KELYA - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to Kelly Services' Second Quarter 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. CEO. and President Corona, George Sir, you begin. may

George Corona

Thank XXXX second John call Olivier and me good Services' Kelly is CFO. our to Welcome Thirot, quarter today's morning. on you, conference With call.

may comments for remind me this the about Actual future you comments, expectations any results materially include Let suggested made could by statements forward-looking our differ that call, to performance. a during company's including for statements performance. our have of made Q&A, update on from those our no SEC Please call. actual we factors filings and risk the refer description the the that obligation this influence to could future

the As comparisons our segment, which we me year-over-year In adoption recorded into are standard you let detail. represented own. our Also morning, of of to is the in earnings in international explain will volatility net staffing required that constant introduced investments the with and like walk in of results currency. this to equity nominal remind his Olivier this exception accounting my more point remarks, out including I'd that has currency through companies the recent related many

Kelly's second X% to from XXXX $X.XX pretax this per Revenue Persol $XX.X to of non-cash $X.XX a second earnings was quarter our $X.X stock. of gain diluted compared number to compared XXXX. of share share common were second Earnings million billion, a operations Approximately with $X.XX on loss per quarter up per share is loss in a EPS of. related in $XX.X earnings XXXX results. the were the to compared Turning quarter million. The

in reporting standard new accounting I with market price, As a result the decreases of which accordance we mentioned. are its here in

per a ago. earnings per unrealized share than $X.XX quarter, loss, $X.XX this per year Excluding share higher for were share the diluted

like States, the hovering decades, We becoming business the and labor and to retain. a few observations so the in of United to line about the to With environment our much have good current difficult qualified in outlook. near in attract unemployment business lowest pleased our share are delivered I'd a in more level current quarter candidates with U.S. With are market. five

As the their which and doing constrained more opportunities pressure time choices. retain, economy the The job choose this have from becoming and to now cost are required employment, selective of to more creates and they in full the on job replace approaches candidates in market on wages extended employees business. recruit,

so. of constraints strong affecting job of continues to to required labor do contributes are turnover these a Notwithstanding and to look they attempt convergence to to activity for not currently not are demand ability typically our present. Temporary fill the affecting signs we demand requisitions, would indicate activity have While conditions, employee level softening market are the levels. higher and also

structural environment. changes are in background, made prior track gross Now, the product growth Expense basis permanent during grow XX with the mix the back us on to expenses points Gross was increase the and during basis of bringing continued in fees. with a quarter our in line experienced QX. some rate rate revenue XX second and on quarter after GP highlights focus X.X%. puts profit that we This throughout GP reflects a consistent rate placement points QX. drop We the The was in business as the X.X% of progress Topline growth up year. over the here was profit quarter. with

year. same was by quarter, in performed Staffing the second The Kelly's the due Staffing Now, revenue America let's quarter. growth Call. quarter XX% delivered favorably Commercial acquisition Educational America revenue XXXX look Teachers segments in three flat the period Kelly growth supply. compared to of operating September to second impacted Staffing tight of the with prior primarily a year, Staffing. the revenue rate On labor was how increased X% starting at last in to

in the On demonstrating was increasing Teachers specialties, customer with the prior growth were revenue trend to Call, fees Excluding quarter with combined quarters. Professional year-over-year. On basis, permanent continuing and last technical Revenue increased second all hiring two pickup placement year-over-year, specialties were year-over-year employees. up commercial KES and up of compared the temporary in growth up technical specialties saw of X%. in a year XX%, professional positive we XX% XX% in XX% our the

gross The the impacted by Expenses for in XX%, placement quarter same positively second quarter Staffing. rate the America by offset were as up profit year. was strong in permanent mix. was profit the Staffing quarter the fees, X% gross for America last rate And customer

to the and America these $XX.X to Staffing conditions. working additional with of compared profit the the the the an Call. more candidates achieved On We year. due attributable of resources up Teachers The increase required bring basis million in million and current is segment told, were addition XXX expenses line business effort to quarter expected to place attract expenses primarily All $XX.X operating to are in points and of for and last

the nominal Staffing to Revenue constant of currency XX% Europe. U.S. revenue the dollars. Americas. International increased now increased Staffing operations in for to prior compared in International region X% the outside year basis, On Let's the across our quarter in a

on year basis basis a of fees of million ago. prior XX%, segment's earlier. by remainder of a this on were region. by offset summary, Staffing reported the a is GP Expenses International my much period operating was impact reported representing constant GP to fee expenses profit mentioned of growth the a second the in compared management XX XX And effective the segment's earlier. due Staffing's Customer of the $X.X partially rate the dollars same points XX.X%, in were lower across Permanent accounted for the International change, X% versus For for drop mix be up was improvement to of points year will the of cost but basis. The reference, year million for $X.X currency year-over-year. quarter ease placement quarter comments

primary reporting take segment. buying process reflects result revenue was that outcome-based and Now, fulfillment mix. segment us; revenue our the contingent delivered discuss our GTS global our to look creation at large from turn down improvement a increase X% Consistent in increased talent as are for products. workforce our whole X% declines a GTS year-over-year the services. separately, product solutions' business a recruitment value let's process results in products, outsourcing, first, but in offset by results and outsourcing, GTS each with two quarter. structural ways the let's segment the centrally second clients I'll payroll talent that this of businesses' last The reporting how as year-over-year, KellyConnect in in while profit and increased process gross quarter from of outsourcing staffing outsourcing quarter, performed the

the Now, let's GTS each in businesses. profit look of two at gross results

workforce our the PPL X% is GP of our contingent CWO talent centrally primarily in payroll partially was products, staffing, quarter profit products. fulfillment delivered centrally made continued offset staffing business business outsourcing our fulfillment outsourcing, talent year-over-year and revenue to up RPO for double-digit delivered in the by and down Our process increases due outsourcing, recruitment Gross process in products. decreased

business. services BPO, employee and improvement XX% strong BPO year-over-year, KellyConnect. explanations services, second business year-over-year rate The were headcount continued the $XX.X second Expenses increases This and by to year-over-year were the product, in our legal million coupled BPO services these based with $XX.X our up new aligned Gross costs KellyConnect, resource result staffing delivered cost volume outcome and in primarily levels CWO in increases GTS basis new business momentum to services quarter, GTS practices. business outcome and increases growth million an incentive-based based and programs our advisory the the and manage our All wins. a in to addition related centrally partially lower PPO driven quarter. salary year told, by additional of and These increased ago. product quarter segment in to due This results of due benefit Kelly were profit we outcome a in our operating for offset compared XX.X% profit cost. to turning products. is partially lower both Now, in comprised is points profit our our by of compensation. was both related X% the program as structural gross GTS offset and our mix, to Overall, in XXX was in increase based up services

call the over for Olivier, turn I'll quarterly Now, the our will company. cover entire results to who

Olivier Thirot

last X% to compared Thank totaled quarter second the $X.X you year. billion, George. up Revenue

total Our foreign exchange. to XXX by were impacted favorably basis points results due company reported

X%. constant quarter So, basis, on second revenue the a growth for our was currency

revenue in QX points America basis performance Call, growth QX total growth Permanent which in Staffing. although revenue continued Staffing growth placement Americas XX% from also fees were On positive was reflects staffing. and include Our Overall, performance results of up continued rate. profit the XXX the movement and Overall, to year-over-year both our rate up in gross Teachers X.X%. added slowing International international our continued

when rate of of additional of increase environment. Staffing were rate expenses a GTS reflect the impact X.X% result second profit resources points Our gross mix the offset expense our basis to year. higher up America in segments' customer relates in by tenant and The XX.X%, Staffing SG&A segment primarily compared rate. both improvement the structural year-over-year. [Indiscernible] in improvement up of last to as XX gross impact impact current The profit quarter was the margin in

include expenses the an also increasing technology compared to prior Our investments year.

million expense year-over-year XXXX. compensation, impact which relating reflect to expenses comparisons reduced $X.X the of the corporate also of in executive adjustments addition, In favorable

quarter our We expenses return for line compared X.X% XXXX. to are reflect from $XX.X the of rate transaction compared in the to Earnings gross and across investments XXXX year. million QX all continuing GP delivering generating in conversion in results of continue of operations X.X% our for from full growth the sales, operations to service, These were of with earnings million. returns our will second profit $XX.X with of manage

our and on standard prior we to Persol a relating losses gains adopted unrealized equity of investments calls, in treatment mentioned our As on required the Holdings. Kelly accounting

on dilutive result approximately XX% quarter reflect million second benefit and stock. $XX.X a Persol are Act. operations from not tax It XXXX gains share significant QX tax the price as non-cash XXXX. $X.XX benefit on related QX earnings. income our These expense X.X% to expense Persol for million of The a non-cash XXXX. recognize loss result performance. million net accounting tax in a the effective tax of Income tax. excluding rate and compared losses reflect related XX.X% compared operating benefit of to a XXXX the of XXXX in our to our of volatility As to non-cash was on second loss does result rate net in $X.XX loss our effective as quarter recognized effective Tax change XXXX the Jobs compared quarter in X.X% QX of was impact tax U.S. The item earnings was share [$XX.X] introduced stock for Persol as rate the tax the earnings common below separate income [Indiscernible] a a compared of benefit And lower Persol X.X% XXXX in XXXX rates the Persol million. a tax trend the we per of to line lower with share per in gain tax in of a the million for loss is of This impact increased market $XX.X $X.X decrease the the reported Cut the loss XXXX. gains $XX.X change, per stock and stock in pretax stock. of finally, was was The EPS

tax, QX impact the Persol our of an QX improvement over XXXX. of XX%, was of Excluding fluctuations the EPS XX% net stock

and Since growth call, May. stock. topline gains declined ahead Persol continued our look year outlook has our result, call we rate QX a discussions, our as outlook been the the on as prior for year. and rest since Now, Consistent encumbered our the in does of a not losses the reflect in with slightly has QX our outlook provided to with the full last slower

unrealized price gains from and material. be could we believe that do losses Although market changes in future resisting

approximately For the XX revenue growth of X.X%, full year, to favorable impact be we revenues points. of up basis FX to increasing the expect X.X% on

be expect expect on leave technology year-over-year and growth spending additional initiatives. our X% be we to [Indiscernible] on would up expense basis. finally, We X%, the to to flat efficiency which And SG&A a

XXXX. in As expect operating a we result, to leverage produce

losses work Our the XXXX annual income tax impact expected and rate the Persol of reform and mid-single-digits credits. is the to ongoing gains of without U.S. be in opportunity impact tax reflecting stock

XX including expect points impact. basis to we to X% quarter, up third the For be revenue of X% unfavorable FX

to rate and we expect gross SG&A sequentially. expect expense be finally, XX%. year-over-year And We up to for the profit be up up

In to free generating compared was capital while cash continue free to year-to-date, flow [Indiscernible] $XX to and the QX XXXX. year. compared down was Accounts generation making the our $XX was million to $XX year-end Cash Now, end, $XX we and days million $X.X year with investments cash $X X% debt and year we million billion totaled sheet. our cash Global second in balance million cash million quarter DSO receivable manage of end flow at XXXX. in return year-end flow moving This reflects XXXX. working a line to XXXX. actively same to quarter last at flow of $XX At XX have compared million totaled quarter in technology. the from last free

slide performance, turning to I'm concluding thoughts. available over George his more information our for on second review our on the back website. For quarter deck please now

George Corona

labor Thank In quarter. the you, with a to team's second during were market, tight execute Olivier. our ability pleased we

As of three we look we continue things. on concentrate will to the to the year, remainder

continue relationships we of into higher technical delevering to continue to First, our increase drive and customers. By professional relationships, we services. deeper these We're optimize to going and professional mix our focus more profitability, deepening create exposure, spaces. products will margin value-added structural these increase our on

our Kelly in modern apprenticeship of future the proactively tech Second, develops in in education. commitment people in investments new capital Innovation technology tech for expenses this more investment Kenzie finally, fund latest integrated investment learning QX to and seed to areas recently connect their our in areas us XXXX, the in continue we we as of we growth. investing that to in our believe that to invest in the because support lives. innovations expenses. area to will round raising to into to business work. upskilling ways scrutinize supporting workers made will transforming redirect to immersive our major continue will and of our to forward, continue Fund efficient future We which to and improvements includes intend making we And launched future solutions. future help continues in all apprenticeships the retraining our growth. for changes and that will in Innovation efficiently today's to This tech new technology a way the made of Demonstrating people enable paid participated drive enrich going the operate during this and work manage Fund work, Kenzie Academy, talent we workforce workers. early we We which Through more generation of invest program Kelly blends next business

efforts look efficiency are quarter. and Just next I questions. on now as I forward answer to opportunities XX we will our you help Modern on innovations. the back focusing to happy exciting Olivier of the we your industry pioneered that years Staffing reporting ago, will deliver us results be greater produce actively to game-changing or And

Operator

go Northcoast of [Operator to with Research. line go ahead. we'll Instructions] Patterson Kyle Please And

Kyle Patterson

revenues of And the John would this I Good my the for you first trends curious some guys the in morning been curious progress create if within how PT seeing so revenue everyone. question. Thank for -- taking accelerating the the that about and decelerating market. Healy U.S. you you On seeing have you're just shift guys quarter? was I'm of morning. or

George Corona

I look two when supply demand. look perspectives, So, at it we at from and revenue,

Number and more than a that achieved a effects fee. But what hiring permanent in placement within strong So, the we're continued lot seeing pretty per going the is few trends the we're past the on. are demand seeing we one, has marketplace.

two you're rather to a unique permanent so this staffing permanent convergence commercial seeing in temp. is if seeing hiring. of to of also So one, hiring temp hiring, But perm so Number is temporary hiring going right lot dynamics. has customers that was the we're quarter direct into hiring, particularly space than started something

of staffing fees. growth increases a placement your has on bit effect but little permanent that tempering it temporary So, rate, your

the remains strong starting perspective, have. bit that have also labor our seeing particularly well are downward are continues. But in the demand when outcome supply little demand that that as services rate look customers using, but to still a from the of and they way impact on the we at So, we strong market growth constrained we're a based and

Kyle Patterson

was more congratulations Okay, great. on of the Kenzie investment Academy inaugural you're strategy And and I then talking investment on at purpose and the the like end -- the call about the when types curious the of be it could Innovation Kelly invested to is various different business? in is the meant specific the be areas complement or with to on area focused that of one parts that Fund, of many

George Corona

take couple designed are in at solutions the us really ways. it's to that area that of workforce technologies new us can a out Yes, for help coming look the a different in

will to make we one, to be number the and them So, efficient. work invest that technologies more people for change way in look able opportunities

that jobs in workforce automated the places productive the for helps the those ready new those are need Kenzie future. were that able as invest in jobs being for workforce them the retrain Academy skills make jobs look we to we our technology more ways of as the work in more And will to move as as more future will for forward. the for productive training happening breakthroughs. They and because move it's like gather we we make in operating know forward, we to and workers and look enhance be to automated, to to people of opportunities in and the jobs of are invest the model We will business efficient and us new

Kyle Patterson

given also the forward, we earnings could that then very Persol going but with you gains add you've into consideration take this made something and reported the good. the into saw already monetizing volatility And and asset. more quarter the Is holding it what to know just the that this back that business? contemplated Okay, guys will or with long-term you or expect the this contemplate for proceeds you have those to be reinvesting

George Corona

Yes.

investment, introduce able growing market we into to fronts is So, been when the company our and where market that a we take strategic run those the very an number And support we we our happy very partnership hold. still Persol we quarter, that And Persol in strategic it strategic fluctuation a reasons part but with Those go-forward global needs our and volatility, into customers look specific more of look Also those and to the though investment. going the investment long the of be at some on one, partnership investment us which Japanese to were; it with is looking of currently even reasons. don't and for the as it. the to that investment had our formed has important a we capital profitable for very venture we of our more outsourcing Asia all receive allowed is have Asia products to on there, operations still three we while grow reasons the strategy. we in consulting a joint and time would in a be our Asia they spend in hold, us footprint have of with -- we're this fastest run as on as continue investment

Kyle Patterson

Okay.

and business, color could next what more the provide if as few in currently was you just over within solutions seeing some curious on the there quarters then well? And Okay. I you're

George Corona

it's more we the shortages, moving talent lose with business with as and for customers are we talent products. the look and looking they and those that the rapidly to in companies larger particularly an and in to see based now, So, right -- customers way success slowdown more to having clear Kelly are types outcome any at the we're towards And don't demand those good solutions. activities the them of continuing like provide that win

to BPO. demand out the environment, in current area, of Right in now So, a the we lot hiring growth there. in continue that RPO particularly, there's business, see

and the Although by us, see see CWO their shifting which is to employment starting purchases have a it's that product work continuing. that a products, instatement customers then based we have we're we to And business that some of finally still activities. product temporary towards we more with more for to of grow procurement smaller opportunities see continue

structurally see to continue to good in we and margins. continued we're So, our in solutions business growth the have improvement going

-- the we margin are traffic So, higher that than when those much in look rather topline at revenue. focused those, what about from fact services. more talk how on that's we we're growth those areas grows And fast

Kyle Patterson

housekeeping great. lastly And then a just of Okay, question. more

at impact, of XX growth the it were does took mainly revenue Or do reason guidance, some the moderations? currency international expectations the expectation segment basis have noticed showing to looks the slightly expectation about that year you Was favorable the moderated. slowing that growth? full impact? of points Looking like this also down I with main for was

Olivier Thirot

that about we about especially, Interesting, now our you're points was the guidance, because give right it's outlook, nominal currency. mention and favorable impact to side on XX. that XXX On revenue the basis

our in negative currency would due not XX QX mainly points euro impact the basis when impact say of about we U.S. versus reason I the have to anticipate fluctuation; We

is heavily on ranging Again, And staffing supply as the that's a expectations business basically the currency you side oppose explaining it's outlook basically, our demand X.X%. and to America If main especially currency, now constant we're expecting revenue to was driver X.X% our to between George U.S. X% slowing growth and from in as the was exclude X% previous on Staffing lower side. balanced down.

Kyle Patterson

great. questions good for and taking Thank quarter. Okay, you guys this my luck

George Corona

you. Thank

Olivier Thirot

Thank you.

Operator

Instructions] in. few further And questions a in moments, Corona while Mr. coming [Operator no

George Corona

John, very you much. thank Okay.

Operator

Xth September starts and midnight. Ladies XX:XX welcome. is for Eastern at gentlemen, this replay. goes A.M. available Very at conference It until today

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Kelly Services (KELYA) 8 Aug 182018 Q2 Earnings call transcript