Q3 2025 Kelly Services Inc Earnings Call

Speaker #1: Good morning and welcome to Kelly Services . Third quarter earnings conference call . All parties will be on listen only until the question and answer portion of the presentation .

Operator: Good morning, welcome to Kelly Services' Q3 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 #1: Today's call is being recorded at the request of Kelly Services . If anyone has any objections , you may disconnect at this time .

Speaker #1: 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 #2: Good morning and welcome to Kelly's third quarter conference call . With me today are Kelly's chief executive officer , Chris Layden , and our chief financial officer , Troy Anderson .

Scott Thomas: Good morning, and welcome to Kelly's Q3 Conference Call. With me today are Kelly's Chief Executive Officer, Peter Leger, and our Chief Financial Officer, Troy Anderson. 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. 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'll 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 #2: 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 #2: 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 #2: 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'll 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 and operations .

Speaker #2: For more information regarding non-GAAP measures and other required disclosures , please refer to our earnings press release . Presentation . And once filed , form 10-q , all of which can be accessed through our Investor Relations website at IR Kelly Services Inc .

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-Q, all of which can be accessed through our investor relations website at ir.kellyservices.com. With that, I'll turn the call over to Kelly's Chief Executive Officer, Peter Leger.

Speaker #2: With that , I'll turn the call over to Kelly's chief Executive officer , Chris Layden . Thank you . Scott , and good morning , everyone .

Peter Leger: Thank you, Scott, and good morning, everyone. It is great to be with all of you. Let me start by saying what a privilege it is to serve as CEO of Kelly, the sixth in our storied history and the first to be selected from outside the company. Having spent my entire career in this industry, I have known and admired Kelly for many years. Our brand is iconic, synonymous with the industry we created when we were founded by William Russell Kelly in 1946. Since then, Kelly has connected millions of people to work, improving families, communities, economies, and the world. This is also a company I have competed with. Throughout my career leading commercial organizations and customer pursuits, I have experienced up close Kelly's ability to win in the market.

Speaker #2: It's great to be with all of you . Let me start by saying what a privilege it is to serve as CEO of Kelly .

Speaker #2: The sixth in our storied history and the first to be selected from outside the company . Having spent my entire career in this industry , I've known and admired Kelly for many years .

Speaker #2: Our brand is iconic , synonymous with the industry . We created when we were founded by William Russell Kelly in 1946 . Since then , Kelly has connected millions of people to work improving families , communities , economies and the world .

Speaker #2: This is also a company I've competed with throughout my career , leading commercial organizations and customer pursuits . I've experienced up close Kelly's ability to win in the market , our diverse portfolio of businesses has significant scale in attractive specialties and differentiated global capabilities that are widely recognized as leading the industry .

Peter Leger: Our diverse portfolio of businesses has significant scale in attractive specialties and differentiated global capabilities that are widely recognized as leading the industry. With our education business, Kelly has proven the ability to drive rapid organic growth in emerging markets, having established a dominant position in K-12 staffing and tripling the revenue of the business since 2020. This is among the best examples in our industry of what's possible when a team combines clear vision, sound strategy, and consistent execution.

Speaker #2: With our education business , Kelly has proven the ability to drive rapid organic growth in emerging markets . Having established a dominant position in K to 12 staffing and tripling the revenue of the business since 2020 .

Speaker #2: This is among the best examples in our industry of what's possible when a team combines clear vision , sound strategy and consistent execution .

Speaker #2: Instead , I've watched a business that has acquired scale in higher margin , higher growth specialties like technology and telecom moving up the value chain as a consultative partner to employers seeking differentiated technical solutions .

Peter Leger: Instead, I've watched a business that has acquired scale in higher margin, higher growth specialties like technology and telecom, moving up the value chain as a consultative partner to employers seeking differentiated technical solutions. At the same time, SET has continued to win and retain market share in our established life sciences and engineering specialties, where for years Kelly has led the market as the second and fourth largest staffing provider respectively. In ETM, Kelly brings enterprise customers unmatched global workforce capabilities and insights through our technology-enabled and AI-powered offerings delivered at scale. This includes talent solutions, business process outsourcing, and staffing services, which Everest just recently recognized as leading the market. I've seen firsthand the competitive advantage that this breadth and depth of capabilities creates as employers increasingly seek partners who can meet their total talent management needs.

Speaker #2: At the same time , said continued to win and retain market share in our established life sciences and engineering specialties , where for years , Kelly has led the market as the second and fourth largest staffing provider respectively , in an ETF .

Speaker #2: Kelly brings enterprise customers unmatched global workforce capabilities and insights to our technology enabled and AI powered offerings delivered at scale . This includes talent , Solutions , business process outsourcing and staffing services , which Everest just recently recognized as leading the market .

Speaker #2: I've seen firsthand the competitive advantage that this breadth and depth of capabilities creates as employers increasingly seek partners who can meet their total talent management needs .

Speaker #2: Because of these assets , Kelly's track record of driving value for customers , including many of the largest employers in the world , is as strong as any company in this space .

Peter Leger: Because of these assets, Kelly's track record of driving value for customers, including many of the largest employers in the world, is as strong as any company in this space. Never have our core strengths and ability to enhance flexibility and agility in an employer's workforce been more important than they are today. As I step into this role, the operating environment is evolving, driven by a dynamic macroeconomic landscape, a sluggish labor market, global and domestic policy shifts, and the AI boom. The impact of these trends on our industry is significant, and Kelly is not immune. These dynamics were more visible in our results in Q3. Despite continuing to capture growth in more resilient markets, our performance as a company fell short of expectations.

Speaker #2: Never have our core strengths and ability to enhance flexibility and agility in an employer's workforce . Been more important than they are today .

Speaker #2: As I step into this role , the operating environment is evolving , driven by a dynamic macroeconomic landscape , a sluggish labor market .

Speaker #2: Global and domestic policy shifts , and the AI boom . The impact of these trends on our industry is significant . And Kelly is not immune .

Speaker #2: These dynamics were more visible in our results in the third quarter . Despite continuing to capture growth in more resilient markets . Our performance is a company fell short of expectations .

Speaker #2: Our team and I know that we can achieve more having proven as much in the organic growth and margin expansion that Kelly has delivered in recent years .

Peter Leger: Our team and I know that we can achieve more, having proven as much in the organic growth and margin expansion that Kelly has delivered in recent years. To consistently win in the market and unlock Kelly's full potential, it's critical that we maximize our core strengths and address head-on opportunities to improve our strategy and execution. To better understand where these opportunities exist, I'm spending much of my time in the field meeting with and listening to our employees and customers. Through my conversations with our team, it's clear that we have a highly engaged group of workforce experts who are passionate about winning in the market and serving our clients and talent. The expertise and high level of service they provide are among our key differentiators that drive employers to choose Kelly to meet their workforce needs.

Speaker #2: But to consistently win in the market and unlock Kelly's full potential , it's critical that we maximize our core strengths and address . Haddon opportunities to improve our strategy and execution .

Speaker #2: To better understand where these opportunities exist , I'm spending much of my time in the field meeting with and listening to our employees and customers .

Speaker #2: Through my conversations with our team . It's clear that we have a highly engaged group of workforce experts who are passionate about winning in the market and serving our clients and talent .

Speaker #2: The expertise and high level of service they provide are among our key differentiators that drive employers to choose Kelly to meet their workforce needs .

Speaker #2: In meeting with many of our top customers , I've heard how Kelly's tailored solutions and unique insights are helping our clients maintain a competitive edge in their industries .

Peter Leger: In meeting with many of our top customers, I've heard how Kelly's tailored solutions and unique insights are helping our clients maintain a competitive edge in their industries. I've also had the pleasure of connecting with the investment community, who have shared with me their growing interest in the value creation opportunity we have here at Kelly. During my time in the field, a few common themes have emerged. First, it's fundamentally important to customers that it be easy to do business with Kelly. We must ensure our structure and processes are designed with customers in mind, and they must be straightforward and intuitive to navigate. Next, the scale Kelly has acquired in higher margin, higher growth specialties is a tremendous asset that has repositioned the company in the market.

Speaker #2: I've also had the pleasure of connecting with the investment community who have shared with me their growing interest in the value creation opportunity we have here at Kelly .

Speaker #2: During my time in the field , a few common themes have emerged . First , it's fundamentally important to customers that it'd be easy to do business with Kelly .

Speaker #2: We must ensure our structure and processes are designed with customers in mind , and they must be straightforward and intuitive to navigate . Next , the scale Kelly has acquired in higher margin , higher growth specialties is a tremendous asset that has repositioned the company in the market .

Speaker #2: This created inroads with employers in attractive end markets who are eager to know how our expanded capabilities can meet their evolving needs . Completing the integration of these investments is critical to our ability to realize their full value and capitalize on these growth opportunities .

Peter Leger: This has created inroads with employers in attractive end markets who are eager to know how our expanded capabilities can meet their evolving needs. Completing the integration of these investments is critical to our ability to realize their full value and capitalize on these growth opportunities. Finally, much work has been done by our team to reduce complexity and improve efficiency. This work continues today with the efforts underway to consolidate disparate front, middle, and back office systems, leveraging the leading technology stack we obtained when we acquired MRP. We must continue to assess our resources from technology platforms to our workforce mix to ensure they're optimized to drive profitable growth. These early observations are helping inform how we move forward on the next leg of Kelly's strategic journey. I'll share more in a moment about our short-term priorities and long-term focus.

Speaker #2: And finally , much work has been done by our team to reduce complexity and improve efficiency . This work continues today with the efforts underway to consolidate disparate front , middle and back office systems , leveraging the leading technology stack , we obtained when we acquired MRP .

Speaker #2: We must continue to assess our resources from technology platforms to our workforce . Mix to ensure they're optimized to drive profitable growth . These early observations are helping inform how we move forward on the next leg of Kelly's strategic journey .

Speaker #2: I'll share more in a moment about our short term priorities and long term focus . First , I'll turn it over to our CFO , Troy Anderson , to provide more details on our results in the quarter .

Troy Anderson: First, I'll turn it over to our CFO, Troy Anderson, to provide more details on our results in the quarter. Thank you, Chris, and good morning, everybody. Before I walk through our results, as a reminder, beginning in Q3, the Motion Recruitment Partners acquisition we completed in Q2 of 2024 is fully in our year-over-year comparable results. I will only speak to reported and adjusted results for the current quarter. Revenue for Q3 of 2025 totaled $935 million, a decrease of 9.9% versus Q3 of last year. This was lower than our expectations, most notably due to lower than expected growth in the ETM staffing specialty, education, and select other specialties. As we discussed last quarter, we had discrete impacts from reduced demand from the federal government and three of our top customers.

Speaker #2: Thank you , Chris , and good morning , everybody . Before I walk through our results as a reminder , beginning in the third quarter , the motion recruitment Partners acquisition , we completed in the second quarter of 2024 is fully in our year over year comparable results .

Speaker #2: Thus , I will only speak to reported and adjusted results for the current quarter . Revenue for the third quarter of 2025 totaled 935 million .

Speaker #2: A decrease of 9.9% versus Q3 of last year . This was lower than our expectations , most notably due to lower than expected growth in the ETM staffing specialty education and select other specialties .

Speaker #2: As we discussed last quarter , we had discrete impacts from reduced demand from the federal government and three of our top customers . Combined , these impacts drove approximately 8% of year over year revenue decline .

Peter Leger: Combined, these impacts drove approximately 8% of year-over-year revenue decline, consistent with our expectations, leaving us with an underlying decline of 2%, excluding these impacts, which is in line with industry performance. Kelly's underlying performance reflects positive trends in each business area that reinforces our confidence in our strategy. Education continued its long-running streak of quarterly growth and achieved a 90% fill rate overall in the quarter for the first time. Within SET, the telecom specialty achieved double-digit growth in the quarter after strong growth in Q2, while the engineering specialty has grown each quarter this year. SET's underlying performance was consistent with Q2 and continues to outperform the market.

Speaker #2: Consistent with our expectations , leaving us with an underlying decline of 2% , excluding these impacts , which is in line with industry performance .

Speaker #2: Kelly's underlying performance reflects positive trends in each business area that reinforces our confidence in our strategy . Education continued its long running streak of quarterly growth and achieved a 90% fill rate overall in the quarter for the first time within set , the telecom specialty achieved double digit growth in the quarter after strong growth in the second quarter .

Speaker #2: While the engineering specialty has grown each quarter this year, Seth's underlying performance was consistent with the second quarter and continues to outperform the market. Within ETM staffing, underlying revenue has been consistent across the quarters.

Troy Anderson: Within ETM, staffing underlying revenue has been consistent across the quarters despite the macro variability. Outcome-based solutions, excluding contact center and payroll process outsourcing or PPO, both continued to grow in the quarter and have shown growth all year. Finally, our managed service provider or MSP specialty showed modest growth in the quarter for the first time this year, reflecting the new customer wins we have referenced in prior quarters. For Q3 revenue by service type, staffing services reflects modest growth in our education business and pressure from government, large customer, and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding contact center solutions, were down year over year, reflecting timing of both project demand and new business within SET and ETM. Talent Solutions was down modestly year over year in the quarter, reflecting a mix of performance across the individual specialties.

Speaker #2: Despite the macro variability , outcome based solutions excluding contact center and payroll process outsourcing or BPO , both continue to grow in the quarter and have shown growth all year .

Speaker #2: Finally , our managed service provider , or MSP specialty showed modest growth in the quarter . For the first time this year , reflecting the new customer wins .

Speaker #2: We have referenced in prior quarters . For Q3 , revenue by service type , staffing Services reflects modest growth in our education business and pressure from government , large customer and macro environment impacts and set an ETM .

Speaker #2: Our outcome based offerings , excluding contact center solutions , were down year over year , reflecting timing of both project demand and new business within Set and ETM talent Solutions was down modestly year over year in the quarter , reflecting a mix of performance across the individual specialties .

Speaker #2: Perm fees represented approximately 1% of revenue , which was consistent with the prior year . Drilling down into revenue by segment education grew 0.9% year over year in the quarter , driven primarily by ongoing fill rate improvement .

Troy Anderson: Perm fees represented approximately 1% of revenue, which was consistent with the prior year. Drilling down into revenue by segment, Education grew 0.9% year over year in Q3, driven primarily by ongoing fill rate improvement. While we believe we won our fair share of the new business opportunities for the school year, we saw a number of decision delays in light of the broader macro environment, and the fill rate improvement benefit was lower year over year, given our maturing customer portfolio, thus the relatively lower growth in Q3. As a reminder, Education volumes and revenues are reduced significantly in Q3 due to the summer break. In the SET segment, revenue was down 9% in Q3 or 3.5% excluding the federal government impact.

Speaker #2: While we believe we won our fair share of the new business opportunities for the school year , we saw a number of decision delays in light of the broader macro environment and the fill rate improvement benefit was lower year over year given our maturing customer portfolio .

Speaker #2: Thus , the relatively lower growth in the quarter . As a reminder , education volumes and revenues are reduced significantly in the third quarter due to the summer break and the set segment revenue was down 9% in the quarter , or 3.5% excluding the federal government .

Speaker #2: Impact . Our telecom and engineering specialties continue to be growth areas within Set , while life sciences and technology saw year over year declines , consistent with the second quarter .

Troy Anderson: Our telecom and engineering specialties continue to be growth areas within SET, while life sciences and technology saw year-over-year declines consistent with Q2. In the ETM segment, revenue declined 13.1% year over year, or an underlying decline of 1.9%. Staffing services revenues declined 16.4%, driven primarily by the large customer and federal contract demand reductions, along with lower hours volume across other clients. Outcome-based revenues decreased by 17.2%, reflecting demand pressure from the large contact center customer that has fully run off as of the end of the quarter. Excluding contact center, ETM outcome-based solutions grew modestly. Talent solutions revenue decreased 1.4% overall, reflecting growth in PPO, MSP new customer wins, and reduced customer volumes in recruitment process outsourcing.

Speaker #2: In the ETM segment , revenue declined 13.1% year over year or an underlying decline of 1.9% . Staffing services revenues declined 16.4% , driven primarily by the large customer and federal contract demand reductions , along with lower hours volume across other clients .

Speaker #2: Outcome based revenues decreased by 17.2% , reflecting demand pressure from the large contact center customer that has fully run off as of the end of the quarter .

Speaker #2: Excluding contact center , ETM outcome based solutions grew modestly . Talent solutions revenue decreased 1.4% overall , reflecting growth in PPO , MSP , new customer wins and reduced customer volumes and recruitment process outsourcing .

Speaker #2: Reported gross profit was 194 million , down 12.5% versus the prior year quarter , primarily from reduced revenue . The gross profit rate was 20.8% , a decrease of 60 basis points compared to the prior year quarter , and a 30 basis point sequential increase .

Troy Anderson: Reported gross profit was $194 million, down 12.5% versus the prior year quarter, primarily from reduced revenue. The gross profit rate was 20.8%, a decrease of 60 basis points compared to the prior year quarter and a 30 basis point sequential increase. The sequential lift, which is typical with the seasonality of our business, was more muted than we expected given the revenue dynamics, along with elevated employee-related costs in the quarter. Education's GP rate increased 20 basis points, while SET declined 80 basis points and ETM declined 60 basis points. We made significant progress improving our SG&A expense profile in the quarter with reported SG&A expenses of $194.4 million, a decrease of $24.6 million or 11.2%.

Speaker #2: The sequential lift , which is typical with the seasonality of our business , was more muted than we expected given the revenue dynamics , along with elevated employee related costs in the quarter , educations , GP rate increased 20 basis points while set declined 80 basis points in ETM declined 60 basis points .

Speaker #2: We made significant progress improving our SG&A expense profile in the quarter, with reported expenses of $194.4 million, a decrease of $24.6 million, or 11.2%, on an adjusted basis.

Troy Anderson: On an adjusted basis, SG&A expenses decreased 9.7% year over year, reflecting the momentum we are gaining on structural and volume-related cost optimization efforts. Expenses increased in our education segment in support of the revenue growth, while expenses decreased across the rest of the company. With the increased revenue pressure, we're enhancing our efforts to drive durable and sustainable efficiencies in our operating model through technology enhancements, including leveraging AI, process efficiencies, and multiple other levers. Existing initiatives like the formation of the ETM segment and integration of MRP and other acquisitions within SET are progressing well and will drive both go-to-market and cost efficiencies going forward. In connection with our various efforts, we recognized $4.7 million of charges in the quarter, down from $6.4 million in the Q2.

Speaker #2: G&A expenses decreased 9.7% year over year , reflecting the momentum we are gaining on structural and volume related cost optimization efforts . Expenses increased in our education segment and support of the revenue growth , while expenses decreased across the rest of the company .

Speaker #2: With the increased revenue pressure , we're enhancing our efforts to drive durable and sustainable efficiencies and our operating model through technology enhancements , including leveraging AI process efficiencies and multiple other levers .

Speaker #2: Existing initiatives like the formation of the ETM segment and integration of MRP and other acquisitions within Set , are progressing well and will drive both go to market and cost efficiencies going forward .

Speaker #2: In connection with our various efforts , we recognized 4.7 million of charges in the quarter , down from 6.4 million in the second quarter .

Speaker #2: These included costs associated with improving technology and processes across the enterprise , as well as severance expenses and executive transition costs . We expect to see these expenses increase in the fourth quarter , as we may continued progress and expand upon our various optimization efforts related to the realignment of Set and acquisition integration during the quarter , we assessed the current goodwill reporting units and determined it was appropriate to combine them into a single set segment , reporting unit .

Troy Anderson: These included costs associated with improving technology and processes across the enterprise, as well as severance expenses and executive transition costs. We expect to see these expenses increase in Q4 as we make continued progress and expand upon our various optimization efforts. Related to the realignment of SET and acquisition integration, during the quarter, we assessed the current goodwill reporting units and determined it was appropriate to combine them into a single SET segment reporting unit. As a result of the assessment, along with declines in the current and projected business performance driven by macroeconomic and industry conditions, we concluded that there was a triggering event for a non-cash goodwill impairment totaling $102 million in the quarter. We are excluding the impairment from our adjusted results. Additionally, with the impairment activity, we were also required to reassess the recoverability of our deferred tax assets.

Speaker #2: As a result of the assessment , along with declines in the current and projected business performance driven by macroeconomic and industry conditions . We concluded that there was a triggering event for a non-cash goodwill impairment totaling 102 million in the quarter .

Speaker #2: We are excluding the impairment from our adjusted results . Additionally , with the impairment activity , we were also required to reassess the recoverability of our deferred tax assets .

Speaker #2: While we have confidence in our business over the future , recoverability time period with a three year cumulative loss position in our near term , actual and expected financial performance , it was necessary to record a valuation allowance of 70 million , which is also non-cash and excluded from our adjusted results .

Troy Anderson: While we have confidence in our business over the future recoverability time period, with a 3-year cumulative loss position in our near-term actual and expected financial performance, it was necessary to record a valuation allowance of $70 million, which is also non-cash and excluded from our adjusted results. As a result of the goodwill impairment and tax valuation allowance, our reported loss per share was $4.26 for the quarter. On an adjusted basis, earnings per share was $0.18 compared to $0.21 in the prior year, with the decline over the prior year primarily due to lower profitability and discrete tax items.

Speaker #2: As a result of the goodwill impairment and tax valuation allowance , a reported loss per share was $4.26 for the quarter . On an adjusted basis , earnings per share was $0.18 , compared to $0.21 in the prior year , with the decline over the prior year , primarily due to lower profitability and discrete tax items .

Speaker #2: Adjusted EBITDA was 16.5 million , a decrease of 36.7% versus the prior year period . While adjusted EBITDA margin declined to 1.8% . Both of which were below our expectations , reflecting the revenue and gross profit declines .

Troy Anderson: Adjusted EBITDA was $16.5 million, a decrease of 36.7% versus the prior year period. While adjusted EBITDA margin declined to 1.8%, both of which were below our expectations, reflecting the revenue and gross profit declines I previously noted. SET expanded margins by 60 basis points year over year despite the lower gross profit due to their expense optimization efforts. ETM saw margin pressure due to the elevated revenue and gross profit declines despite substantial progress on their SG&A. Education experienced margin compression due to the seasonality of that business. Moving to the balance sheet and cash flow, we are generating strong operating cash flow this year with $94 million through Q3, up significantly versus the prior year.

Speaker #2: I previously noted said expanded margins by 60 basis points year over year despite the lower gross profit due to their expense optimization efforts .

Speaker #2: ETM saw margin pressure due to the elevated revenue and gross profit declines . Despite substantial progress on their G&A , education experienced margin compression due to the seasonality of that business .

Speaker #2: Moving to the balance sheet and cash flow , we are generating strong operating cash flow this year with 94 million through the third quarter , up significantly versus the prior year total available liquidity as of the end of the quarter was 269 million , comprising 30 million in cash and $239 million of available liquidity .

Troy Anderson: Total available liquidity as of the end of the quarter was $269 million, comprising $30 million in cash and $239 million of available liquidity on our credit facilities, leaving us ample capital allocation flexibility. Total borrowing of $118 million increased versus the prior quarter due to our normal working capital seasonality. Our debt-to-EBITDA leverage ratio was less than 1 at the end of the quarter. We don't expect a material change in our net debt position over the remainder of the year from normal operations. We ended the quarter with $40 million remaining on our current Class A share repurchase authorization. We continue to believe the data demonstrates that the company is measurably undervalued by the market. With that backdrop and our capital allocation flexibility, we anticipate being active in our repurchase program during the remainder of the year.

Speaker #2: On our credit facilities , leaving us ample capital allocation , flexibility . Total borrowing of 118 million increased versus the prior quarter due to our normal working capital seasonality , our debt to EBITDA leverage ratio was less than one at the end of the quarter .

Speaker #2: We don't expect a material change in our net debt position over the remainder of the year from normal operations. We ended the quarter with $40 million remaining on our current Class A share repurchase authorization.

Speaker #2: We continue to believe the data demonstrates that the company is measurably undervalued by the market . With that backdrop , in our capital allocation flexibility , we anticipate being active in our repurchase program during the remainder of the year .

Speaker #2: We also maintained our quarterly dividend of 7.5 cents per share . These actions reflect our confidence in Kelly's strategy and our commitment to opportunistically deploying capital in pursuit of attractive returns for shareholders .

Troy Anderson: We also maintained our quarterly dividend of $0.075 per share. These actions reflect our confidence in Kelly's strategy and our commitment to opportunistically deploying capital in pursuit of attractive returns for shareholders. As we look at Q4, we are assuming no material change in the macroeconomic or industry dynamics and a positive resolution to the federal government shutdown during the quarter. For revenue, we expect a decline of 12% to 14% in the quarter, which includes 8% of -impact associated with reduced demand from discrete large customers and for federal contractors, consistent with the Q3 impact. Excluding these items, our underlying revenue decline would be 4% to 6%.

Speaker #2: As we look at the fourth quarter , we are assuming no material change in the macroeconomic or industry dynamics and a positive resolution to the federal government shutdown during the quarter for revenue , we expect a decline of 12 to 14% in the quarter , which includes 8% of negative impact associated with reduced demand from discrete large customers .

Speaker #2: And for federal contractors . Consistent with the third quarter impact . Excluding these items , our underlying revenue decline would be 4% to 6% .

Speaker #2: The incremental revenue decline relative to the third quarter is primarily due to the strong growth we saw in the fourth quarter of last year , and includes a modest impact related to the government shutdown for adjusted EBITDA , we expect margin of approximately 3% in the quarter .

Troy Anderson: The incremental revenue decline relative to Q3 is primarily due to the strong growth we saw in Q4 of last year and includes a modest impact related to the government shutdown. For adjusted EBITDA, we expect margin of approximately 3% in the quarter. This represents a sequential increase of 120 basis points consistent with the prior year change despite the incremental revenue pressure and a decrease of approximately 70 basis points year-over-year in the quarter consistent with what we experienced in Q3.

Speaker #2: This represents a sequential increase of 120 basis points , consistent with the prior year change . Despite the incremental revenue pressure in a decrease of approximately 70 basis points year over year in the quarter , consistent with what we experienced in the third quarter .

Speaker #2: While we're not providing specific guidance beyond the fourth quarter , as we look out over the next few quarters and the anticipated residual year over year impacts from the reduced demand for federal contractors and from the three large customers in ETM , it's likely we'll see continued revenue and margin pressure , at least through the first half of 2026 .

Troy Anderson: While we're not providing specific guidance beyond the Q4, as we look out over the next few quarters and the anticipated residual year-over-year impacts from the reduced demand for federal contractors and from the three large customers in ETM, it's likely we'll see continued revenue and margin pressure at least through the H1 of 2026. As Peter Leger said, across Kelly, we're addressing head-on opportunities to continue to improve our execution. This includes in the finance organization, where we're well underway with implementing measures that will enhance our agility, efficiency, and business impact in this evolving operating environment. I'm grateful to all of the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhanced profitability over the long term. I'll now turn the call back to Peter Leger for his closing remarks.

Speaker #2: As Chris said , across Kelly , we're addressing head on opportunities to continue to improve our execution . This includes the finance organization where we're well underway with implementing measures that will enhance our agility , efficiency and business impact in this evolving operating environment .

Speaker #2: I'm grateful to all of the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhance profitability over the long term .

Speaker #2: I'll now turn the call back to Chris for his closing remarks . Thank you . Troy . As we move forward , our immediate focus is on stabilizing Kelly's performance and actions to this end are underway .

Peter Leger: Thank you, Troy. As we move forward, our immediate focus is on stabilizing Kelly's performance, and actions to this end are underway. We're moving swiftly to align resources with current demand trends while continuing to drive structural efficiencies across the enterprise. As part of this effort, we made the difficult but necessary decision last month to implement strategic restructuring actions that resulted in a targeted workforce reduction. These actions address excess capacity while further streamlining our organizational structure following the consolidation of the OCG and P&I businesses into the single ETM segment. We're also continuing and where possible accelerating our technology modernization initiative within SET and ultimately across the enterprise. This initiative will unlock substantial growth and efficiency opportunities, making it easier for our employees to serve our customers and talent, reducing expenses associated with managing disparate and outdated systems, and enabling more rapid innovation and integration of AI.

Speaker #2: We're moving swiftly to align resources with current demand trends while continuing to drive structural efficiencies across the enterprise . As part of this effort , we made the difficult but necessary decision last month to implement strategic restructuring actions that resulted in a targeted workforce reduction .

Speaker #2: These actions address excess capacity while further streamlining our organizational structure . Following the consolidation of the OCG and Nai businesses into the single ETM segment , we're also continuing and where possible , accelerating our technology modernization set and ultimately across the enterprise .

Speaker #2: This initiative will unlock substantial growth in efficiency opportunities , making it easier for our employees to serve our customers and talent , reducing expenses associated with managing disparate and outdated systems and enabling more rapid innovation and integration of AI while executing our near-term priorities .

Peter Leger: While executing our near-term priorities, we're also keeping our sights set on the future. As I conclude my initial assessment of the business, our team is aligned where we must focus longer term to accelerate progress on Kelly's strategic journey. First and foremost is growth. Growth is the single most important value creation lever at this stage in Kelly's journey. To drive organic growth, we'll continue to enhance how we go to market, especially with our large enterprise customers, to bring to bear the full strength of Kelly's portfolio and win more market share. We'll also continue to drive inorganic growth by pursuing targeted investments that add scale and capabilities in higher margin specialties. We'll focus on evolving our product mix as well to address changing buyer preferences, such as the shift towards statement of work solutions and to capitalize on the AI boom.

Speaker #2: We're also keeping our sights set on the initiative with future . As I conclude , my initial assessment of the business , our team is aligned on where we must focus longer term to accelerate progress on Kelly's strategic journey .

Speaker #2: First and foremost is growth . Growth is the single most important value creation lever at this stage in Kelly's journey to drive organic growth .

Speaker #2: We'll continue to enhance how we go to market , especially with our large enterprise customers , to bring to bear the full strength of Kelly's portfolio and win more market share .

Speaker #2: We'll also continue to drive inorganic growth by pursuing targeted investments that add scale and capabilities in higher margin specialties . We'll focus on evolving our product mix as well to address changing buyer preferences , such as the shift toward statement of work solutions and capitalize on the AI boom are widely recognized .

Peter Leger: Our widely recognized Kelly Global Re:work Report found nearly half of executives surveyed are struggling to find the talent with the right operational and technical skills in AI. This unmet demand represents a significant opportunity to position Kelly as the partner of choice for employers navigating the transition to an AI-enabled workforce. We'll continue to focus on efficiency. This means continuing to align resources with demand while re-engineering our cost base to drive further structural efficiencies. That includes our initiatives to modernize our technology stack and integrate legacy acquisitions. Finally, culture. Culture is fundamental to how we'll achieve our ambitions and win in the market. We're committed to building on the strong culture that exists here at Kelly, doubling down on customer centricity, visibility, and accountability. I look forward to sharing with you more about these areas of focus and our progress as we move forward.

Speaker #2: Global Rework report found nearly half of executives surveyed are struggling to find the talent . With the right operational and technical skills in AI , this unmet demand represents a significant opportunity to position Kelly as the partner of choice for employers navigating the transition to an AI enabled workforce .

Speaker #2: Next , we'll continue to focus on efficiency . This means continuing to align resources with demand while reengineering our cost base to drive further structural efficiencies .

Speaker #2: That includes our initiatives to modernize our technology stack and integrate legacy acquisitions . And finally , culture . Culture is fundamental to how we'll achieve our ambitions and win in the market .

Speaker #2: We're committed to building on the strong culture that exists here at Kelly , doubling down on customer centricity , visibility and accountability . I look forward to sharing with you more about these areas of focus and our progress as we move forward .

Speaker #2: We're navigating a complex moment for our industry and our company . These circumstances call for decisive action to address near-term dynamics . While positioning the company to realize the significant value creation opportunity before us .

Peter Leger: We're navigating a complex moment for our industry and our company. These circumstances call for decisive action to address near-term dynamics while positioning the company to realize the significant value creation opportunity before us. There's much work to be done, but I'm excited and energized to meet this moment together with our team and contribute my operational experience to accelerate our progress. Our core strengths, an iconic brand, a differentiated portfolio, and an engaged team give me the confidence that we'll emerge more agile, resilient, and primed for growth. I'm grateful to the board of directors for placing their trust in me to lead Kelly at this moment on the company's journey. I also want to extend my appreciation to Peter Quigley for his support as I've stepped into this role and for his distinguished service to the company over the last 23 years.

Speaker #2: There is much work to be done , but I'm excited and energized to meet this moment together with our team and contribute by operational experience to accelerate our progress .

Speaker #2: Our core strengths and iconic brand . A differentiated portfolio and an engaged team . Give me the confidence that we'll emerge more agile , resilient and primed for growth .

Speaker #2: I'm grateful to the Board of Directors for placing their trust in me to lead Kelly at this moment . On the company's journey , I also want to extend my appreciation to Peter Quigley for his support as I've stepped into this role and for his distinguished service to the company over the last 23 years , into our team .

Peter Leger: To our team, thank you for welcoming me with openness and enthusiasm. I look forward to working alongside you to realize our collective ambitions and create long-term value for all of our stakeholders. Operator, you can now open the call to questions.

Speaker #2: Thank you for welcoming me with openness and enthusiasm . I look forward to working alongside you to realize our collective ambitions and create long term value for all of our stakeholders .

Speaker #2: Operator . You can now open the call to questions .

Speaker #1: Thank you , ladies and gentlemen . If you wish to ask a question , please press star one one on your telephone keypad .

Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one one on your telephone keypad. You may withdraw your question at any time by repeating the star one one command. If you're using your 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. For our first question, we'll go to Joe Gomes from Noble Capital. Joe, your line is now open.

Speaker #1: You may withdraw your question at any time by repeating the star one one command . If you're using your speakerphone , please pick up the handset before pressing the numbers .

Speaker #1: Once again , if you have a question , you may press star one . One at this time . For our first question , we'll go to Joe Gomez from Noble Capital .

Speaker #1: Joe , your line is now open .

Speaker #3: Good morning . Thanks for taking my questions .

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

Speaker #2: Good morning, Joe. Morning, Joe.

Peter Leger: Morning, Joe Gomes.

Peter Leger: Morning, Joe Gomes.

Speaker #3: I wanted to start out . Troy . I don't know if you can kind of break out these discrete , you know , between the federal government and the large customer impacts .

Joe Gomes: I wanted to start out, Troy Anderson, I don't know if you can kind of break out these discrete, you know, between the federal government and the large customer impacts. I know in total it was, I think you'd said roughly 8%, but I don't know if you can break that down, what was for the federal government and what was for the large customers.

Speaker #3: I know in total, it was, I think you'd say, roughly 8%. But I don't know if you can break that down.

Speaker #3: What was for the federal government , what was for the large customers ?

Speaker #2: Yeah . Joe , thanks for the question . There are roughly equal . So it's roughly two points each plus or minus a little bit .

Troy Anderson: Yeah, Joe, thanks for the question. They're roughly equal, so it's roughly 2 points each, plus minus a little bit. I'd say generally speaking, they're roughly equal.

Speaker #2: But I'd say , generally speaking , they're they're roughly equal .

Speaker #3: Okay . Thanks for that . And I know Chris , you just talked about some of this . Go to market here . You know , optimizing large enterprise customer share wallet .

Joe Gomes: Okay. Thanks for that. I know, Peter Leger, you just talked about, you know, some of this go-to-market here, you know, optimizing large enterprise customer share wallet. You know, when you see that, and I understand that goal, I also see, hey, 3 customers had a significant impact on revenue this quarter. You know, how are you kind of like squaring that circle and making sure that, you know, if we get even more concentrated in some big customers, the same things don't happen, you know, down the road?

Speaker #3: And you know , when I you see that and I understand that goal . But then I also see hey three three customers had a significant impact on revenue this quarter .

Speaker #3: How are you kind of like squaring that circle and making sure that if we get even more concentrated in some big customers , the same thing don't happen down the road .

Speaker #2: Yeah . Thanks , Joe . This is Chris , and it's a good question . And let me just start by reiterating that we know Kelly can achieve more .

Peter Leger: Yeah. Thanks, Joe. This is Chris, and it's a good question. Let me just start by reiterating that we know Kelly can achieve more. We saw the headwinds, and we know there's also execution gaps that we're gonna continue to address head-on. You know, one of the things that you heard me talk about is the breadth and depth of our portfolio. As we've gone and acquired really significant scale over the last few years, that's also built on a foundation where we have had incredible strength, right? Number 1 in education, number 2 in science, number 4 in engineering, just outside the top 10 in our technology business. You know, Everest recognized specialization and strength in our MSP, BPO, and staffing services.

Speaker #2: We we saw the headwinds and and we know there's also execution gaps that we're going to continue to to address head on . You know , one of the things that you heard me talk about is the breadth and depth of our portfolio .

Speaker #2: And as we've gone and acquired really significant scale over the last few years , that's also built on a foundation where we have had incredible strength .

Speaker #2: Right . Number one , in education , number two in science , number four in engineering , just outside the top ten in our technology business , you know , Everest recognized specialization and strength in our MSP , BPO and staffing services .

Speaker #2: And so as I'm talking to customers , not only , you know , the three impacted , but also the thousands of customers we're working with from around the globe .

Peter Leger: As I'm talking to customers, not only, you know, the three impacted, but also the thousands of customers we're working with from around the globe, they wanna be doing more with Kelly. They wanna make sure that it's easy to work with us, that we're bringing all of our capability to them. One of the things I have been impressed with is I, and I saw this from the outside before I got here, and I've been even more impressed as I've joined, is the depth of these relationships, the length of time we've been working with customers around the world.

Speaker #2: They want to be doing more with Kelly. They want to make sure that it's easy to work with us and that we're bringing all of our capability to them.

Speaker #2: And one of the things I have been impressed with is I and I saw this from the outside before I got here , and I've been even more impressed .

Speaker #2: Is I've joined is the depth of these relationships , the length of time we've been working with customers around the world and and we know we'll continue to partner with them in new ways as we continue to make sure that we're showing up and that we're easy to work with .

Peter Leger: We know we'll continue to partner with them in new ways as we continue to make sure that we're showing up and that we're easy to work with, and we're showing up with all of our capabilities. We do have opportunity as we move forward around some of that execution, but that's what we're taking head on. Again, I have some confidence as I've been engaging with customers over the last 60 days.

Speaker #2: And we're showing up with all of our capabilities . So we do have opportunity as we move forward around some of that execution .

Speaker #2: But that's what we're taking head on . And again , I have some confidence as I've been engaging with customers over the last 60 days .

Speaker #2: Yeah . Joe , this is Troy . I would just add that again , these these four discrete .

Troy Anderson: Yeah, Joe, this is Troy. I would just add that again, these four discrete items are somewhat unique and completely unrelated, just happened to all be around the same time. It's the macro environment affected each of them in varying ways, policy decisions affected them in varying ways, and their industry challenges are also affecting them in varying ways. It's less about customer concentration, and it's more about, you know, stickier services and just growing. We have relationships, by the way, with all those customers still, and still very significant for at least one or two of them.

Speaker #4: Items are somewhat unique and completely unrelated . Just happened to all be around the same time , but it's the macro environment affected each of them in varying ways .

Speaker #4: Policy decisions affected them in varying ways . And and they're in their industry challenges are also affecting them in varying ways . So it's it's less about customer concentration and it's more about , you know , stickier services and , and just growing .

Speaker #4: We have relationships , by the way , with all those customers still and still very significant for at least 1 or 2 of them .

Troy Anderson: Anyway, just wanted to remind everybody of that, since we didn't really get into the details of what they were.

Speaker #4: So anyway , just wanted to remind the since we didn't really get into the details of what they were , but remind everybody of that .

Speaker #3: Appreciate that . And then one more for me , if I may , Troy , you got to slide here in the deck about the revenue trends and you kind of break out excluding discrete impacts .

Joe Gomes: Appreciate that. One more from me, if I may. You know, Troy, you got a slide here in the deck, you know, about the revenue trends, and, you know, you kind of break out excluding discrete impacts. You know, if you take a quick glance at those that, you know, Q1, Q2, Q3, they're, you know, pretty much trending the wrong way. Just trying to get an idea, you know, I understand the federal government shutdown. You know, what else needs to occur in the macro environment that you think we can start to see these revenue trends reverse and start becoming positive, or, you know, as opposed to negative and/or, you know, start growing again as opposed to trending downward?

Speaker #3: And if I take a quick glance at those , you know , quarter one , quarter , two quarter , three , there , you know , the pretty much trending the wrong way .

Speaker #3: And just trying to get an idea , you know , I understand the federal government shut down . But you know what else needs to occur in the macro environment that you think we can start to see these revenue trends reverse and start becoming positive or , you know , as opposed to negative and or , you know , start growing again as opposed to trending downward .

Speaker #4: Yeah , it's a fair question . Again , I would I would say that set . And again , they're somewhat unique across the three .

Troy Anderson: Yeah, it's a fair question. I would say that, you know, SETT, and again, they're somewhat unique across the three segments. SETT is fairly consistent across the quarters. We had great strength in telecom, double-digit growth there this quarter after nearly double-digit last quarter. Engineering's been growing all year, and consistent rate of decline in technology and life sciences. We did expect a little bit more out of SETT this quarter, but we're still pleased that we, despite the broader environment around us, that we saw at least consistent performance and some strength there in those two areas. Education, somewhat of a unique dynamic there, market, some decision delays.

Speaker #4: Segments . Set is fairly consistent across the quarters . We had great strength in telecom double digit growth there this quarter . After nearly double digit last quarter .

Speaker #4: Engineering has been growing all year and consistent rate of decline in technology and and life sciences . So we did expect a little bit more out of set this quarter .

Speaker #4: But but we're still pleased that we despite the broader environment around us that that we saw at least consistent performance and and some strength there .

Speaker #4: There's two areas . Education again somewhat of a unique dynamic . There market some decision delays . Those are decisions we still expect to to win in at a future date .

Troy Anderson: Those are decisions we still expect to win at a future date, but there was some hesitancy in the market just given some of the policy changes and dynamics around the broader macro environment. We expect education to continue to grow and us win our fair share, if not more. We've been taking share in a growing market there. Then on ETM, again, the underlying still low single digit. We think we're, you know, we're competitive in the market. As Peter Leger said, highly ranked by the industry experts, and we saw growth at MSP, so we're starting to realize the benefits of some of the new logo wins there.

Speaker #4: But there was some hesitancy in the market just given some of the the the policy changes and dynamics around the broader macro environment .

Speaker #4: So we expect education to continue to grow and and us win our fair share , if not more . We've been taking share in a growing market .

Speaker #4: There and then and then on ETM again , the underlying still low single digit , we think we're you know , we're competitive in the market .

Speaker #4: As Chris said , highly ranked by the industry experts . And we saw growth in MSP . So we're starting to realize the benefits of some of the new logo wins .

Speaker #4: There . Staffing has been consistent across the year despite the macro headwinds . The underlying staffing and really that that decline there was just less growth in PPO and a bit of a downturn in RPO .

Troy Anderson: Staffing has been consistent across the year, despite the macro headwinds, the underlying staffing. Really that decline there was just less growth in PPO and a bit of a downturn in RPO, the recruitment process outsourcing. There's different dynamics in each, and there's significant opportunity in each, as Peter Leger outlined in his prior response. I think it's just a matter of moving us forward with some of the initiatives and getting through some of the softness that we see in more in the macro dynamics around us.

Speaker #4: The recruitment process outsourcing . So there's there's different dynamics in each and and there's significant opportunity in each . As Chris outlined in his in his prior response .

Speaker #4: So I think it's just a matter of moving us forward with some of the initiatives . And and getting through some of the softness that we see in more in the macro dynamics around us .

Speaker #3: Okay . Great . Thanks . I'll get back in queue .

Joe Gomes: Okay, great. Thanks. I'll give back the queue.

Speaker #1: Thank you . Our next question comes from the line of Kevin Stankey from Barrington Research Associates . Kevin , your line is now open .

Operator: Thank you. Our next question comes from the line of Kevin Steinke from Barrington Research Associates. Kevin, your line is now open.

Kevin Steinke: Great. Thank you. Wanted to start out by asking about, you know, the various factors in the operating environment that you noted in your earnings release are currently impacting your results, you know, largely the macroeconomic landscape and sluggish labor market. On top of that, you know, specifically added in the AI boom. I'm just kind of wondering what you're seeing in terms of the impact of AI on demand for your business currently. On the flip side, you also mentioned that could be an opportunity, you know, over the longer term as, you know, as your customers look to find AI talent. Maybe if you could walk through the dynamics you're seeing with AI currently.

Speaker #2: Great . Thank you .

Speaker #5: So I wanted to start out by asking about the various factors in the operating environment that you noted in your earnings release . Are currently impacting your results largely , the macroeconomic landscape and sluggish labor market .

Speaker #5: But on top of that , you specifically added in the AI boom . And so I'm just kind of wondering what you're seeing in terms of the impact of AI on demand for your business currently and on the flip side , you also mentioned that could be an opportunity , you know , over the longer term , is , you know , is your customers look to find IA talent .

Speaker #5: So maybe if you could walk through the dynamics you're seeing with AI currently .

Speaker #2: Yeah . Kevin , thanks . This is Chris . We really see there to be an opportunity to continue to capture new AI growth opportunities .

Troy Anderson: Yeah, Kevin, thanks. This is Peter Leger. We really see there to be an opportunity to continue to capture new AI growth opportunities. You know, from our standpoint, really not just in the SET business, but in ETM and in education, we've got a unique opportunity in the market based on our capability to bring employers a flexible, more scalable solution as they're bridging into a more AI-enabled workforce. We think that's going to unlock a lot of value in a way that will combine the power of people and technology. We have that opportunity as we move up the value chain in our SET business with a lot of the work we're doing in things like data modernization and other digital work. That's solutions-based business.

Speaker #2: And you know , from our standpoint really not just in the set business but in ETM and in education . We've got a unique opportunity in the market based on our capability to bring employers a flexible , more scalable solution as their bridging into a more AI enabled workforce .

Speaker #2: We think that's going to unlock a lot of value and in a way that will combine the power of people and technology , and we have that opportunity as we move up the value chain in our set business with a lot of the work we're doing and things like data modernization and other digital work that solutions based business .

Speaker #2: And again , that's in in growing demand and , and as we indicated in our prepared remarks more broadly across employers in our research , 50% told us that they are struggling to find the right operational and technical skills to help them navigate this transition into the AI enabled workforce .

Troy Anderson: Again, that's in growing demand. As we indicated in our prepared remarks, more broadly across employers in our research.

Peter Leger: 50% told us that they are struggling to find the right operational and technical skills to help them navigate this transition into the AI-enabled workforce. We see it as a real opportunity for us on the go-to-market side. Now internally, you heard Troy and I both talk about how we are gonna continue to accelerate the modernization of our technology stack, the technology stack that we acquired when we acquired MRP. That continues to be a priority as we think about ways to improve both processing and efficiency across our teams and bring our teams new tools.

Speaker #2: So we we see it as a real opportunity for us on the go to market side . Now , internally , you heard Troy and I both talk about how we are going to continue to accelerate the modernization of our technology stack .

Speaker #2: The technology stack that we acquired when we acquired MRP , that continues to be a priority as we think about ways to improve both process and efficiency across our our teams and bring our our teams new tools and a lot of that is underway .

Peter Leger: A lot of that is underway, the integration of those AI-based tools in our recruiting process, in our client portals, and we're gonna continue to see that add value and drive opportunities for efficiency and productivity over the next couple of quarters.

Speaker #2: The integration of those AI based tools and our recruiting process in our client portals . And we're going to continue to see that add value and drive opportunities for efficiency and productivity over the next couple of quarters .

Speaker #5: Okay , great . So it sounds like AI offers a nice longer term growth opportunity for you . I was just curious if in the shorter term , you know , perhaps are some customers , you know , kind of holding off or delaying hiring decisions as they assess the impact of AI on their businesses ?

Kevin Steinke: Okay, great. You know, it sounds like AI offers a nice longer term growth opportunity for you. I was just curious if in the shorter term, you know, perhaps are some customers, you know, kinda holding off or delaying hiring decisions as they assess the impact of AI on their businesses and, you know, if as they assess whether they need to add as many people in the past, you know, given that AI will bring them greater productivity. I'm just wondering if that's, you know, having any short-term impact on demand for your services.

Speaker #5: And , you know , as they assess whether they need to add as many people in the past , you know , given that AI will bring them greater productivity , I'm just wondering if that's , you know , having any short term impact on on demand for your services .

Speaker #2: Well , let me let me start and I'll Troy build on it . You know , first , I think we just need to step back in the broader context of what we've been have seeing . , you know , many of the businesses that would support some of the disruption , maybe you've seen in the lack of job growth that we've seen really pretty consistently across every month this year is a bit embedded already in the workforce dynamics .

Speaker #2: Well , let me let me start and I'll Troy build on it . You know , first , I think we just need to step back in the broader context of what we've been have seeing .

Peter Leger: Well, let me, let me start, and I'll have Troy build on it. You know, first, I think we just need to step back in the broader context of what we've been seeing a pretty sluggish labor market. You know, many of the, you know, many of the businesses that would support some of the disruption maybe you've seen and the lack of job growth that we've seen really pretty consistently across every month this year, is a bit embedded already in the workforce dynamics. We see and have been seeing that sluggish impact all year. Now outside of that, we continue to see companies invest in bridging themselves into a more AI-enabled workforce.

Speaker #2: workforce . And we believe there could actually be opportunities not only on the solution side of how we can help companies navigate that , but it also could be an indication at some point on the staffing part of our business that that companies use flexible labor as a bridge into that , as their navigating more certainty around the demand for their products and services .

Peter Leger: We believe there could actually be opportunities, not only on the solution side of how we can help companies navigate that, but it also could be an indication at some point, on the staffing part of our business that companies use flexible labor, as a bridge into that, as they're navigating more certainty around the demand for their products and services. We'll continue to be navigating those indicators that will impact both parts of our business, our staffing and our solutions.

Speaker #2: And so we'll we'll continue to be navigating those indicators that will impact both parts of our business , our staffing and our solutions .

Speaker #4: Yeah , Kevin , I would just add , this is Troy , the I wouldn't say there's been a change this quarter versus last quarter or two quarters ago in terms of any impact that that AI may have had in terms of our positions , the type of positions we staff or the type of opportunities we're pursue .

Troy Anderson: Yeah, Kevin, I would just add, this is Troy. I wouldn't say there's been a change this quarter versus last quarter or two quarters ago in terms of any impact that AI may have had in terms of our positions, the type of positions we staff or the type of opportunities we pursue. But what we are seeing an uptick in our ability to leverage AI in terms of providing support to our customers, be it with our platforms, from a workforce management perspective in the ETM space, be it some of the solutions that we're bringing to bear in SETT, not just in the Technology vertical, but also in Telecom and Engineering and life sciences.

Speaker #4: But what we are seeing an uptick in , in our ability to leverage AI in terms of providing support to our customers , be it with our platforms , from a workforce management perspective and the ETM space , be it some of the solutions that we're bringing to bear in set , not just in the technology vertical , but also in telecom and engineering and life sciences .

Speaker #4: So there's and we're starting to be able to now move upstream into bumping into some of the major consulting players with with some of the our nimbleness and the capability that we bring trying to fill that gap that Chris highlighted about work , companies not being able to to find the right skills and the right workers .

Troy Anderson: I mean, we're starting to be able to now move upstream into bumping into some of the major consulting players with some of our nimbleness and the capability that we bring, trying to fill that gap that Peter Leger highlighted about companies not being able to find the right skills and the right workers. Yeah, no real change in what we've seen. If anything, it's creating more opportunity for us to bring our solutions to bear.

Speaker #4: So , yeah . So no , no real change in what we've seen . And if anything , it's creating more opportunity for us to bring our solutions to bear .

Speaker #5: Okay , great . All right . Good to hear . So I just wanted to get a little more insight on education . You mentioned some just some delayed decision making .

Kevin Steinke: Okay, great. All right, good to hear. I just wanted to get a little more insight on education. You mentioned some, just some delayed decision-making there, due to macro factors, and I'm just trying to relate the macro environment to, you know, the K-12 space and perhaps why customers have been, you know, holding off on decisions there.

Speaker #5: There due to macro factors . And I'm just kind of trying to relate the macro environment to , you know , the K through 12 space and perhaps why customers have been , you know , holding off on decisions .

Speaker #5: There .

Speaker #4: Yeah , sure . So in this Troy , the so I guess two things . One , again I want to highlight across our portfolio billion dollar business .

Troy Anderson: Yeah, sure. This is Troy. I guess two things. One, again, I wanna highlight across our portfolio, you know, billion-dollar business now, largely in the K-12 substitute teacher, we achieved a 90% fill rate in the quarter for the first time ever. That is a tremendous value that we deliver to our clients. We have Some of our largest customers are closer to 100% even. We have tremendous offering there in value that for our customers. The new business there are really new opportunities for outsourcing. It's less about us and competitors taking each other's customers, and it's more about us competing with in-house offerings.

Speaker #4: Now, largely the K through 12 substitute teacher market. We achieved a 90% fill rate in the quarter for the first time ever. So, that is a tremendous value that we deliver to our clients.

Speaker #4: And we have some of our largest customers are closer to 100% . Even so , we have tremendous offering . There in value that for our customers , the the new business , there are really new opportunities for outsourcing .

Speaker #4: It's less about us and competitors taking each other's customers , and it's more about us competing with in-house offerings . Even when we we lose a client here or there , it's usually they bring it back in-house that it's stabilized and they now feel confident they can they can run it in-house .

Troy Anderson: Even when we lose a client here or there, it's usually they bring it back in-house, that it's stabilized, and they now feel confident they can run it in-house. They may have implemented a technology solution that enables them to do that. That again, doesn't happen very often. What we saw with the two things really: the fill rate, we are maturing that portfolio. We've had tremendous growth there over the last number of years. Peter Leger highlighted in his comments, we've tripled that business over the last 5 years. As those clients mature, I mean, you can only get to 100%. You can't get above that.

Speaker #4: They may have implemented a technology solution that enables them to do that . But but that again doesn't happen very often . What we saw with the so two things really the fill rate we are maturing that portfolio .

Speaker #4: We've had tremendous growth there over the last number of years, as Chris highlighted in his comments. We've tripled that business over the last five years.

Speaker #4: And so as those clients mature , I mean , you can only get to 100% . You can't get can't get above that .

Speaker #4: And so as all those relationships mature and we're operating in that 90 plus percent range , we're just not going to get as much fill rate lift across the portfolio that we've seen over the last few years .

Troy Anderson: As all those relationships mature and we're operating in that 90%-plus range, we're just not gonna get as much fill rate lift across the portfolio that we've seen over the last few years that has been supplementing the new business wins. We'll continue seeing some benefit there. A little bit less benefit there than we've seen in prior years. The decision delays is really just around. Keep in mind back in the summer, there was a $6 billion grant from the Department of Education that was withheld and put under review right around the time where certain decisions might have been made. Typically, these awards are done in the spring, late spring and early summer and then implemented for the new school year.

Speaker #4: That has been supplementing the new business wins , but we'll continue seeing some some benefit there . So a little bit less benefit there than we've seen in prior years .

Speaker #4: And then the decision delays is really just around . Keep in mind , back in the summer there was a $6 billion grant from the Department of Education that was withheld and put under review right around the time where certain decisions might have been made .

Speaker #4: Typically these these awards are done in the spring , late spring and early summer . And then implemented for the new school year .

Speaker #4: So there was the future of the Department of Education , just there was just a lot of noise in the system . And for a school district to , to venture into this , this new space of outsourcing , their substitute teacher delivery , you know , some some felt like that was not a step they were ready to take .

Troy Anderson: There was the future of the U.S. Department of Education. There was just a lot of noise in the system. For a school district to venture into this new space of outsourcing their substitute teacher delivery, you know, some felt like that was not a step they were ready to take. The work has been done, the relationships have been built, the value proposition has been sold. Now it's just, it's more of a when than an if on those. We have confidence that we'll get again, our more than our fair share of those as they come back to market.

Speaker #4: The work has been done . The relationships have been built , the value proposition has been sold . And so now it's just it's more of a when than an if on those .

Speaker #4: So we have confidence that we'll will get again more than our fair share of those as they come back to market .

Speaker #5: Okay . Got it . All right . That's helpful . And can you , can you just talk a little bit more about the timeline on the integration work going on and the set segment ?

Kevin Steinke: Okay. Got it. All right. That's helpful. Can you just talk a little bit more about the timeline on the integration work going on in the SET segment? Peter Leger, I believe you said you're looking to even accelerate, you know, that a bit and just tie that to, you know, the completion of the process, I think you said would be also beneficial with, you know, taking that SET offering to the market in an integrated way and, you know, driving greater growth out of that offering.

Speaker #5: Chris , I believe you said you're looking to even accelerate that a bit . And just tie that to , you know , the completion of the process .

Speaker #5: I think you said would be also beneficial with , you know , taking that set , offering to the to the market in an integrated way and , you know , driving greater growth out of that offering .

Speaker #2: Yes , exactly . And , and as I mentioned , a little earlier , we have significant scale . And we've deployed about $900 million of capital , mostly in the set business .

Peter Leger: Yes, exactly. As I mentioned a little earlier, we have significant scale. We've deployed about $900 million of capital, mostly in the SET business. Our customers, as we're talking to them, continue to want to leverage those capabilities, not just in technology, but technology and telecom, technology and life sciences. What we're doing is accelerating the modernization of that tech stack. When we acquired MRP, they had a leading tech stack. We were in the process of looking at various ways to integrate our disparate front, middle, and back office.

Speaker #2: And our customers , as we're talking to them , continue to want to leverage those capabilities , not just in technology , but technology and telecom technology and life sciences .

Speaker #2: And so what we're doing is , is accelerating the modernization of that tech stack . We acquired when we acquired MRP . They had a leading tech stack .

Speaker #2: We were in the process of looking at various ways to integrate our disparate front , middle and back office . We have selected the tech stack that we acquired when we when we bought MRP and are in the process now of migrating the rest of the organization to that tech stack .

Peter Leger: We have selected the tech stack that we acquired when we, when we bought MRP and are in the process now of migrating the rest of the organization to that tech stack. We're starting with the integration, though, of our SET business. So we really, we know that that will give us an unlock as we go to market, making sure that it's easy for our internal teams to be collaborating, winning new business, helping go to market faster, leveraging that tech stack. Then as we get SET integrated and the legacy SET acquisitions integrated into that technology stack, we will also be bringing through our Education and ETM segments. So that is all underway, and all of it is on schedule.

Speaker #2: We're starting with the integration , though , of our set business . And so we really we know that that will give us an unlock as we go to market , making sure that it's easy for our internal teams to be collaborating , winning new business , helping go to market faster , leveraging that tech stack , and then as we get set integrated and the legacy set acquisitions integrated into that technology stack , we will also be bringing through our education and ETM segments .

Speaker #2: And so that that is all underway and all of it is is on schedule .

Speaker #4: Yeah . Kevin , I might just add this , Troy , the the we have a big cut over here at the end of the year with the legacy acquisitions being integrated into the MRP tech stack .

Troy Anderson: Yeah, Kevin, I might just add. This is Troy. We have a big cut over here at the end of the year with the legacy acquisitions being integrated into the MRP tech stack, then in 2026, the rest of SET. We'll start making, as Peter just indicated, we'll start moving some of the enterprise capabilities, likely leading with the human capital management component, along with the rest of SET, then quickly follow that with education and ETM beyond 2026. Those are some of the key near-term milestones around that. The go-to-market side of SET has been integrated, the management teams, the sales teams, and the like.

Speaker #4: And then in 26 , the rest of set . And we'll start making as Chris just indicated , we'll start moving some of the enterprise capabilities likely leading with the the the human capital management component , along with the rest of set .

Speaker #4: And then and then quickly follow that with education . ETM beyond 26 . So those are some of the key near-term milestones around that .

Speaker #4: The go to market side of set has been integrated . The management teams and the sales teams and and the like there . But they're on separate systems , as Chris said .

Troy Anderson: They're on separate systems, as Peter Leger said, and so that creates some inefficiencies and some challenges with some of the collaboration. We'll get through that here pretty quickly. Again, first big cut over into the year and then through 2026.

Speaker #4: And so that creates some inefficiencies and some challenges with some of the collaboration . But , but but we'll we'll get through that here pretty quickly .

Speaker #4: Again , first big cut over into the year . And then and then through through 26 .

Speaker #5: Okay . Great . Yeah that's helpful . Just lastly you talked about the fourth quarter outlook . Assuming a positive resolution to the government shutdown .

Kevin Steinke: Okay, great. Yeah, that's helpful. Just lastly, you talked about the Q4 outlook, assuming a positive resolution to the government shutdown. I mean, it sounds like the impact on you has been pretty modest, but kind of what's the swing factor there in terms of, you know, if this shutdown dragged on even longer than we expect?

Speaker #5: I mean , it sounds like the impact it has on you has been pretty modest . But kind of what's what's the swing factor there in terms of if this shutdown dragged on even longer than , than we expect ?

Speaker #4: Yeah . So the we can measure the direct impact . Right . We know what our government business is . We we were fortunate that there was a larger percentage of the positions that we have that were deemed essential .

Troy Anderson: Yeah. The direct impact, right? We know what our government business is. We were fortunate that there was a larger percentage of the positions that we have that were deemed essential. That was a pleasant surprise if there's such a thing in the dynamic. Less than a point. If it goes all the way through the quarter, you know, maybe closer to a point of revenue impact. We tried to capture that in the 12 to 14 expectation. Give us some room there. What we can't measure really is the indirect impact.

Speaker #4: And so that was a pleasant surprise . If there's such a thing and in the dynamic . But so less than a point , if it goes all the way through the quarter , you know , maybe closer to a point of revenue impact .

Speaker #4: And we've tried to capture that in the 12 to 14 . Expectation . Give us some room there . What we can't measure really is the indirect impact .

Troy Anderson: Just yesterday, right, 10% of flights across 50 major airports being reduced 10%, that, you know, that's gonna have a ripple effect. There could be other ripple effects in other industries, the longer this goes on. That's a bit of a wildcard that we don't know. Really all we know right now is what we can directly see. I think the longer this goes on, it's not gonna help anybody.

Speaker #4: So just just yesterday , right , 10% of of flights across 50 major US airports being reduced , 10% that , you know , that's going to have a ripple effect .

Speaker #4: There could be other ripple effects and other industries . The longer this goes on . So that's that's the a bit of a wildcard that that we don't know .

Speaker #4: So really all we all we know right now is is what we can directly see . And I think the longer this goes on it's not going to help anybody .

Speaker #5: Yeah okay . All right . Understood . Thanks for taking the questions . I'll turn it back over .

Kevin Steinke: Yeah. Okay. All right, understood. Well, thanks for taking the questions. I'll turn it back over.

Speaker #4: Thanks , Kevin .

Troy Anderson: Thanks, Kevin.

Speaker #1: Thank you . Our next question comes from the line of Mark Riddick from Sidoti . Mark , your line is now open .

Operator: Thank you. Our next question comes from the line of Marc Riddick from Sidoti. Marc, your line is now open.

Marc Riddick: Hey, good morning.

Speaker #6: Good morning .

Speaker #2: Good morning .

Troy Anderson: Good morning, Marc.

Speaker #4: Mark . Mark .

Speaker #7: So I was wondering if you could talk a little bit on cash usage and prioritization . Maybe we can start with what we're looking at for CapEx for this year .

Marc Riddick: I was wondering if we could talk a little bit on cash usage and prioritization. Maybe we can start with what we're looking at for CapEx for this year and then how the technology plays into how that might skew 2026. I have a follow-up after that.

Speaker #7: And then how the technology plays into what, how that might skew 26. And then I have a follow-up after that.

Speaker #4: Yeah , sure . Mark , destroy the the CapEx year to date is about 7 million , probably be ten ish on a full year basis , you know , plus or minus a little bit .

Troy Anderson: Sure, Marc. This is Troy. The CapEx, you know, year to date is about $7 million. Probably be 10-ish on a full year basis, you know, plus or minus a little bit. Some of that spend on the technology deployment is, you know, cloud-based implementation work, so it doesn't show up as CapEx, but it still gets capitalized. Third-party labor and some of the software cost, et cetera. It's up in the operating section of the cash flow statement. Overall, again, strong cash flow for the year.

Speaker #4: Some of that spend on the technology deployment is , you know , cloud based implementation work . So it doesn't show up as CapEx , but it still gets capitalized .

Speaker #4: Third party labor and some of the software costs , etc. . So it's up in the up in the operating section of the cash flow statement .

Speaker #4: But but overall , again , strong cash flow for the year . And with that , we're seeing the opportunity to with some of the debt paydown that we've done this year , we're seeing the opportunity to in the fourth quarter here , given the share price and just the undervaluation of the stock .

Troy Anderson: With that, we're seeing the opportunity to, with some of the debt paydown that we've done this year, we're seeing the opportunity to, in Q4 here, given the share price and just the undervaluation of the stock also, engage in some repurchase activity. I think net-net, as I said in my prepared remarks, no material change in our net debt position relative to Q3 here, which is about $90 million or so. You know, $118 in debt and $30 million in cash. You know, the wild card could be if perhaps there's a small tuck-in acquisition or something like that we're able to get over the goal line before the end of the year.

Speaker #4: Also engaged in some repurchase activity . So I think net net , as I said in my prepared remarks , know no material change in the our net debt position relative to the third quarter .

Speaker #4: Here , which is which is about 90 million or so , you know . 118 in debt and 30 million in cash . And , you know , the wild card could be if perhaps there's a small tuck in acquisition or something like that , that we're able to get over the goal line before the end of the year .

Troy Anderson: Otherwise, that's what we're expecting.

Speaker #4: But but otherwise , that's what we're expecting .

Speaker #7: Okay . And then you kind of let , let yourself into where I was going next , which is acquisition . What you're seeing with the pipeline currently , maybe valuation wise , and are you seeing the , you know , how many opportunities out there vis a vis maybe six months ago or so , there seems to be a little bit of a pickup in activity .

Marc Riddick: Okay. I mean, you kinda led yourself into where I was going next, which is acquisition. What you're seeing with the pipeline currently, maybe valuation-wise, and are you seeing, you know, how many opportunities out there vis-a-vis maybe six months ago or so? There seems to be a little bit of a pickup in activity there, overall. I was sort of wondering what your appetite is at the present time or should we, you know, as far as larger acquisitions, you know, are we sitting sort of on the sidelines for larger acquisitions now or how are you feeling about that?

Speaker #7: There overall . So sort of wondering what your what your appetite is at , you know , at the present time and , or should we , you know , as far as larger acquisitions , you know , are we are we seeing sort of on the sidelines for larger acquisitions now or are how you're feeling about that .

Speaker #4: Yeah , it's a it's a fair question . The I mean we're active . We have an active corporate development team . They're they're constantly evaluating pipeline .

Troy Anderson: Yeah. It's a fair question. I mean, we're active. We have an active corporate development team. They're constantly evaluating pipeline. We've been expanding our network of sources for opportunities. We have seen some certain assets that are fairly richly valued, and that we've passed on or that we've thrown in, you know, maybe an inquiry, but quickly decided that was going a direction we didn't wanna go. We continue to be active. We're looking at across primarily in the SET and education areas, type of opportunities, therapy add-ons, some of the other add-ons that we can do in the SET verticals, be it technology, be it engineering, or life sciences.

Speaker #4: We've been expanding our network of sources for opportunities. We have seen some certain assets that are fairly richly valued and that we've passed on or that we've thrown in.

Speaker #4: And , you know , maybe an inquiry , but quickly decided that was going a direction we didn't want to go . But we continue to be active .

Speaker #4: We're looking at across primarily in the set and education areas type of opportunities , therapy , add ons , some of the other add ons that we can do in , in the in the set verticals , be it technology , be it , be it engineering or life sciences , but you know , as we sit here today , unlikely that there's a large acquisition in the near term , but we never say never .

Troy Anderson: You know, as we sit here today, unlikely that there's a large acquisition in the near term, but we never say never. Certainly we're going to continue looking at building upon the scale that we've achieved. We're going to continue looking at adding capabilities. We believe we have a great foundation to be building upon, both for organic growth and inorganic growth. We've got strong cash flow, and we expect to continue to be able to deploy capital opportunistically across the various options, as I mentioned earlier.

Speaker #4: But certainly we're going to continue looking at building upon the scale that we've achieved . We're going to continue looking at adding capabilities .

Speaker #4: We believe we have a great foundation to be building upon , both organic growth and inorganic growth . And so that's and we've got strong cash flow .

Speaker #4: And we expect to to continue to be able to deploy capital opportunistically across the various options . As I mentioned earlier .

Speaker #7: Great . Thank you very much .

Marc Riddick: Great. Thank you very much.

Speaker #2: Thank you .

Troy Anderson: Thank you.

Speaker #1: Thank you . Our next question comes from the line of Jessica Loos from Northcoast Research . Jessica , your line is now open .

Operator: Thank you. Our next question comes from the line of Jessica Luz from Northcoast Research. Jessica, your line is now open.

Speaker #8: Hi , Chris . Hi , Troy . Thank you for taking my questions . First of all , I don't know if it was already touched on , but I have a brief question and then a follow up .

Jessica Luz: Hi, Peter Leger. Hi, Troy. Thank you for taking my questions. First of all, I don't know if it was already touched on, but I have a brief question and then a follow-up. First, in terms of the current macro environment having a impact on the quarter, just to go a bit deeper, how would you characterize the sales cycle for the business overall?

Speaker #8: First , in terms of the current macro environment , having an impact on the quarter , just to go a bit deeper , how would you characterize the sales cycle for the business overall ?

Speaker #2: The sales cycle is still really robust . And , you know , we're we're continuing in some of the the work I shared in my in my prepared remarks , our focus on growth is at the core of what we're doing right now , making sure that we are in front of our customers , helping them understand all of the ways that we can add value .

Peter Leger: The sales cycle is still really robust, and you know, we're continuing in some of the work I shared in my prepared remarks. Our focus on growth is at the core of what we're doing right now, making sure that we are in front of our customers, helping them understand all of the ways that we can add value. We're gonna continue to make sure that all of Kelly is coming to our largest enterprise customers. We've also seen in our SET business a really strong retail pickup this year, which has been driving some of the stability in the SET business and some of the growth in engineering and in telecom.

Speaker #2: And we're going to continue to make sure that all of Kelly is coming to our largest enterprise customers . We've also seen in our set business really strong retail pickup this year , which has been driven , driven , driving some of the stability in the set business and some of the growth in engineering and in telecom .

Speaker #2: And then finally , you know , in the education space as Troy indicated earlier , you know , we're number one in the market on the heels of a 90% full rate in the quarter .

Peter Leger: Finally, you know, in the education space, as Troy Anderson indicated earlier, you know, we're number one in the market on the heels of a 90% fill rate in the quarter. It is maybe as exciting of a time as any to go and sell with that track record of success. We are everywhere in the market talking to districts that are insourcing their model and helping them understand how we could add value as their partner. We're gonna continue to have that be a priority as we drive growth into the future.

Speaker #2: It is maybe as exciting of a time as any to go and sell with that track record of success . And and we are everywhere in the market talking to districts that are insourcing their model and helping them understand how we could add value as their as their partner .

Speaker #2: So we're going to continue to have that be a priority as we drive growth into the future .

Speaker #8: All right . Thank you . And then just for the brief follow up , again , if it was touched on or not , in terms of the pricing environment for the three segments , do you see any specific pressures within any of the segments .

Jessica Luz: All right. Thank you. Then just for the brief follow-up again, if it was touched on or not. In terms of the pricing environment, for the 3 segments, do you see any specific pressures within any of the segments?

Speaker #8: ?

Speaker #2: You know , I'll maybe start . And Troy , feel free to weigh in . You know , we're we're going to continue .

Peter Leger: Yeah. You know, I'll maybe start, and Troy, you feel free to weigh in. You know, we're going to continue, I would say overall, just to kind of set the stage to be disciplined in how we're going to approach new opportunities in the market. We're not going to go buy business. We continue to see rationality in terms of, you know, where we play. We've got a huge opportunity to continue to move up the value chain in the statement of work, solutions-based business, particularly in SET. That continues to be a priority. We're going to continue to monitor that over the next couple of quarters. I don't know, Troy, if there's anything else you want to add.

Speaker #2: I would say overall just to kind of set the stage to be disciplined in how we're going to approach new opportunities in the market .

Speaker #2: We're not going to go by business . We continue to see rationality in terms of , you know , where we play . We've got a huge opportunity to continue to move up the value chain and the statement of work solutions based business , particularly in set up .

Speaker #2: And and that continues to be a priority . And we're going to continue to monitor that over the next couple of quarters . I know if there's anything else you want to add .

Speaker #4: Yeah , I think as we look across the three segments , education and said , are I'd say stable , the spreads there are stable to actually improving as again , we move up the value chain and with with both current and prospective clients on new opportunities .

Troy Anderson: Yeah. I think as we look across the three segments, education and SET are, I'd say stable. The spreads there are stable to actually improving, as again, we move up the value chain, and with both current and prospective clients on new opportunities. Then, I would say it's a little more mixed in ETM, as some of the large enterprise, as they come up for renewals, of course, we're trying to work with them on their cost structure. There could be a little bit of concession here or there. Generally speaking, I'd say, you know, maybe we see a little bit in ETM and actually more positive momentum than the other two.

Speaker #4: And then I would say it's a little more mixed in in ETM as we some of the large enterprise , as they come up for renewals , of course , we're trying to work with them on on their cost structure .

Speaker #4: And so there could be a little bit of concession here or there , but but generally speaking , I'd say , you know , maybe we see a little bit in , in ETM and actually more positive momentum than the other two .

Speaker #4: And it's not really translating our gross profit was commented not as not as strong as we were expecting , down 60 basis points year over year , but but it was really more a function of the business mix in some elevated cost of service in the quarter versus really spread or pricing pressure .

Troy Anderson: It's not really translating. Our gross profit was, I commented, not as strong as we were expecting, down 60 basis points year over year. It was really more a function of the business mix, and some elevated cost of service in the quarter, versus really spread or pricing pressure.

Speaker #8: Okay . Perfect . Thank you guys so much .

Jessica Luz: Okay. Perfect. Thank you guys so much.

Speaker #4: Thank you .

Troy Anderson: Thank you.

Speaker #1: Thank you . This concludes the question and answer session . I would now like to turn it back to Chris Layden for closing remarks .

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Peter Leger for closing remarks.

Speaker #2: Thank you all for joining today . That concludes we'll see you next quarter .

Peter Leger: Thank you all for joining today. That concludes. We'll see you next quarter.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.