KELYA - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to Kelly Services Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO. Please go ahead.

Peter Quigley

Thank you, John. to Third welcome Conference and everyone, Kelly Quarter Services Call. Hello, our today our Officer is me Chief Safe Olivier language. through With you Thirot, Financial walk who Harbor will

Olivier Thirot

And everyone. you, good thank Peter. Yes, morning,

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

addition, adjusted non-GAAP designed to In discussed an basis. be Discussion trends will give insight of financial measures into an certain our the our during certain operations. items data basis, on on reported in and on call, adjusted

our We in available our have website. performance which the third information provided is more slide deck, on also on quarter

our discussion morning, to we’ll refer During deck. this that

it be helpful So available. to it may have

back Now, to Peter. you,

Peter Quigley

to overview highlights segments, of lives. conclude that on observations morning's by were in our provides people segments. Olivier. with their business explain way To I'll designed of current in be that change start work Kelly's new operating on you QX. what in impact chosen finally, performance through then connect third I'll COVID-XX new some my more will share perspectives specialties. in I we'll idea covering quarterly perspectives how of the today, of announced in the Olivier including growth then release. brief Olivier will this then you, even accelerate a earnings of to our highlighting the environment, walk how you Kelly's Thank plans an and model resulted give enriches our has I'll us quarter. organizing And the our our is operating And new a before give business this

QX. to turn let's Now

third is on-going showed operating the worst growth is our business last in to wage the our trends Kelly's assessment reinforcing talent some While to uneven QX some demand improvement, COVID-XX revenue by Kelly's challenges quarter, year, segments compared line sequential we're seeing lowering of continued jobs. in that in impact earlier top currently all particularly recovery, in us. featuring gradual tempered lower supply, business behind stronger but What in

larger adapted to in the Our many attractive quickly market and momentum talent with gained customers have benefits. have and pay more challenges

operating customers execute environment, remains moving comparison. are While their sized on to to promising most demand reinvent Kelly by taking on recover, our believe strategically many pre-pandemic Kelly excel specialty model redefine growth most focus specialties We've sluggish to continue the placing and strategic attracting in talent our small talent. where business robust unique and with this we opportunities, and and to plans chosen provider. medium longer Amid forward demand, and a as we the

also specialties toward chosen shift reflect specialties. our our Our desire higher portfolio margin to

Professional results and segments and in As part our specialties; five known Education, and OCG Engineering based Commercial, forward step important Science, on Kelly's Industrial International. by we of today, are financial reporting operating Technology, evolution, previously as this

has focus operating or played scale regardless new Kelly model, our one specialty, operating whether combines While particular part important years, based. of our staffing of for for segments represent resources specialties a of and new revenue an in outcome that these generating many all they're

of P&L. right artificial businesses team organizing where to best new our barriers, the specialty new professional and we our today's and growth these established market. subscale even way This coming office and is focuses advantages we'd We now the growth light believe organizational products any the that focus process greater commercial, will give our for business in think structure disciplined clerical the part of skill of that our not expect and and business growth, or out same our and removes calls industrial, combine business are our value. to to each portfolio those move win, the all within sales leader, marketing industrial but We've our help us combines Kelly same profitable efforts future shareholder able crisis, capital outsourcing of example, delivers include targets and are just sets solutions specialty, or as For the guide solutions allocations. deliver growth staffing, unit, targets for center, we same sharing and

segments, come by of are the don't all yet demand growth encouraged We in expect increase operating to our organically. our we new of each across

and M&A prime to most reviewing in at results. as are their continuing as while QX portfolio, operating of to such the growth, Brazil our the our operations our segments and optimize time I'll specialties over Olivier targeted We same by strategic review for opportunities technology staffing it to of in QX. demonstrated each further sale now education, explain turn during our to

Olivier Thirot

On today, of Peter. deck we we slide you their the operating financial the that have seven new and five model pre outcome information. respective issued the of overview XXXX of Thank an are the segments pandemic

operating we go the and Canada. more Technology. primarily in into So details and can Engineering Q&A It's more $X during Science, than with billion the as and quickly starting business U.S.

Telecommunications. acquisitions, the Science, and a well-placed name, expect Engineering acquisitions As GT focus the are from specialty IT and areas NextGen of with you would

Now more businesses been brand efforts focus the a sets what all single we margins. and old margin skill services. our customers models allows is deliver outcome higher we products reflects talent the based talent. effectively unit albeit our have based the the recruiting compete for and and business lounge the to very align Specialities, with The valuable GT accounts and outcome rate some with sales space to also based in together efficiently of This and segment specialty have that subscale lower in into in and combine these structure, But that had delivery the on segments. [Indiscernible] us brought

product Insight the light the future, XXXX provide center settings. students. broad building industrial our acquisition talent and base solutions market single in in contact education school eliminates metropolitan childhood our And talent as to organizational those same as products the branch Connects barriers tools Kelly the as deliver that business with increasing U.S. will specialties, segment, million directed to combines science, our sets. all needs Canada leadership Education, and in of artificial increase position and technology expect with Next services were our and Professional $XXX across bringing early range more well $X and outcome together U.S. education continue Industrial districts and towards states. of office similar about talent staff. provide is the together special view this our billion both markets, of in and our allows to call revenue customers delivered our and unit reflects instructional K-XX specialty models the these to our in included to large on In us staffing in in skill results in of revenues XX than a in these engineering education to we [Indiscernible] center based delivery software of higher efficiency. to largest a including we recent of support services delivery districts are smaller

provider of profiles, practice process the rate well and margin and $XXX delivers based as consulting with services RPO segment recruitment based lower service services. outsourcing processing, including to GP million fold both higher rate for XXXX, with in process as and basis. rate customers fee to higher were combination reflects Outsourcing just services Revenues and have global customers products we reflect over products. a our on combined GP margin, payroll managed the with combines GP MSP margin lounge barrel BPO the SME segment different consulting that outcome Our businesses outsourcing, staffing and

margins the $X product And result, a the covering in As XXXX. will billion business quarter-to-quarter, Brazil, and QX staffing, its segments in than depending business vary also National in predominantly Mexico at is in of sales finally, Europe, mix. before on more

both to the Moving segment delivering niches, countries the of blend life materials focus and QX each in and Information to earlier this released operating the And watchmaking these results financial in move as in segments countries a customers our locally of well large and a reflect GP about in to performance blue on as operates was in SME Switzerland. morning. such collar our relevant as company I'll solutions for as Europe XX prepared businesses respective forward, served. Mexico, and Most whole. now of for geography, rates in of segment the discussion continue will their The the tenants. provides science white specialty included

Revenue reflect also than extent $X billion stimulus foreign QX the significant. on the in availability expense continuation impact and growth economic QX prior Peter continuing As duration the pandemic to of of COVID mitigation revenue activity, of XX% of of XX limited was impact the and the beginning assistance exchange U.S. impact government reflect pandemic, totaled the lesser the quarter from third The not mentioned, our of a of The rate some our the actions, stabilization year. talent. results in our down and temporary results the in

of see sequential mentioned exited impact crisis we begun of quarter, the and we we QX. to full COVID-XX demand depth the growth customer last on reached the in demand As QX have as in

customer, QX the to was impact Gains experience continue segments school quarter, as on talent QX, been the rate, exit September variety services. company. including delivery using particularly our improvement early in quarter. in for QX the our the revenue business a rate the gains continues the year-over-year for which the for districts and for We in and U.S. special have the depending the be improved all we accounts. our impacted the with QX, quarter see sorry, trend to of demand, models, second During particularly fall to consistent revenue Like large virtual demand of an -- since month has on gradual uneven the in QX education in return key average trends and the exit school hybrid, in demand in biggest has

decline through during U.S. backing in feeling while and quarter, in quarter related the also available And with has safety results needs our a finally, industrial. in were professional supply some revenue skill QX concerns resilient, enhanced education the As most X% tenant the pool the we by childcare the OCD personal were COVID-XX our and especially reduced continued be revenue to moved and quarter. benefits in for are of sets, constraints segment talent unemployment impacted the

life profit Overall customer NLG was full Permanent the uncertainty down of placement from strong. economic the XX% down time industries as depressed negatively customers remain impacted, all segments. hiring were as as gross were year-over-year in impact certain While demand such XX.X%. sciences fees

reflect factors. We third basis rate extent, of of compensation the as was benefit XX past, which the when our and band unfavorable improved starting The demand to negative of year. related expenses driven XX.X% in a QX relief fees mix charges to for government Increase Our compared doubtful charge related $X.X with stopped the product no down from customer servicing COVID-XX subsidies we and large SG&A including in U.S., services XXXX. prior lesser to customer stimulus actions by recognize for positively recovery segment up was international in offset impact the to quarter took medium points and significant, This impact expenses several to by were was XX.X% cost adjustments year-over-year. we mentioned we on-going accounts GP were $X.X expense and talent charge April, The the similar in million assignment, down of related allowance lower was with quarter. customers small time pandemic the there government the million quarter customers, gross for contract The The increase non-cash sized the excluding in increase recorded the mix. and to we our our X.X% profit of customers. the our the were full lower not and disputes for have on costs was in a no in impacted margin protracted are by with decline receivable. in on and expenses There dispute the of expenses mitigation recovery rate temporary employee placement lower rates. quarter our employees in was related outpaced the impact the partially year-over-year. the

QX. year-over-year comparisons reduction We in seen the And XXXX by cost QX of the who have back prior from actions compensation furloughed the in employees of the Sequentially continuing benefits pandemic. incentive we the impacted expense had QX have the in low brought level we also to over course expense XXXX. quarter levels as increased took temporarily QX in finally, been the are of modestly unusually

to of quarter for QX $XX.X from million XXXX Our earnings compared reported million. was reported operations $X.X loss the

includes QX dispute. charge non-cash the XXXX customer a earnings Our related million $X.X to

operations losses the earnings segment earnings dispute on for national and related holdings. segment $X breakeven our year-over-year the customer quarter. the was decline of includes for Kelly's QX offset personal item more basis, four tax versus Science, before modest but Technology are operating earnings as also in were million Professional a So and the significantly the OCG on I the our by this loss increased equity segments the nearly strong when five year-over-year, The unrealized XX% earnings than for GP the include earnings year. while in million, expands Engineering OCG the $X.X at quarter. for like-for-like segments mentioned, to And adjusted investment reported gains management. decline XXXX, earnings, and decline delivered International The a cost in Industrial and charges last of

million For personal we pre-tax from income line million. and tax are of in as for recognized operations our the third non-cash quarter on the These the losses compared million stock to gain benefit quarter, was our $XX.X below loss benefit separate $XX.X gains with a Income item. tax year. XXXX earnings common compared $XX.X $X.X pretax recognized prior million

XXXX, information. additional compared by the earnings was Credit. for some earnings quarter the a was In Opportunity QX as provide stock, to the share, of personal Our by related loss the negatively $X.XX a non-cash XX%. of gain XXXX stock. per tax was of In quarter in underlining these in on the earnings order offset on by per benefits finally, the personal for of favorably XXXX than valued offset by XXXX per understand the impacted third $X.XX QX effective share Adjusting a impacted better dispute. expense Work $X.XX per EPS rate share EPS $X.XX, X% to share me trend let to XXXX, partially per reported QX to customer earnings, your was XXXX. charge in more tax loss common Items, compared benefit, the was was on decline for And Tax share

the totaled end Now, $XXX at ago. $XX quarter down moving no XXXX. We Cash to the balance to our million U.S. with year million zero, from compared was borrowings That year sheet. nearly a million facilities. $X ended in credit

receivable reductions of reflect taxes the balances as working declined cash in the and impact Our in CARES primary late revenues March provision under accounts the benefit beginning of capital, Act. the of the payroll deferral U.S. of

capitalize the As and manage of year. $X.X year-over-year was market and XX XX% end debt future and year from opportunities. growth of was decreased to the Receivable Accounts period cash XXXX, and to we've available advantage we navigate an Global days, increase the billion DSO last to we same X our days the working X of days that recovery have ensure closely take economic uncertainty, on of capital economic spate continued to

it not we reflects of of as of quality QX the experienced reflect increase The saw two our receivables. the increase the result While DSO, trends, deterioration in we have in pandemic. does an a

are and continuing customers of their taking cash flows, efforts First, their are payment terms manage own with to us. full advantage

customers Second, who recovered payment there greater large proportion and with large as longer shift has terms. resulted generally customer faster has in of has business a accounts our mix in enjoy a been demand

the of payment quarter, $XX collection period cash We to of for million to patterns conditions. the monitor million In closely flow in use current continue in very flow cash confident necessary cash same XXXX. that of customer $X compared are to free we to have resources teams generated our flow our the free respond and our

benefit mentioned, ability for As in part that a COVID-XX we compared reason the to certain continued is defer for And tax payroll stimulus. from economic payments have as the to our ago. I of cash to flow free related increase quarter year primary a

demand to quarters, balances improved to cash meet to for a two back at our expect lows, revenue level gradually of some quarters. needs, continue you, the have use and reduced begin over now QX next to several past have improve to we from if demand their working Given existing Peter. operating been volumes that of and we the capital And would

Peter Quigley

Thanks, Olivier.

decision less to results ahead. his QX strong on and acceptable of our a by industrial lies Kelley delivered clear good share recovery, small pipelines have sequential medium in businesses recovery in will resources pandemic same the in and post thoughts staffing and are trajectory we potential. enterprises serve Higher prior Call was next Olivier strategic as And specialties not Our shift COVID-XX benefits. the all COVID-XX parts a demand value performed Solutions the business toward been phase by Virtual already well margin encouraged which we our our we'll see Center the of have higher OCG showing and specialties pandemic. we of made companies, portfolio and small Science, And some the pandemic. challenging environment. this our sized to Overall, enter seeing are of without in to medium the COVID-XX, Kelly are all the environment. pandemic have resilient closely larger most district climate. of the of and professional tough in this school been of disproportionately segments growth while and operating improvements we track We're will a and continue of is been our pipeline What's new post believe is specialty prospects and continue increase plus a believe to it has instructors pandemic for strong we environment, a considerable In impacted our the by educators to education going signs within offers showing of the support dramatically new customers signs what from demand during acquisition business we recovery. yet now impacted environment assertion.

Olivier Thirot

past with Consistent quarters, we are providing Economic two to cycle. guidance highly continue the uncertain. Peter. not in on where based conditions we are you, Thank the be

the reviewing data that earnings of subsequent crisis, annual the have stability And and economic and possibility demand speed to completing will our the call economic the now's rates. repeated a providing be the reopening based of including the Since an recovery, quarter economy, we depths year-end scenarios to they in early that our fourth of However, outlook we'll of beginning then we the cycle, be viability in are XXXX on infection each with quarter, a and comfortable the the position stages to continued evaluate of after of cycles planning return resurgence mid-February. in downturn.

review to on continue We debt and cash covenants the impact earnings, the scenarios resulting of matrix. flows,

We continue remain we to financial liquidity stress weather covenants, test adequate at have and debt the confident and point, cash crisis. that our this and resources we flows to

planning that prepared our that to so advance are [Indiscernible]. We also actions we take are

in strategy For in completed opportunities the example sale focus we quarter, we the of and inorganic evaluating to accelerate our in specialties advance our the staffing to operations our growth. choose to where are Brazil,

I So predictive Current to level of may perspective buying are understand share demand trends helpful fourth while will current we be results, in not of the behavior. quarter. on are they but providing guidance, future some the and customer

As on instruction. service particular in not our of trends. be in the were my to in XX% subsequent fully mentioned revenue segments, will in and as remarks even than results, district's we back third declines pace quarter across neither less been Education of the the as challenging in QX person revenue the improvements

our will supporting when schools to higher services with person are hybrid are to demand in inflection, be return remote we all able our While for in K-XX selection. and

recovery significantly to QX, will in the longer Assuming caused and pre-crisis revenue QX. And a lift traditional impacts, a starting are and currency our that year revenue related QX year-over-year the the Revenue to when reported as a anticipate COVID-XX seasonal logistics will currency June, of we education economic levels view seeing reach in and year expect recovery the in global services exhibit factors during for by our which we revenue XX.X% us. XXrd for year-over-year calendar. are XX.X%. is to and specific response doesn't period to to in we also was was consistent the the QX seasonal school month of be month decline for sectors, our see we were trend than constant encouraging, K-XX Other our QX fiscal decline some give speed change constant XXXX we reminder, of demand distribution are trends the each sense of the week normal revenue for

will QX revenue. XX So a have But the week additional is weeks of holiday week.

about two gain QX. working we So in days will

reflect economic crisis trends to continue year-over-year we XXXX. the March the We expect in anniversary impact declines until of revenue to

slightly to QX expect than QX. be our lower We rate GP

increase We costs would the seasonal related and expect to subject of expect degree during that employee that a more pronounced variability be pandemic. always of education, margins, a have to and revenue lower could are certain even we

We our discussed, strict SG&A we'll have And definitive yet not as due material sign continued we to and margin to with seen pressure And in respect expense continue environment. of crisis. with levels customers some any cost I've steps the work controls. with response closely current to the to have taken

are we compensation we the with expected the and Back reducing the to the you recovery, the actions acted in made international have our volumes. staffing and to start infrastructure reductions conditions and and monitor mid-October, In the take planning. We've handling of the beginning scenario cost with anticipated of our Peter. to in decision ended assess our on to difficult furloughs in we speed at Based month base. consistent service line October. continued temporary of all delivery levels now continued crisis November, However,

Peter Quigley

talent the Even we Thank when growth ends. pandemic, though with making have are customers ourselves. progress serve you, crisis us, reinventing will in that significant our Progress plans coincided for Olivier. that encouraged our I'm and a global aggressive

an journey, our path We're and grow organized to to foundation making technology transformation we have digital of growth. to have the our strategy. a Kelly the specialization sustain in strides pursue thrive. aggressive building And future We

dedication to targets for quarter, not on inorganic aspirations. to progress growth monitor that And introducing We’re without be And for to in This our passion squarely see of people affirming standing our five-point our we market to long work systemic in talent demand the share in of to we acquisition would our barriers purpose. impossible possible last equation, this bolster point Kelly promise. commitment and the we assignment connecting of continue talent And the that team. our talent purpose work. extend hard or people now and talent enrich looking vantage for supply that ways the U.S. are the their to continue make some middle to secure lives. From operating even we it enriching the

As talent. a a opportunity considering next should talent we always champion to can aren't company that's who what's more for do to work. and We fair meaningful believe those given secure

questions. directors In also closing, support. can call like and their upend to Our platform the careers a to stronger make will course talent organizations, of and we sets thank market and for but more barriers more great capable employment at change. great month to of new a equity that not is overall John, Kelly communities at being times. in customers, positive shareholders the before. board Kelly And on together, teams, catalyst we our our for open families, believe help will help announced to the uniquely thrive. for assignment, equitable systemic or only accessible people. and are are people I'd their place last rising our work, labor more These emerge U.S. But the to occasion and change challenging now than economy internal you

Operator

go go with And and ahead. our Please Josh one first for Sidoti. question we'll Vogel Instructions] to [Operator moment

Josh Vogel

Thanks. guys. Good you're morning, Hope well? doing

Peter Quigley

Josh. Morning,

Olivier Thirot

Good morning, Josh.

Josh Vogel

in where you're unemployment. assuming about on Hi. in getting Peter wage that's lower issues paid and supply your people are in talking earlier changes stimulus and because jobs unemployment commentary, of level, in

you and to coming the improve over? stimulus Are within do once months the to professional supply? And could that's But stronger you division don't that expect assuming I'm the order Now flow -- talk curious seeing is have if three industrial. that now that in that in, ago? but to just stimulus just relative I'm you supply orders

Peter Quigley

very business. too. encouraged order we're the doing professional Josh. that hope you're also by of We're parts well in demand in Thanks, but And and Yes. our industrial, seeing other Yes.

it's the are know, small sized stimulus market an are that big match box think paying, wage I also if that particularly only hour dollars, but enterprises have rates, to you the it's medium you and companies when really not transportation a $XX small to particularly match go may have where needs, childcare concerns to because the It's into talent, a that. business and of medium sized be a challenge willing isn't a reluctant in find pandemic. needs, environment people about workplace to reluctant

So a dynamic skill wage lower scale. of see the it's professional at particularly end combination, sets. the our the We in same don't

Olivier Thirot

Just maybe P&I segment. on that the add to specific to

segment We wage about seen basically moving inflation increase. of have We last on up. this the at were four X% year,. QX year

knowing of now the some in sharing us positive X% of we're that you are I wages, to convincing at with course, more rather cases, in mainly We are at is we meaning that, mean, customers large successful numbers terms also. really probably X%, some customers to which for get more competitive

Josh Vogel

was for down a insight, this, Thank but may you talked notes. the you Olivier, little writing bit have to I sir. And

So I missed it.

whatnot. and and that But -- engineering some if U.S. to down provide mostly you to of down that market; Canada, it's your mid-single-digit. or Looking at not science, the tech, your guys set services call seeing more are peers XX%, in that going end are I'm they sure I'm were

And So strength on if weakness to quarter? talk was your business. the talk versus that difference there just the maybe to you wondering you saw pockets some just in can I of

Olivier Thirot

in one things improvement some not were of seen see mean, is merger quickly. have acquisitions would picking And terms the QX, oil I up. of namely those down bit where over is we start moving a some pretty I was Engineering seen around But of around start or more we from extent, sign because say, of we XXXX in up IT because IT challenging. science. some very -- Clearly, that. say is which of the is dynamics. and and would gas, signs still to downside. NextGen I markets, technology. but we pickup see we mean, positive the more Telecommunication, time very to pretty good see and GTA science, have QX much the to T-Mobile We Yes. basically customer and little some reason see I resilient. But

Peter Quigley

And Josh, opportunity portfolio, in to if business I companies number professional the as in comparison acquisition. IT Hence, and space. we a in mentioned volume of would bolster along the technical of smaller an looking our just our right point exposure earlier, to the to strategy, that I our addition out or by also education, is for inorganic have came

Josh Vogel

dispute The Sure. in globally? other sense. Are you customer clients, with That an elsewhere Mexico, isolated whether or is makes event? Right. any negotiations there having at

Olivier Thirot

No.

said, it's event. It I to relationship years. a a this really make We a older clear. dispute don't customers with was more five basically is of is any Mexico, that have our it It item. one non-cash customer. one-time than As in It's

So that I case, any isolated so old. we other have not not But very have is seen would call it pretty exposures. we though a similar far.

Peter Quigley

circumstances We assets, a a many, a track our in of one customers, record situation that our and is the strongest accounts from you court our a many system. of just have one-off years. great as are receivable over know, Mexican extenuating with set This resulted

Olivier Thirot

of because don't of is in unusual the event. at our mentioned its bad the and look type This we more event, the have a of we not Yes. When sheet debt, and in level balance bad magnitude, we magnitude this of have very the also some you disclosures, balance unique but debt historically. sheet, really

Josh Vogel

Sure.

into more, queue. I'll then the back and hop one Just

payroll especially thinking at we to expect the and differ into paid item should of end get handle be on accrued the balance taxes, of of XXXX half a related that's half XXXX. line and Just XXXX? to out end we payroll the that cash taxes, And when trying sheet, and look the at the flow, all at for other

Olivier Thirot

mean, term see you're I line balance going the specific Yes. when, when you a see in item there liabilities. is the to sheet long

similar That amounts, basically to in amount the It million. is flow U.S. for again, Now And tax. it's was $XX a QX deferral expect, cash of payroll is benefits for about type same of the mainly our we course, about QX boost million. of QX. in a positive $XX of free

probably of total of the the basically and half end million XX% the So at and going paid is second the of it be should XXXX. year around at to next XXX end be

Josh Vogel

for taking look questions. soon. well. to I guys Thanks, forward Very my talking

Olivier Thirot

Yes. Thank Josh. you,

Operator

Research. with Barrington go ahead. to Next, Kevin we'll go Steinke Please

Kevin Steinke

good Hey, morning.

Peter Quigley

Kevin. morning, Good

Olivier Thirot

morning. Good

Kevin Steinke

referenced pipelines, strong business you the talk you believe. in to Maybe contributing just strength about I could see what's So new pipeline it? as you the

Peter Quigley

Yes.

large the out how they reflection among and pandemic a And just those demand in And [ph] our it's and think, in our demand. operate figuring also to I Kevin, strong and think some pent we're Engineering And accounts, that's Set environment. professional are businesses, Technology. that products in seeing businesses a our both industrial up there's Science, offer. for that particularly services they I very that

we're Our life our order nice in seeing been Distribution, -- among resilient sciences throughout but particularly the large practice, increases for in particularly logistics, pandemic, example, accounts. has demand there. apparent it's

Olivier Thirot

us well. automotive as I would where improvement, helpful which for very lot is add a we see of

Kevin Steinke

great. Okay,

moving just a It's forward generation? not in or towards maybe actually trying situation opportunities are environment. And are convert slow a so, those in get sense little things the but opportunities pipeline, to actual this the where to how revenue quickly they're as pipeline to moving those are in

Peter Quigley

Yes.

the large say actually they're I think among accelerating. customers, I'd

I small think remains as it a bit I slow. said, medium still and little sized, among

of outsourcing quarter, the the to that closed being in cycles Our than significant well as pipeline. making and again, OCG a last be deals pre pandemic. But number as well have strong we're space. The pipeline looks longer been new encouraging, space bit decision in winds little seeing ones consulting a the tend as very

Kevin Steinke

great. Okay,

some you mix Olivier, margin actually have basis like of improvement. kind point broke think you out be I the the past? don't factors provide gross the contribution, through year-over-your the the able -- of behind some as to product and Would in you of factors that costs. So, walked employee you

Olivier Thirot

the our moving dollar our of point Yes. the higher because mix, over in is we the XX the you XX XXXX. XX project decline at XX, at basis look revenue. time, have look minus have basis helpful, XX.X% when about is it's something I minus very GP mean, basically is when seen so to is in which is margin which basis we XX% seen out you past. it would around than I say points at something points, QX, instead XX% of And structurally

about would XX, is tax say Fee one showing less exposure cost. or slightly have. is basis mix we with much negative. employee-related say of is structural it's I XX would sampling point. normal whether more Customer costs fee a DSO. customer fluctuations say international mix the And offset have International, of I would points. basis need in the is would other have of by about think -- improvement it's employee-related on positive quarter-over-quarter U.S. result about that little something we're we on where year-over-year I This costs, the the especially are main payroll the the mix, of And factors and I say XX We our mean, course more of you factors pressure these are customer also, -- say always to I I on business. And been and offset the XX, fee a would margin, related more into product offset in yes, but that bit our mix, mentioning fees, partially improvement

GP the on I as to done need are have that we XX, think improve still to profile points, you product mix, about XX to track years. think due what five or last by to is our value margin for basis continue about we So this

product margin to. mean, a these even progress. the benefits margin our seen again, continuing referring was show to you fluctuation, XX.X. main reminder, our during GP structural I environments is driver I have in in a And as fact, XXXX being and one-time employee challenging And long XXXX, mix term was we Act even CARES In if exclude

Kevin Steinke

Okay. you. That's helpful. Thank

So might I trend to a SG&A you sense to as think wanted how fourth just get quarter. the in

to of SG&A customer You for also to in So, SG&A dispute adjusted would doing sequentially? against of and about? temporary bringing Have -- temporary employees kind XQ, or what guess from Or the mentioned, I you back tick you also up staffing? to some think furlough. internal that costs ending adjustments kind how expect referenced reductions compensation, would you

Olivier Thirot

-- offset Yes. eye drop we recovery really an by I XX%, right? management, how I way ratio, much what are -- I about I it right? XX%. GP was mean, on is keeping the So yes, QX, these basically in in call of see would the dollar QX basically we we SG&A think QX XX%,

a look on to you I I recovery good And XX%. mean, we it's we ratio, through managed around, way say, of that dollar SG&A cover GP look basically a in line. at QX. the to see our QX, expect protect bottom if management, our at this to that about drop very through Meaning trending basically And QX, basically, in gross GD XX% of probably would pressure potential management when we offset that XX% right? So have cost

Kevin Steinke

That's Okay. great. helpful. Very

segment So kind of this returns it's within with your transition the to I structure, any days, the organization early know initial wins the seeing within early you're from pipeline? structure that or or but just new

Peter Quigley

very Yes, already. pleased. Kevin,

some the think in the combination businesses as subscale as early We've wins. different earlier focus customer -- what were the the and of the that to I referred I segments. seen

reenergized a I just has thought quarter. it we're focus around I resources I produced call I organization. of the be that of the where think specialty the combination frankly And a ahead discipline after one head of -- think and we'd those

Olivier Thirot

Yes.

that's First staffing, instance, at is things based creating P&I structure not combining with outcome those very see And so to one of an all, I'm what a we QX I the referring environment. look new numbers, dynamic. positive and outcome of amongst is new if and for think of extremely the positive I business

is in And seen up outcome have P&I some business we Our accelerations. QX, based XX%. the by in revenue

of it's very a First all, resilient business.

some based of it outcome in And I when broader for integration, the example. several believe numbers, think dynamic. in to is was that seeing, QX at creating I that and P&I looking that I of said combining start seen we topline, together the opportunities this is see, instance synergies have We think really times. part for I But acceleration we start that instance, we with have

Kevin Steinke

color. helpful That's Okay.

would don't in what prepared your you be, plan future maybe perhaps I would in be growth that think know, you crisis, once targets? I those past comments segment. this or targets the to longer talking establish a for get mentioned about your we open term for those each discussing you

Peter Quigley

pre we're pandemic Yes. Kevin, because disrupted back how growth remarks I about February, transparency aspiration. for we we to to talked how doing we helps the COVID, has think, But would The with provide to like progress. tracking, in it's inform think more aspiration my targets into the in work I in transparent continue that going that company. to a but be targets, internal we're and our

Kevin Steinke

Okay. taking for sense. turn Yes. Fair it I'll enough. questions. now. Thanks the Makes over for

Peter Quigley

it. Appreciate Kevin. Thanks, Yes.

Olivier Thirot

you, Kevin. Thank

Operator

Next, we'll go Noble with The go Gomes Capital. to ahead. Please Joe

Peter Quigley

Morning, Good. Joe.

Joe Gomes

sold your the you provide process So terms just staffing real more if Brazilian a in quick, quarter, behind sizing and the in could third of little color you you thought mentioned, operations?

Peter Quigley

Yes.

for more made aspirations So a ago that of I'll the a Olivier probably you the to in Brazil we investment know, years sort than you beachhead Joe. give let XX be numbers, America outsourcing with line with But, in our Latin our provide staffing we're Brazil the operation expansion. In customers, the just intervening consulting up while global to decade, headed. we've solutions where continue obviously changed didn't to course. we And have

decided we exit so, business. And to the

Olivier Thirot

Yes.

to also, so sizing going and idea to And you're collection, give you and cash that going release. cash course, to I you see see and $X.X you our proceeds of an on, mean, Just our the see statement. are XX-Q. that in earnings our impact, the of get and of was you're the cash about on flow size going to the net million, when

the book size the To give to million. the year at right? the small, was overall, you revenue of impact, the election mean, of is P&L meaning, value. was close last idea $XX business, zero, an So And about I of

to million. overall. $XX the -- also and earnings So And XX-Q pretty you're on again going about and the on date small XXXX, Yesterday see XXXX, year the to release. that

a business. small So rather

clearly is our on another think I step focus strategy.

impact diversity another have You our legal. But that And focus over time, and that's basically might pretty step right? a overall, we on strategy. small remember scale

Joe Gomes

for you education challenges Thank to there. the Switching understanding that. the some and business gears on of

uncertainty given got just Wonder, You there. you in in something little any I Have aren't challenge in did anytime also, to the that increase a to back the mention to if the retaining if you more you saying, have the that difficulty in color you do In -- here? detail something. schools business. clients quarters. I've acquired Just different. if give to in seen hey, for talent not some and find a teachers it's becoming soon, And more going more business? normalized that model Is new go

Peter Quigley

Yes.

made go or very reverse order, pandemic thanks The pre environments even to order Joe, I pandemic. winds And say, So many reflects acquisition but new the is going think are probably them. into it of for given that compared new in instructors sort to environment, will among the the promising terms part already is of a up to of maybe pandemic on side I the as when the you the other in the the of our classroom. particularly in leaving teachers a for would I customer the comment are we of be are to is age, pre question pandemic, increase. reluctant And teachers get going be result the back was fact, that -- demand respect and to to with But that the which of ask the upper earlier number is And customer pandemic, substantially. demographic retirees, teachers case the environment. people in and profession, accelerated

some impacted be a to of historic them tends are had have fill because lot in extent due little bit than to has rates role with ability our substitute that disciplines, teacher been So some the older lower or had other that retirees a to our education. fact population

teaching which see a I in call We the momentum individuals to in coming job demographic, are a pivoting new a out recruiting amount different opportunity seekers, we time may nice who of our career short a what as pandemic. done have, of think,

the we're we're from the our to our different what to programs so, up try that taken demographic the I pandemic coupled environment line for into hit during number prepare And recruit post the crisis. shortage know, with is the quite you base. think encouraged we've But stood seeing of teacher to supply combination a of even the wanting where from a help top school though districts is

Joe Gomes

me. last about you've one headlines seen for new Europe. you color. lockdowns Thank for one that And in Obviously, the

big trying of How point? wrench get at detail monkey here -- guys a of bit how is on little your Just been you more this business? how it impacting you it's to at a throwing

Peter Quigley

dealing March, Joe, And competitors. it. they as it lockdowns, know, of but than the clearly customers our will of differently it companies with but transportation are with Well, we like. are significantly to And are you an did but seeing, our lower is of Europe exposure they're our some than impact -- necessarily some is immediate childcare issues, grapple to issues -- early with and in there still some that indications going deal to have the not

reinstituted of tell. be UK total So quantify. impact, likely countries sort a and like lockdowns. to hard to basically France it's where particularly in think, There's to too the But an to hard it's they're early I although almost

Joe Gomes

questions. Thank for the Okay. appreciate taking it. Really you

Peter Quigley

Good hear from Joe. Thanks, to Yes. you.

Olivier Thirot

you, Joe. Thank

Operator

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

Peter Quigley

John. your well. help. Okay, Thank Appreciate everyone. Stay you

Olivier Thirot

well, Thank yes. you, Stay John.

Operator

and does you your Ladies for participation. Thank that you. gentlemen, your conference today. for conclude Thank

You may now disconnect.

Kelly Services (KELYA) 7 Nov 202020 Q3 Earnings call transcript