP rate improved 50 basis points. On an organic basis, our GP rate declined 110 basis points due to business mix and lower perm fees. We reported a loss from operations of $15.1 million for the full year, primarily due to $86.3 million of non-cash impairment charges. Adjusted EBITDA was $143.5 million, up 31%, and our adjusted EBITDA margin improved 100 basis points to 3.3%.
Speaker Change: Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years.
Speaker Change: Before we look ahead I'll reflect briefly on our full year results.
Speaker Change: Revenue was $4 3 billion down 10, 4%.
Speaker Change: Organic revenue grew 5% for the year, reflecting solid execution and market share gains amid persistent market headwinds.
Speaker Change: And overall double digit market declines according to major industry analysts.
Speaker Change: Our 2020 for GP rate improved 50 basis points on.
Speaker Change: On an organic basis, our GP rate declined 110 basis points due to business mix and lower perm fees.
We reported a loss from operations of $15 1 million for the full year, primarily due to $86 3 million of noncash impairment charges.
Speaker Change: Adjusted EBITDA was $143 5 million up 31% and our adjusted EBITDA margin improved 100 basis points to three 3%.
Troy Anderson: We had a reported loss per share of $0.02 and earnings per share of $2.34 on an adjusted basis, an increase of $0.14. We ended the year with total available liquidity of $154 million, comprising $39 million in cash and $115 million of available liquidity on our credit facilities. Total borrowing was $239 million at the end of the year, reflecting an adjusted EBITDA leverage ratio of 1.7. We'll continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns. Indicative of that, in Q4, we completed $10 million of our $50 million Class A share repurchase authorization, leaving us with 31.6 million Class A shares outstanding at the end of Q4. Our operating cash flow and available liquidity give us ample financial flexibility to fund our operations and capitalize on attractive organic and inorganic investment opportunities.
Speaker Change: We had a reported loss per share of <unk> <unk> and earnings per share of $2 34 on an adjusted basis an.
Speaker Change: An increase of 2014.
Speaker Change: We ended the year with total available liquidity of $154 million.
Speaker Change: Comprising $39 million in cash and $115 million of available liquidity on our credit facilities.
Speaker Change: Total borrowing was $239 million at the end of the year, reflecting an adjusted EBITDA leverage ratio of one seven.
Speaker Change: We will continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns.
Speaker Change: Indicative of that in the fourth quarter, we completed $10 million of our $50 million of class a share repurchase authorization.
Speaker Change: Leaving us with $31 6 million class a shares outstanding at the end of the quarter.
Speaker Change: Our operating cash flow and available liquidity give us ample financial flexibility to fund our operations and capitalize on attractive organic and inorganic investment opportunities.
Troy Anderson: For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we have experienced the past few quarters and expect to see modest improvements in market conditions as we progress through the year. Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth. We also expect to continue to expand our net margin and ultimately cash flow by efficiently converting more of our top-line growth to bottom-line profitability. Our initial outlook will be for H1, where we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition, with modest organic revenue growth. The MRP benefit will be slightly higher in Q1 than in Q2, given the 31 May 2024 acquisition date.
Speaker Change: For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we've experienced the past few quarters.
Speaker Change: You can expect to see modest improvements in market conditions as we progressed through the year.
Speaker Change: Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth.
Speaker Change: We also expect to continue to expand our net margin and ultimately cash flow by efficiently converting more of our topline growth to bottom line profitability.
Speaker Change: Our initial outlook will be for the first half of the year, where we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition with modest organic revenue growth.
Speaker Change: The MRP benefit will be slightly higher in Q1 than in Q2, given the May 31, 2020 for acquisition date.
Troy Anderson: The H1 growth will largely be driven by the Education segment, although their year-over-year quarterly growth rates won't be double digits like they were throughout 2024 as a result of their strong performance during the year. We expect the other segments to range from flat to showing a few points of decline. Moving on to gross profit. Overall, we expect to see GP rate improvement of approximately 80 basis points in the H1, reflecting the benefit of the MRP acquisition. We expect the organic GP rate to be roughly flat, with Q1 down slightly. This is measurably improved relative to the 110 basis point organic decline for all of 2024. The improved GP rate performance reflects our expectation of overall mix improvement with outcome-based solutions and higher margin specialty offerings.
Speaker Change: The first half growth will largely be driven by the education segment, although their year over year quarterly growth rates won't be double digits like they were throughout 2024 as a result of their strong performance during the year.
Speaker Change: We expect the other segments to range from flat to showing a few points of decline.
Speaker Change: Moving on to gross profit overall, we expect to see GP rate improvement of approximately 80 basis points in the first half of the year, reflecting the benefit of the MRP acquisition.
Speaker Change: We expect the organic GP rate to be roughly flat with Q1 down slightly this is measurably improved relative to the 110 basis point organic decline for all of 2020 for the.
Speaker Change: The improved GP rate performance reflects our expectation of overall mix improvement with outcome based solutions and our higher margin specialty offerings.
Troy Anderson: Reflecting on SG&A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation-related actions over the past two years, and we'll continue to actively manage resources in line with revenue trends in each segment. Total adjusted expenses will increase gradually in Q1 and Q2 relative to the Q4 of 2024, in conjunction with revenue and the normal payroll tax and performance incentive resets at the beginning of the year. For depreciation and amortization, all in, we expect approximately $13.5 million each quarter. Given all the above, we expect adjusted EBITDA margin to improve roughly 10 basis points for the H1 of the year to approximately 3.6%, with Q1 being slightly lower and Q2 higher. We expect our effective tax rate to be in the upper teens for the H1 of 2025.
Speaker Change: Reflecting on SG&A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation related actions over the past two years.
Speaker Change: <unk> actively managed resources in line with revenue trends in each segment.
Speaker Change: Total adjusted expenses will increase gradually in the first and second quarters relative to the fourth quarter of 2024 in conjunction with revenue and the normal payroll tax and performance incentive resets at the beginning of the year.
Speaker Change: For depreciation and amortization all in we expect approximately $13 5 million each quarter.
Speaker Change: Given all of the above we expect adjusted EBITDA margin to improve roughly 10 basis points for the first half of the year to approximately three 6% with Q1 being slightly lower in Q2 higher.
Speaker Change: We expect our effective tax rate to be in the upper teens for the first half of 2025.
Troy Anderson: Finally, we expect to increase our CapEx and software development spending in 2025 as a result of the MRP integration and our overall enterprise technology modernization plans. In closing, I want to thank our teams for the strong performance during the year and their dedication and commitment to the company overall, as well as our customers for giving us the opportunity to support them and for their continued partnership. With that, I'll turn the call back to Peter for his closing remarks.
Speaker Change: And finally, we expect to increase our Capex and software development spending in 2025 as a result of the MRP integration and our overall enterprise technology modernization plans.
Peter: In closing I want to thank our teams for the strong performance during the year and their dedication and commitment to the company overall as well as our customers for giving us the opportunity to support them and for their continued partnership with that I'll turn the call back to Peter for his closing remarks.
Peter Quigley: Thanks for those insights, Troy. We move forward into 2025 propelled by positive momentum from our recent achievements and well-positioned to accelerate profitable growth as staffing demand rebounds. Our priorities for the year are clear. First, we'll deliver top-line growth by continuing to increase scale in our chosen specialties. To this end, we'll continue to execute our organic growth initiatives, including our omni-channel delivery strategy in P&I and our large enterprise account strategy, both of which we expect will continue to deliver gains in market share. In addition to these initiatives, our primary focus is the integration of MRP. Since completing the acquisition, we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business.
Peter Quigley: Thanks for those insights Troy, we move forward into 2025 propelled by positive momentum from our recent achievements and well positioned to accelerate profitable growth as staffing demand rebounds, our priorities for the year are clear.
Peter Quigley: First we will deliver top line growth by continuing to increase scale in our chosen specialties to this end, we will continue to execute our organic growth initiatives, including our omnichannel delivery strategy and P&I and our large enterprise account strategy both of which we expect will continue to delay.
Peter Quigley: Gains in market share.
Peter Quigley: In addition to these initiatives our primary focus is the integration of MRP since completing the acquisition we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business at the core of the value case for this deal is the <unk>.
Peter Quigley: At the core of the value case for this deal is the highly complementary nature of MRP's portfolio of businesses and our SET and OCG businesses, respectively. To maximize value creation, we're integrating each of its respective business lines within our SET and OCG segments. We'll combine Motion Recruitment's IT staffing and consulting business with SET's technology specialty, which includes Softworld. This significantly increases the scale of our IT staffing and consulting business, propelling Kelly into the top 10 providers in the category. TG Federal will come together with SET's government specialty. This builds upon the life sciences and engineering workforce solutions we currently bring to our public sector partners and adds a strong IT solutions capability. Motion Recruitment's telecom staffing and SOW managed services business will integrate with SET's telecom specialty, enhancing our market-leading staffing and solutions provider in the telecom market.
Really complementary nature of Mrp's portfolio of businesses, and our Sep and OCG businesses, respectively.
Peter Quigley: <unk> value creation, we're integrating each of its respective business lines within our set and OCG segments will combine motion recruitment it staffing and consulting business with <unk> technology specialty which includes software.
Peter Quigley: This significantly increases the scale of our it staffing and consulting business propelling Kelly into the top 10 providers in the category.
<unk> federal will come together with certain government specialty this builds upon the life Sciences and engineering workforce solutions. We currently bring to our public sector partners and adds a strong IP solutions capability promotion recruitment telecom staffing nsfw managed services business.
Peter Quigley: We'll integrate with sets telecom specialty enhancing our market, leading staffing and solutions provider in the telecom market.
Peter Quigley: Finally, we'll combine MRP's Sevenstep business with KellyOCG's global RPO specialty. Differentiated by innovative technology, they'll create a leading talent solutions offering that will rank among the top five globally. Each of the combined business lines will be ready to go to market beginning in Q2 following the conclusion of the earn-out period included as part of the MRP transaction. Among the leaders we have designated for each of the combined businesses are members of the deep experienced management bench at MRP. By leveraging the unique strengths of each business, we're creating a clear pathway toward achieving revenue and cost synergies. We expect synergies to ramp throughout 2025 and into 2026, culminating in an EBITDA benefit of approximately $10 million. Second, we'll continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness.
Peter Quigley: Finally, we'll combine MRP seven step business with Kelly OCG as global RPI specialty differentiated by innovative technology that will create a leading talent solutions offering that will rank among the top five globally.
Peter Quigley: Each of the combined business lines will be ready to go to market beginning in Q2. Following the conclusion of the earn out period included as part of the MRP transaction.
Peter Quigley: Among the leaders we have designated for each of the combined businesses are members of the deep experienced management bench at MRP.
Peter Quigley: By leveraging the unique strengths of each business, we're creating a clear pathway towards achieving revenue and cost synergies, we expect synergies to ramp throughout 2025 and enter 2026, culminating in an EBITDA benefit of approximately $10 million.
Peter Quigley: Second we will continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness.
Peter Quigley: To this end, in Q1 2025, we're bringing together KellyOCG and P&I under common operational management. This decision reflects shifting buying preferences among large enterprise customers as demand grows for integrated end-to-end workforce solutions that bundle traditional staffing services with advanced outsourcing and consulting capabilities. Unifying OCG and P&I positions Kelly to address these preferences more effectively by simplifying our go-to-market approach and unlocks new value-creating opportunities. The combined OCG and P&I business, along with our SET and Education businesses, will underpin the more streamlined operating model designed to accelerate profitable growth. Finally, we're laser-focused on driving incremental EBITDA margin expansion. The integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026. In addition, we'll continue to shift our business mix towards higher margin, higher growth areas, including outcome-based solutions.
Peter Quigley: To this end in the first quarter of 2025, we are bringing together Kelly OCG and P&I under common operational management.
Peter Quigley: This decision reflects shifting buying preferences, among large enterprise customers as demand grows for integrated end to end workforce solutions that bundled traditional staffing services with advanced outsourcing and consulting capabilities.
Peter Quigley: Defying OCG and P&I positions Kelly to address these preferences more effectively by simplifying our go to market approach and unlocks new value, creating opportunities the combined OCG and P&I business, along with our set and education businesses will underpin a more streamlined operating.
Peter Quigley: Model designed to accelerate profitable growth.
Peter Quigley: Finally, we are laser focused on driving incremental EBITDA margin expansion the integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026.
Peter Quigley: In addition, we will continue to shift our business mix towards higher margin higher growth areas, including outcome based solutions with strategic initiatives targeting both growth and efficiency, we're positioned to deliver top and bottom line results that outperform the market on a consistent basis reinforcing.
Peter Quigley: With strategic initiatives targeting both growth and efficiency, we're positioned to deliver top and bottom line results that outperform the market on a consistent basis, reinforcing that this is a different Kelly. I have great confidence in our team's capacity to execute against these ambitious priorities and achieve our performance expectations for the full year. With our team focused on our specialty growth strategy and guided by our noble purpose, I look forward to building on the positive momentum we created in 2024. Together, we'll deliver long-term value to all our stakeholders, connecting our talent and customers to limitless opportunities and rewarding our shareholders for placing their trust in our company. We're grateful for their support as we move forward on our journey to unleash Kelly's full potential. Liv, you can now open the call to questions.
Kelly: That this is a different kelly.
Kelly: I have great confidence in our team's capacity to execute against these ambitious priorities and achieve our performance expectations for the full year with our team focused on our specialty growth strategy and guided by our noble purpose I look forward to building on the positive momentum we created in 2024.
Kelly: <unk> will deliver long term value to all our stakeholders connecting our talent and customers the limitless opportunities and rewarding our shareholders for placing their trust in our company.
Kelly: We're grateful for their support as we move forward on our journey to unleash <unk> full potential.
Speaker Change: Live with you can now open the call to questions.
Operator: Certainly. Ladies and gentlemen, if you wish to ask a question, please press star one one on your telephone keypad. You may withdraw your question by repeating the star one one command. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press star one one at this time. Our first question will go to Joe Gomes with NOBLE Capital. Your line is now open.
Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad, mainly Chile. Your question by repeating just bought one one coming.
Speaker Change: Youre using a speakerphone, please pick up the handset before pressing the numbers.
Speaker Change: Once again, if you have a question you May press star one at this time.
Speaker Change: Our first question will go to Joe Gomes with Noble capital. Your line is now open.
Joe Gomes: Good morning.
Joe Gomes: Good morning, Nice good morning, gentlemen, thanks for taking my questions.
Peter Quigley: Morning, Joe.
Joe Gomes: Nice quarter. Thanks for taking my questions. I wanted to start off on the education segment. Really strong revenues were up by over 12%, but that was down, if you look at the full year, I think they were up 15.5%. Anything unusual? Were you expecting more in the education segment? Was it in line with your expectations for the quarter?
Speaker Change: I wanted to start off on the education segment again.
Speaker Change: Strong revenues were up by over 12%, but that was down if you look at the full year I think they were up 15, 5%.
Anything unusual whether you're expecting more in the education segment was it in line with your expectations.
Speaker Change: Quarter.
Peter Quigley: Yeah. Thanks, Joe. The Kelly Education segment in Q4 was impacted significantly by the two hurricanes in the end of September, early October timeframe. That was not anticipated. While a hurricane can be common, the fact that there were two back-to-back created significant disruption in school districts in markets in which we participate. That was a significant contributing factor to the performance of Kelly Education in Q4.
Yes, Thanks, Joe.
Speaker Change: The education segment in Q4 was impacted significantly by the <unk>.
Speaker Change: Two hurricanes in the.
Speaker Change: End of September early October timeframe.
Speaker Change: That was not anticipated while a hurricane can be.
Speaker Change: And the fact that there were two back to back created.
Speaker Change: Significant disruption in school districts in markets in which we participate so that was a significant contributing factor to the performance of education in Q4.
Joe Gomes: Okay. Even with those, it still grew over 12%. That's fantastic there.
Speaker Change: Okay.
Speaker Change: <unk> 12 over 12% so that's fantastic.
Peter Quigley: Yeah.
Speaker Change:
Joe Gomes: In the release, you talked about some new customer wins and the sales pipeline momentum. Peter, just wondering, can you give us a little more color on that? The number of wins or growth in the pipeline. What more could you add to that statement that you had in the press release?
Speaker Change: And then.
Speaker Change: Right.
Speaker Change: Please you talked about some new customer wins in the sales pipeline momentum.
Speaker Change: And Peter I, just wanted to give us a little more color on that.
Speaker Change: The number of wins or growth in the pipeline.
Speaker Change: What more could you add to that statement that you had in the press release.
Peter Quigley: Well, in terms of Education specifically, Joe, based on staffing industry analyst market share numbers, we continue to take share. We're taking share not just because we're competing on price, but we're competing on value. We're the market leader for a reason. We deliver higher fill rates and better performance for school districts across the country, and they recognize that value. We're very confident in our ability to continue to win more than our fair share of schools. We also are very encouraged by the performance of our therapy business in combination with our traditional K-12 core education business. We expect in the quarters to come to see meaningful contributions from the combination of traditional K-12 and therapy.
Joe Gomes: Well in terms of education, specifically, Joe we have.
Joe Gomes: Based on staffing industry analysts market share numbers we.
Joe Gomes: Continuing to take share.
Joe Gomes: And we're taking share not just because we're competing.
Joe Gomes: On on price, but we're competing on value, where we're the market leader for a reason we deliver a <unk>.
Joe Gomes: Higher fill rates.
Joe Gomes: And better performance for school districts across the country and they recognize that value and so we're very confident in that.
Joe Gomes: Our ability to continue to win more than our fair share of of schools. We also are very encouraged by the.
Joe Gomes: Performance of our therapy business in combination with our traditional okay.
Joe Gomes: 12 core education business, and we expect in the quarters to come to see.
Joe Gomes: Meaningful contributions from the combination of.
Joe Gomes: Traditional K 12 and therapy.
Joe Gomes: Okay. On the M&A front, anything there? How's the market, I guess? Our pricing, is it kind of trending in your favor? Are there more opportunities coming across the sill there? Maybe give us a little more color on that also.
Joe Gomes: Okay and on the M&A front.
Joe Gomes: Anything there how's the market gas or pricing.
Joe Gomes: Is it kind of trending in your favor.
Joe Gomes: More opportunities coming across.
Phil There: Phil There, maybe give us a little more color on that also.
Peter Quigley: Yeah, Joe, it hasn't changed meaningfully in terms of the deal flow. It's still in a bit of a trough, I would say, relative to prior periods. The anticipated or hoped-for realignment of sellers' expectations about valuations is not immediately evident. There still appears to be some disconnect between valuation expectations and performance. We're actively monitoring the deal flow and actively engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.
Phil There: Yeah, Joe It Hasnt changed meaningfully in terms of the deal flow.
Phil There: It's still it's still in a bit of a <unk>.
Phil There: Trough I would say relative to prior periods.
Phil There: And the.
Phil There: Anticipated or hoped for realignment of sellers' expectations about valuations is not is not immediately evident.
Phil There: There is still.
Phil There: Appears to be some disconnect between valuation expectations.
Phil There: And performance.
Phil There: But we're we are actively monitoring the deal flow and actively.
Phil There: Engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.
Joe Gomes: Great. I'll get back in queue. Peter, it's been great working with you. I know it's early, and you're going to be here hopefully to the end of the year, but I just want to congratulate you on the career.
Phil There: Great I'll get back in queue, Peter it's been great working with you I know its early and youre going to be here hopefully to the end of the year, but I just wanted to.
Phil There: Thank you.
Phil There: Congratulate you on the career.
Peter Quigley: Thank you. Thank you, Joe. I appreciate it, and likewise, been a pleasure to work with you.
Phil There: Thank you. Thank you Joe I appreciate it and likewise pleasure.
Phil There: Pleasure to work with you.
Operator: Thank you. Our next question coming from the line of Will Brunemann with Northcoast Research. Your line is now open.
Phil There: Thank you.
Phil There: Our next question coming from the line of.
Phil There: Well Benjamin with Northcoast Research your line is now open.
Will Brunemann: Hey, guys. How's it going?
Benjamin: Hey, guys how has it gone.
Peter Quigley: Good, Will. How are you?
Speaker Change: Well how are you good morning.
Joe Gomes: Good morning.
Will Brunemann: I'm good. You said staffing revenue trended higher, and maybe you already gave a little bit of color on this, but you said staffing revenue trended higher in Q4. Was that mostly demand, or is that more so on the pricing side? If you could give me some insight on demand for perm and temp staffing and how that sort of progressed throughout Q4.
Benjamin: Good.
Speaker Change: So you said staffing revenue trended higher and maybe you already gave a little bit of color on this but you said staffing revenue trended higher in the fourth quarter.
Speaker Change: Was that mostly demand or is that more so on the pricing side and then if you could give me some insight on demand for Perm.
Speaker Change: Temp staffing and how that sort of progressed throughout the quarter.
Troy Anderson: Yeah, sure. This is Troy. Good to talk to you, Will. Thanks for the question. The staffing, P&I was where we saw the strong demand on staffing, in the quarter. They do tend to have a seasonal uptick in the Q4, tend to progressively grow through the year and have a seasonal uptick. We have been talking about the improvements in P&I throughout the year, with their omnichannel strategy, along with their large account strategy and the outcome-based solutions. They had a good quarter, up 3.7% on staffing and up 5% on outcome-based. It was pretty consistent, throughout the quarter. I mean, they finished strong in December, but you start to get some anomalies with the holidays and weather and things like that. Overall it was consistent performance, and we've seen consistent performance, improving performance throughout the year on the P&I side.
Troy Anderson: Yes sure this is Troy.
Troy Anderson: Good to talk to you well thanks for the question the staffing so P&I was where we saw the strong demand on staffing in the quarter. They do tend to have a seasonal uptick in the fourth quarter tend to progressively grow through the year and have a seasonal uptick.
Troy Anderson: <unk> have been talking about the improvements in P&I throughout the year.
Troy Anderson: With their omnichannel strategy, along with their large account strategy and the outcome based solutions. So they had a good quarter.
Troy Anderson: Up 3% three 7% on staffing and up 5% on outcome based.
Troy Anderson: And it was pretty consistent throughout the quarter I mean, the finished strong.
Troy Anderson: In December but.
Troy Anderson: You start to get some anomalies with the holidays and.
Troy Anderson: And weather and things like that but but overall it was it was consistent performance that we've seen consistent performance.
Troy Anderson: Improving performance throughout the year on the P&I side set the staffing was was pretty much consistent with Q3, some ebbs and flows across the months.
Troy Anderson: SET, the staffing was pretty much consistent with Q3. Some ebbs and flows across the months, down 5 in Q3 and down 5 in Q4. We saw some good improvement on the outcome-based side with SET, which helped them pull back a little bit from their Q3 decline.
Troy Anderson: But but down 5% in Q3 and down 5% in Q4, we saw some good improvement on the outcome based side with set which help them pull.
Troy Anderson: Pull back a little bit from their Q3 decline.
Will Brunemann: Okay, great. That is all. Thank you.
Troy Anderson: Okay, Great. That's all thank you.
Troy Anderson: Okay.
Troy Anderson: Thanks, Will.
Troy Anderson: Thanks, Paul.
Operator: Thank you. Our next question coming from the line of Kevin Steinke with Barrington Research. Your line is now open.
Troy Anderson: Thank you.
Speaker Change: Our next question coming from the line of Kevin Spanky with Barrington Research. Your line is now open.
Kevin Steinke: Hey, good morning.
Kevin Spanky: Hey, good morning.
Troy Anderson: Morning, Kevin.
Speaker Change: Good morning, Kevin.
Peter Quigley: Morning.
Kevin Spanky: Good morning.
Kevin Steinke: Morning. Just wanted to start off by asking about overall customer sentiment and, as you talked about your outlook for the H1 2025, you mentioned that you, I think you just expect the environment to be similar to what it has been. Are we just kind of still seeing general cautiousness? How are customers, in your view, thinking about the overall macroeconomic environment and how that might be impacting their plans and overall demand? Thanks.
Kevin Spanky: Good morning, just wanted to start off by asking about.
Kevin Spanky: Overall customer sentiment.
Kevin Spanky: As you talked about your outlook for the first half of 2025.
Kevin Spanky: Mentioned that U.
Kevin Spanky: Do you just expect the environment to be similar.
Kevin Spanky: To what it has been.
Kevin Spanky: So are we just kind of still seeing general cautiousness.
Kevin Spanky: How are customers in your view thinking about.
Kevin Spanky: The overall macro.
Kevin Spanky: Economic environment, and how that might be.
Kevin Spanky: <unk>.
Kevin Spanky: There.
Kevin Spanky: Their plans.
Kevin Spanky: Overall demand thanks.
Peter Quigley: Yeah, Kevin. Post the election, there was clearly a shift, I would say, towards more optimistic points of view from our customers in terms of the future business environment, tax policy, tax changes, and relaxing of certain regulatory restrictions. As the administration took over and with a flurry of executive orders, I would say companies are taking a little bit more cautious approach, a wait and see, to understand the downstream impacts of some of the executive orders that have come out, as well as the pending legislation around budget, and tax policy, et cetera. That's why we've landed on H1 of the year being a continuation of what we've seen in the prior few quarters. Again, we're pleased with the fact that we're continuing to take share across our specialties and we will execute with that end in mind.
Kevin Spanky: Yes, Kevin.
Kevin Spanky: So post the election, there was clearly a.
Kevin Spanky: A shift I would say towards more optimistic points of view.
Kevin Spanky: From our customers in terms of.
Kevin Spanky: The future business environment.
Kevin Spanky: Tax policy tax changes.
Kevin Spanky: Relaxing of certain regulatory restrictions.
Kevin Spanky: But.
Kevin Spanky: As the administration.
Kevin Spanky: Took over and with a flurry of executive orders I.
Kevin Spanky: I would say companies are taking a little bit more of a cautious approach a wait and see.
Kevin Spanky: To understand the downstream impacts of some of the executive orders that have come out as well as the.
Kevin Spanky: Pending legislation.
Kevin Spanky: That around.
Kevin Spanky: Budget and tax policy et cetera.
Kevin Spanky: So that's why.
Kevin Spanky: We've.
Kevin Spanky: The landed on.
Kevin Spanky: The first half of the year being a continuation of what we've seen in the prior few quarters and again were.
Kevin Spanky: We're pleased with the fact that we're continuing to take share across our specialties.
Kevin Spanky: We will execute.
Kevin Spanky: With that end in mind.
Kevin Spanky: Okay.
Kevin Steinke: Okay, that makes sense. Just with regard to the organic growth outlook for H1 2025, you talked about Education continuing to grow nicely, although probably not at double-digits. I assume that's just kind of a comp issue. Then, on the other segments, I think you said flat to down modestly. Maybe if you could touch on the other segments in terms of the assumptions there as well. You've had some pretty nice momentum going here in Professional & Industrial, and also Outsourcing & Consulting Group. Maybe just talk about by segment, what you're factoring in terms of that outlook for H1 2025.
Kevin Spanky: Okay that makes sense.
Kevin Spanky: Yes.
Kevin Spanky: With regard to the organic growth outlook for the first half of 2025.
Kevin Spanky: You talked about education continue to grow nice continuing to grow nicely although.
Kevin Spanky: Probably not at double digits I assume that's just kind of a comp issue.
Kevin Spanky: And then on the <unk>.
Speaker Change: Other segments, I think you said flat to down modestly.
Speaker Change: Maybe if you could touch on the other segments in terms of the assumptions there as well.
Speaker Change: <unk> had some pretty nice momentum going here in professional and industrial.
Speaker Change: And.
Speaker Change: Also.
Speaker Change: Sourcing consulting so maybe.
Speaker Change: Just talked about.
Speaker Change: This segment, what's your back.
Speaker Change: Factoring in in terms of.
Speaker Change: That outlook for the first half of 2025.
Troy Anderson: Yeah, sure. Kevin, this is Troy. Appreciate the question. Our H1 up approximately 10% with MRP and then roughly flat or modest growth on organic. It's not significantly different than our H2 performance from 2024. We were up about 2%, if you look at H2. When you think about the market conditions as we were just discussing and the customer sentiment, again, it's not entirely different. You do get some of the dynamics you mentioned. Kelly Education, yes, is predominantly on the compares. Keep in mind, they operate more on a school year basis, so their new wins come in the spring and summer. They're implementing going into September. The benefit of any new wins, we've entirely captured at this point in the revenue performance.
Speaker Change: Yes, sure Kevin destroy.
Speaker Change: I appreciate the question.
Speaker Change: Our first half.
Speaker Change: Up 10.
Speaker Change: 10, with MRP and then.
Speaker Change: Roughly flat or modest growth on organic.
Speaker Change: Not significantly different than our <unk> performance from 'twenty four we were up about two if you look at second half. So when you think about the market conditions as we were just discussing in the customer sentiment.
Speaker Change: Again, it's not entirely different and then you do get some of the dynamics you mentioned education, Yes is predominantly on the compares keep in mind. They operate more on a school year basis. So they are new wins come in in the spring and summer, they're implementing going into September.
Speaker Change: So the benefit of any new wins, we've entirely captured at this point in the revenue performance.
Troy Anderson: We'll see that uptick in the H2 of the year as we capture more share and expand into greenfield areas on the education side. I would expect, not double digits in H1, but maybe some uptick in the H2. On P&I, little bit of a pullback maybe, relative, again, very strong Q4. Outcome-based, again, drove a good bit of that. There was a little bit of a favorable compare on outcome-based versus Q4 of the prior year, where we had a bit of a pullback and some seasonality. P&I probably in the more roughly flat range SET, again, coming off of minus 3 Q2, minus 5 Q3, minus 4 Q4. Good performance in outcome-based, but still a lot of challenge in the IT market.
Speaker Change: <unk>.
Speaker Change: That we'll see that uptick in the back half of the year as we as we capture more share and expand into greenfield areas on the education side, So I would expect.
Speaker Change: <unk>.
Speaker Change: Not double digits in first half, but maybe some uptick in the back half on P&I.
Speaker Change: A little bit of a pullback maybe relative again, a very strong Q4.
Speaker Change: Outcome based again drove a good bit of that there was a little bit of a favorable compare on outcome based versus Q4 of the prior year, where we had a bit of a pullback.
Speaker Change: Some seasonality cell.
Speaker Change: P&I, probably in the more roughly flat range set again coming off.
Speaker Change: Minus three in Q2 minus <unk> three minus four.
Speaker Change: Q4, good performance and outcome based but.
Speaker Change: Still a lot of challenge in the.
Troy Anderson: I think as you've seen probably in some of the peers and just some of the industry data that's come out, probably a little bit of a pullback here earlier in January and looking for some better performance as the quarter progresses. Probably down, not inconsistent with Q4, maybe a little bit better than that. OCG, a dynamic going on there. The growth in 2024 was driven entirely by PPO, and as we've talked about all year and you've seen in the GP rates, that puts a lot of pressure on the GP side. We're looking for more of a remix in 2025. We've talked about the pipeline and new wins there, which takes a while for those to implement. We see a lot of MSP and RPO opportunities that have been won and are implementing.
Speaker Change: Mark yet and I think as <unk> seen probably in some of the peers and just the.
Speaker Change: Some of the industry data that's come out probably a little bit of a pullback you earlier in January and looking for.
Speaker Change: Some better performance as the quarter progresses, so probably down.
Not inconsistent with Q4, maybe a little bit better than that.
Speaker Change: And then OCG dynamic going on there the growth in 24 was was driven entirely by PPO and as we've talked about all year and you've seen in the in the GP rates that puts a lot of pressure on the on the GP side.
Speaker Change: And we're looking for more of a remix in 2025, we've talked about the pipeline and new wins, there, which which takes a while for those to implement so we see a lot of MSP and <unk>.
Speaker Change: Opportunities that are or have been won and are implementing.
Troy Anderson: PPO is a bit of a counter-cyclical in softer markets. People will go more to the payrolling route of contractors they've had before versus going out for net new. Really you'll see a remix on OCG, where we have lower PPO growth, but being replaced by MSP and RPO growth, which will net benefit us from a margin perspective. You won't see the growth rates in OCG in 2025 that you've seen this year.
Speaker Change: PPO is a bit of a counter cyclical in softer markets.
Speaker Change: We will go more to the payroll route of contractors, they've had before versus going out for net new.
Speaker Change: So really youll see a remix on OCG, where we have.
Speaker Change: Lower PPO growth, but being replaced by MSP, and <unk> growth, which will net benefit us from a margin perspective, but.
Speaker Change: You won't see the growth rates in OCG and 25%.
Speaker Change: That you've seen this year.
Kevin Steinke: All right. Thank you. That's helpful color. When you were talking about bringing together Professional & Industrial and Outsourcing & Consulting under common operational management, is that also going to be brought together from a segment reporting perspective? Or how will you approach that going forward?
Speaker Change: Alright, thank you.
Speaker Change: That's helpful color.
Speaker Change: And when you.
Speaker Change: You were talking about.
Speaker Change: Bringing together professional and industrial.
Speaker Change: And outsourcing outsourcing and consulting under.
Speaker Change: Common operational management.
Speaker Change: Is that also.
Speaker Change: We need to be brought together from a <unk>.
Speaker Change: Segment reporting perspective.
Speaker Change: Or how will you approach that going forward sure we're going through the segment reporting for 'twenty five the analysis associated with that as we speak. So we haven't made any definitive conclusions yet we have some other.
Troy Anderson: Sure. We're going through the segment reporting for 2025, the analysis associated with that as we speak. We haven't made any definitive conclusions yet. We have some other elements of customer accounts and some offerings and the like that we're looking at making some changes with as well. We'll have a full readout in the Q1, and of course, bridge you all very clearly from our reporting structure for 2024 to any changes in 2025.
Speaker Change: Elements of customer accounts, and some offerings and the like that we're looking at.
Speaker Change: Making some changes with as well so we will have a full readout in Q1 and of course Bridge Bridge you all very clearly from.
Speaker Change: Our reporting structure for 24% any any changes in 'twenty five.
Kevin Steinke: Okay. Sounds good. Thanks for taking the questions. I'll turn it over.
Speaker Change: Okay sounds good thanks for taking my questions I'll turn it over.
Troy Anderson: Thanks, Kevin. That's good. Thanks, Kevin.
Speaker Change: Thanks, Kevin Thanks, Kevin.
Operator: Thank you. Our next question coming from the lineup, Marc Riddick with Sidoti. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Marc Riddick with Sidoti. Your line is now open.
Marc Riddick: Hey, good morning.
Marc Riddick: Hey, good morning.
Troy Anderson: Morning, Marc. Good morning.
Speaker Change: Good morning, Mark good morning.
Marc Riddick: First of all, Peter, just want to say it's been a pleasure working with you and looking forward to working with you through the remainder of the year at least. Troy, welcome.
Marc Riddick: First of all Peter.
Marc Riddick: It's been a pleasure working with you and looking forward to working with you through the remainder of the year at least.
Marc Riddick: Welcome.
Marc Riddick: Yes.
Troy Anderson: Thank you, Marc.
Marc Riddick: Looking at.
Marc Riddick: to working with you going forward as well.
Marc Riddick: Going forward as well.
Troy Anderson: Appreciate it.
Marc Riddick: Actually, no, I wanted to go back for a moment. You did have a smaller acquisition that was announced back in November in the Education space. Maybe spend just a little time talking about that and sort of how that opportunity came about with Children's Therapy Center.
Marc Riddick: Okay. So I did want to touch a little bit.
Marc Riddick: The.
Marc Riddick: Actually no I wanted to go back for a moment.
Marc Riddick: It did have a smaller acquisition.
Marc Riddick: That was announced back in November.
Speaker Change: Jason maybe you can just maybe spend a little time talking about that.
Marc Riddick: Sort of how that opportunity came about with children's therapy Center.
Troy Anderson: Yeah. Thanks, Marc. Yeah, small acquisition, a little over $3 million, Children's Therapy Center. Very interesting space for the therapy business part of Kelly Education because CTC operates brick-and-mortar clinics that complement the in-school therapy that PTS provides to our school dist customers. Because they're clinics, they're not bound only to school hours or even the school calendar. It provides us with an opportunity to provide services outside of school time and even during the summer months. That can be very attractive to therapists that want a more regular schedule. We're very excited to essentially pilot this complement to our PTS business. So far, we're very pleased with how the integration is going. As you know, the therapy business is
Speaker Change: Yes.
Speaker Change: Thanks Mark.
Speaker Change: Small acquisition, a little over $3 million.
Speaker Change: Children therapy Center.
Speaker Change: Barry.
Speaker Change: Interesting space for that therapy business part of Kelly education because.
Speaker Change: CTC operates.
Speaker Change: Brick and mortar clinics that complement the in school therapy that Pts.
Speaker Change: Provides to our.
Speaker Change: School District customers.
Speaker Change: And because their clinics, they're not bound.
Speaker Change: Only two school hours or even the calendar.
Speaker Change: School calendar so.
Speaker Change: It provides us with an opportunity to.
Speaker Change: <unk> provides services outside of school time, and even during the summer months.
Speaker Change: That can be very attractive to therapists that one or more.
Speaker Change: Regular.
Speaker Change: Schedule.
Speaker Change: And so we're very excited to essentially pilot.
Speaker Change: This.
Speaker Change: Complement to our Pts business and so far we're very pleased with how the integration is going in.
Speaker Change: As you know the therapy business.
Peter Quigley: commands significantly higher gross margins than our traditional K-12 business does. We're excited about the possibility to further expand our therapy practice through CTC.
Speaker Change: Commands significantly higher gross margins than our traditional K 12 business does so we're we're.
Speaker Change: Excited about the possibility to further expand our therapy practice through CTC.
Marc Riddick: Excellent. Shifting gears, as far as the sort of cash usage and the like of it, we did sort of notice in prepared remarks around the share repurchase activity during the Q4. I wanted to sort of touch a little bit on that appetite going forward as well as it seems as though there seems to be some comfort, at least, with the prepared remarks that you already had regarding the valuation gulf, I suppose. Maybe if you could talk a little bit about what acquisition prioritization you may have now, and if that's shifted at all over the last year or so. Thank you.
Speaker Change: Excellent and then shifting gears as far as the.
Speaker Change: Sure.
Speaker Change: <unk> sort of cash usage and the likelihood.
Speaker Change: The nose and prepared.
Speaker Change: Paired remarks around the.
Speaker Change: Share repurchase activity during the fourth quarter.
Speaker Change: I wanted to touch a little bit on sort of.
Speaker Change: That appetite going forward as well as it seems as though.
Speaker Change: There seems to be some comfort at least.
Speaker Change: The prepared remarks that you already have regarding the.
Speaker Change: The valuation Gulf I, suppose, but maybe if you could talk a little bit about what what acquisition prioritization you may have now and if that's shifted at all over the last year or so.
Speaker Change: Thank you.
Troy Anderson: Yeah. Sure. Thanks, Marc. This is Troy. Yes, completed the $10 million share repurchase in Q4. It's a 2-year authorization. Clearly, there was a pretty significant disconnect in Q4 on the share price coming out of the Q3 report. We felt it was important to be in the market there. We continue to believe very strongly in the Kelly strategy and our ability to execute against that in 2025 and over the coming years and still believe there's a disconnect. We also want to make sure that we're focused on investing in the business to support that strategy, drive growth both organically and inorganically, maintain the dividend, and of course look for opportunities for debt repayment.
Speaker Change: Yeah sure Thanks, Marc destroy the.
Speaker Change: Yes completed the 10 million share repurchased $10 million share repurchase in Q4. It is a two year authorization.
Speaker Change: Clearly there was a pretty significant disconnect in the fourth quarter on the share price coming out of the Q3 report.
Speaker Change: So we felt it was important to be in the market there.
Speaker Change: We continue to think.
Speaker Change: We believe very strongly in Kelly's strategy, and our ability to execute against that.
Speaker Change: 25% over the coming years, and still believe Theres a disconnect but.
Speaker Change: We also want to make sure that we're focused on investing in the business to support that strategy drive growth both organically and Inorganically.
Speaker Change: Maintaining the dividend and of course look for opportunities for debt repayment and our net debt went up about $4 million in the quarter, but that included the $10 million of share repurchase plus the $3 million.
Troy Anderson: Our net debt went up about $4 million in the quarter, but that included the $10 million of share repurchase plus the $3 million or so that Peter referenced with CTC. I think our bias probably in the near term is a little bit more toward the repayment and investing in growth to drive further shareholder value creation. We have the authorization available there, and we'll continue to look at return to shareholder as an option throughout that time horizon.
Speaker Change: So that Peter referenced with CTC.
Speaker Change: So I think our bias probably in the near term is a little bit more toward the repayment and investing in growth to drive further shareholder value creation, but we have the authorization available there and we will continue to look at return to shareholder as an option throughout that time horizon.
Marc Riddick: Great. Thank you very much.
Speaker Change: Great. Thank you very much.
Peter Quigley: Thanks, Marc.
Speaker Change: Thanks Mark.
Operator: Thank you. I see there are no further questions in the queue at this time. I will now turn the call back over to Mr. Peter Quigley for any closing remarks.
Speaker Change: Thank you.
Speaker Change: That said there are no further questions in the queue. At this time I will now turn the call back over to Mr. Peter Quigley for any closing remarks.
Peter Quigley: Yeah, thanks, Liv. I think we can conclude the call. Thank you everybody for your time this morning, and appreciate your participation. Thank you, Liv.
Speaker Change: Yes. Thanks.
Speaker Change: I think we can I think we can conclude the call and thank you everybody for your time this morning and.
Speaker Change: I appreciate your participation. Thank you Liz and thank you.
Troy Anderson: Thank you.
Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference call, and you may now disconnect.
Speaker Change: Ladies and gentlemen, thank you for your participation.
Speaker Change: This concludes today's conference call you may now disconnect.