KELYA - Earnings call transcript Q1 2021

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Operator

Good morning and welcome to Kelly Services First Quarter Earnings Conference Call. [Operator Instructions] 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. Peter Quigley, President and CEO. begin. may you Sir,

Peter Quigley

our Hello, call. welcome Olivier With Officer, presentation you Chief Tony. be which first in found Thirot, Kelly quarter Financial our through walk will conference me who Harbor everyone you, language to can and materials. Services our Safe Thank today is

Olivier Thirot

everyone. Thank morning Peter, you, good and

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

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

We with have well slide slide expanded are we our an as call that deck on deck today’s information on using our as on performance website. also more provided the

to you, back Peter. Now

Peter Quigley

medium and pandemic More workforce staffing and the Olivier. and you, labor U.S., large the other building, are began recovery. and COVID-XX small, a new enterprises. for year entering temporary a Thank solutions recovered, promising we the unemployment after has of market phase than In down, demand the across is is

we to entering growth appears sustainable that momentum recovery we recovery. At throughout gather haven’t completely solid, are a capture While to will be we well-positioned COVID the us, Kelly, what left in behind likely are XXXX.

XXXX, against specialization And sheet our and in actions our strategy. XXXX are executing Our in we well-defined capital. protected balance

growth organic strategy, help to in market. bringing new investing that high potential solutions are accelerate We to

and are inorganic the that Education an in growth time, launched we unprecedented pace. streams new K-XX pandemic close induced product will pursuing learning same the our segment. example, March At help unlock tutoring gaps revenue For we in at

out pursue recall, targeted As bolder plans to to you approach February the may before XXXX, through shortly laid a growth we in M&A. hit, pandemic driving

specialization We plans the are acting including accelerate Education these two in last segment year. strategy, to acquisitions on our

excited milestone. reached new M&A we a are have to Now,

Our purchase acquisition colleagues them revenue largest continue Kelly’s to a expands Olivier deal future in in Kelly is and market the in history. will minutes. helps shift I’d the and are to listening publicly high-value April like welcome this and Softworld in XXXX presence Softworld toward and of the solutions few share what portfolio means specialties. meantime, significantly Kelly’s But in family. fast-growing technology for staffing our space to growth today, know our GP the I The to

you to this on have We’re journey us. thrilled with

I first performance, Before will it on to a Olivier off highlights. I hand Kelly’s provide quarter details share few to

against both operating All year, or Science, either QX segments, XXrd Technology, were delivering Industrial, the measures: last International delivered in of Professional quarter while & week revenue profitable improvements in revenue Education three Engineering, and International. rates, the fourth our and in improvements growth and dollars Education, sequential and all OCG, OCG excluding

in expectations impacted thrive year-over-year better Education the customers and growing. is better facilities demand growth schools from sciences in in way International manufacturing portfolio XX,XXX is sustained while row, to normal which see began. to The placed and Kelly earnings. revenue we most March, reopened. we added pandemic We substitute OCG U.S. pleased in quarter long as still COVID-XX segment our month our saw surpassed been by earnings pipeline to healthy second from exceed among Specifically, captured our a teachers teams QX, pre-COVID has demand our best the a increased for but delivering segment have starting the reopen, the as our delivered system continued new were wins life levels as are since its year-over-year segment, education and to our sales and

in growth, SET delivered among during growth verticals rates some Our a deceleration top from in headwinds the slight segment quarter stemming sequential certain line industries. notwithstanding

not returned is business new to of this in staffing We demand pre-pandemic specialty solutions revenue And Professional fee continue quarter, to up, and we fee delivered Staffing our Industrial our in perform line in meet our our strong our businesses to significant & our In staffing our line demand continue business and top to did demand strong for growth. while Science captured segment, the and outcome-based convert levels growth. with well expectations. trending enough

than in to some Olivier to the the additional insight those in about is enable this later P&I some of now more future. to have this regarding in share to While turn we steps will particularly steps provide market, industrial demand will of usual attributable more tighter taken opportunity to I light our QX capture call. results. it labor jobs, over a I details

Olivier Thirot

Peter. you, Thank

remain. of globe. of our mentioned, first pandemic activity Peter for COVID-XX a pandemic starting continuing impacted around activity as one-year our results in economic lower results XXXX the QX economic mid-March in this visible impact related response in As financial the the demand passed some the mark the quarter. demand became of The as We challenges reflect stabilization and services, our of impact

X.X% in from quarter X.X% billion, down down totaled year, currency. the the first constant or prior of For $X.X XXXX, revenue

we low to last As QX quarter, see in in mentioned XXXX. we point demand the experienced gradual continued from improvement have

down pandemic International positive of new gradual XXrd for OCG currency in gains XXXX. in is five for at days the constant Three is year we plus month and have XXXX, the confirming QX plus down quarter. trend year-over-year currency at the of of X.X%, X.X%. week exit to the trends exit is compared of early December segments part X.X%. account to the due month X.X% year-over-year and of over reflects the improvements or education constant that Our This reporting reflects comparable excluding our plus prior course are to our was now trends revenue March in of rate seen X%, of revenue the rate, March. the

school segment to of impacted the be use districts including Education and our U.S. as variety the quarter, hybrid, demand virtual on a impact continues for our an delivery models, services. For has which to

the still to in quarter International continued demand in segment our QX in revenue sequentially gains their encouraging. trends did grow show near have instructional and our in the experienced Italy improvement revenue continued returned had also growth, and XXXX, the Education modify quarter, in first revenue volatility for term sequential in products, response improvement to schools rates, positive Industrial from revenue of Switzerland to However, contact our which infection to delivery is a solid revenue is possible. in Mexico in Professional impact changing the remote local Because in including positive quarter center the seen and excluding Revenue the outcome-based our segment positive has week. XXrd to March. in rate & sequential Russia continues reflect with exit a business. continued growth growth France and

customers, quarter in XXXX QX with profit the trending environment the Engineering, have a reaching gross up our was segment. SET, in in with of while X.X% fees fees the still down challenges each the when that point customers’ customer perform a has shortages our well, in is and internal specialty. uncertain strongest. Permanent growth offset And finally, corresponding segment, where P&I performance constant sector, Greenwood/Asher QX up more XXXX. and for also revenue International of that with in year-over-year in currency continued over to segment, Education key and business QX inflection we period comparable OCG And many new Europe. generally placement the reflecting OCG wins partially gas This and up XXXX, to in the slower limited coupled in in sustained PPO. CW, fees recover. a concentration pre-COVID a the cover both XXXX on thanks in was has the activity have supply in two were by Peter XXXX And SET clinical customers in our increase tracked RPO has basis. acquisition and of within Overall, from segment from X.X% in later. results served base period, staffing science After exceeded decline been by the significant Our and and will revenue Science, life XX% with some oil to been in our existing level a additional

Our fees, by which gross costs. by prior profit employee positively rate the benefit quarter On impact was of the our XX.X%, impacted term was GP higher consistent with offset basis, of the first higher was year-over-year related a negative rate year.

XXXX increases P&I expenses down in we in in by Within for customer on center was with conditions On as revenue down reflect and ability continuing segments our line X% specialties. for management restructuring expected experience one-time the product. caused X% expenses costs our variability year-over-year of caused demand trends, the an quarter cost preserving year-over-year first rates while reported basis, base, expenses segment, currency. in and million in in were respond of were the our GP associated a with selected Included all investment in $X.X expense basis. some future in organic a in SG&A the like-for-like continues improved, Overall, shift product contact mix, reductions quarter by to customer market constant charge. the of and did with case in

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

QX charge. million charge Our of of XXXX million include of goodwill and impairment sale assets $XX.X of $XXX.X $X.X on gain a earnings million restructuring

quarter were basis, on As operations XXXX first adjusted, earnings like-for-like XXXX QX a XX%. $XX.X and declined from earnings the in million

segments operations a operating than well International from earnings all positive quarter, OCG the delivered ago. For adjusted and had earnings year and

gains back before include to in our Persol tax turning whole, a on and also earnings the Holdings. losses as the company investment Kelly’s equity unrealized Now,

a quarter related of tax operations from compared $XX.X $XX.X investment. million are the pre-tax year. from below acquisition gains stock non-cash Kelly we year-over-year by also million the earnings million from income caused our $XX.X Income below volumes million. from on separate operations, pre-tax Other innovation had loss non-cash item. higher transaction quarter a for benefit write-down These of unusual our was quarter, $XX in expense Softworld the expense recognized and our earnings income compared an this first and losses Persol tax recognized For as and line expense XXXX a to gain one-time with common prior

share and per tax earnings unfavorably Persol recorded share, share XXXX finally, $X.XX loss was earnings of per non-cash quarter taxes first the XXXX charge, U.S. XXXX. to stock, loss And XXXX tax of in partially rate common all was our the gains XX.X%. QX items, due in at to common the restructuring impairment charges, higher the per higher sale the effective impact for of on and rate. on statutory the rate, gain quarter rate EPS offset primarily per of deferred XX%. Persol $X.XX $X.XX $X.XX was tax, the includes per Japanese assets. on per share related Adjusting a to and was for statutory the And Our the the than Persol stock was QX on of share, share gain reported a compared impacted of compared share by net XXXX goodwill decline XXXX, these by for earnings

as Now, to sheet, balance April second quarter. Softworld Kelly’s Peter mentioned, on moving in falls we Xth, acquired fiscal which the

balance So of the first impact the sheet acquisition our in is reflecting end the as Softworld of quarter. of not

quarter remains end, low, year in at and Again, $X end a end $XXX $XX and million compared compared to XXXX quarter $X $XXX U.S. we million As Debt the borrowings our with facilities. $X at a at no cash million XXXX of ended to million nearly ago. million credit year million year totaled year-ago. end quarter

of our year-over-year to end since lower reductions an was our of increase benefit receivables from deferral reflects period was the capital of balance revenue the under the Act business given U.S. working provisions a XXXX. receivable the lesser several the the of four a Accounts The one-day billion, large cash in in CARES impact recovery reflects of as days, end higher continues. of payroll and, same the of However, X.X% impact XXXX, extent, over of on the the collection increase taxes COVID-XX the of year DSO but decrease from XX an days $X.X customers. in from year-over-year. Global year current decline

cash In carrying million in the flow free of due are to balances administrative the customer-driven year-end for consistent issues. with same generated flow, we cash our higher We $X period XXXX. quarter, at

Form our we existing plus adjustments entire Softworld in X-K acquired we $XXX able As to the balances. we acquisition, million and capital noted cash working fund announcing were acquisition for the with

credit liquidity. daily working in debt existing begin borrow back continue now revenue And to to As needs, now are to as did with manage support a result, Peter. levels or you, capital back require we needed while levels. the recover on balances not levels And our acquisition surpass line facilities cash financing, pre-COVID to may Softworld to

Peter Quigley

details, for those Thanks Olivier.

living While by provide pandemic, customer are healthy we that economic recovery continued the the we’re see and the insight COVID-XX and with it’s clear wins the I to would of in that to momentum still we more we’re pipelines pleased sales like impact the a and dynamics new into encouraged capturing demand/supply progresses. as P&I I call. the little mentioned earlier staffing, are

delivered quarter. from customers are challenging. pre-pandemic is our up, this steps And while capture wage jobs exceeds we supply business levels, we taking demand and growth particularly new noted, in trending As existing to is than staffing more while lower

deployed front last we that You will pandemic, successfully year. the new our mid-year even recall office during

the systems. emerged inefficiencies this current more pronounced certain the use became of deployment, activities phase depressed legacy last demand year’s The During to we as still require first causes Kelly environment. significantly of from

We technology addressing this alleviate are additional some training the technology introducing front-line by teams, of exploring complementary inefficiencies. and accelerating of to deployment use timeline, our the

we and a professional P&I, bring let’s employment, workers stream have internal also between new recruiting high a roles revenue in skilled in-person gap began bridges in focusing in on quickly. branches the new local of and talent, demand resources solution basis. capture offering targeted high have To we We recruiter facilitate P&I to started a clients vacant and value project markets that more on physical filling reopening full-time are temporary

to Overall, optimistic resume about We expect work. and of levels P&I as schools talent early vaccination enabling improve the rates we supply delivery, these of all skill more parents at instructional rise recovery. return the stages in-person are to to

COVID-XX, dollars. year. our setback, job the to have second e-registration segments thousands worth market We unforeseen put and faster, and them on hundreds Kelly the noting will deployed fairs we half year talent to It’s in practices, an conditions the hires of in the job in intelligent continue with of half into complete experience now expect bringing hundreds To in these the demand pandemic. is maximizing the during particularly time and improved we standard cut help process. of all incorporated response Following in people recruiting online economic our accelerate, to momentum of that technologies operating virtual GP of launched the the have last

new single provide efficiently tech to contingent Olivier their to clients internal talent, simplifying deployed XXXX. such contract tasks of numerous connect save has and will Technologies welcome operations, powerful and thousands of hours throughout back that additional quickly our it stack recovery Kelly position as parts the hundreds a as these own perform introducing annually. now process for easier human make Kelly I request And thoughts faster highly hiring to clients, the and entire teams are work and to accelerates. growth We Kelly source, speeding enables full more and time, on and talent that repetitive across workforce. a up through our and capture

Olivier Thirot

Peter. and our of February, on resources we We we this for the adequate you, to progresses. in pandemic to the year. remain the full continue in and that have end anniversary returned earnings the and crisis our the as year confident passed liquidity financial an Thank we have full of guidance update from year emerge the providing At quarter year the X-year COVID time release capitalize And outlook to recovery.

activity our of just the discussed, purchase As we reflected the quarter, have XXXX Softworld we of end results. the in nine first completed Softworld’s we and have after months of

our acquisition the the in high accelerate demand, will that growth, revenue will specialty improvement expect the Softworld technology margin high a structural impact in rate. and result in GP We of our

an So Softworld Softworld, in inorganic will will without I address perspective the our impact outlook, the separately. acquisition address first from of of impact discussing expectations of basis then and our the

results recovery most our and second the for on for an with steady is of reflect three the at we the trend remaining increase substantial in of gradual the the current of opportunity XXXX. continuation in quarter half As demand first view look quarters, and

up organic to our steps to This the expectation continues to talent to year, we expected be XX% rate. the full X% XX% us. guidance reflects I expand to are taking that we our to improve, of to of XX% For available expect revenue XXXX year-over-year revenue compared to initial demand but address current the growth shortage, talent supply

levels in that has cross to pre-COVID XXXX. of segments timeline product the depend mix. already, so later segment half the that milestone and expect revenue on We in we operating geographies XXXX reach first will OCG other for serve, each concentration done industry will or and

continue organic revenue to launch will to initiatives growth. are targeted that intended We growth further accelerate

expect growth to we add additional addition, to Softworld our basis revenue an XXX points rate to this XXX year. In

slightly organic our be rate margins. under GP just expect We versus to down XX%, pre-COVID our

relatively pursue GP GP of specialty business, While improve Softworld margin in organic intended total an rate by the to recovery rate our this specialty, is year-over-year commercial lower The XXXX. year. to our basis we higher points XX expect our points drive expected expect margin and to also keep addition in in additional continued company improvement we XX flat to strategy growth in basis specialties

savings in respect actions XXXX, cost our of definitive steps intended the sustainable the some and XXXX. partially and reductions offset are cost as to place temporary SG&A of taken meaningful QX have We to in expiration of impact cost in authorizing

these as savings expense the revenues us will that growth increase. allow expect moderate We to

on we organic X% expect X% basis. SG&A up So, all an in, be to expenses to

intangible non-cash expected points expenses this add an also and amortization also XXX of operating points of XXX is basis acquisition recent basis about Our additional to year.

deliver and additional measures our of strategy, growth. to on on execute to our acquisition utilize EBITDA we as EBITDA the promise progress plan profitable we margin As

these mid-teens, an of for with earnings we the which opportunity effective and begin impact our work been an quarter include outlook will through income release has the August. XXXX. in providing And finally, rate the extended reporting We tax second measures which expect in credit, tax on

recovery review with dividend policy we’ll now. Back allocation our our Peter the you, in our to As continue demand of capital continues, including strategy, expected Directors. Board to

Peter Quigley

optimism performance, Olivier. than raised confidence ahead looking you, we in newly our a and pandemic are year recovery the in the growing our guidance. with reflected began after Thank XXXX as economic More and

small the encouraging growth strengthen toward recovery. fee the Robust time hiring are an their points and businesses We increased well in also enterprises, gaining that growth. economic to continue Kelly and positioned anticipation in multiple customers traction is the confidence among ramp about layers. at our full this medium seeing is demand large strong future U.S. recovery specialization during strategy as of up growth to from drive in sign

the targeted M&A high-value acquisition expands by specialties space. and pursuing staffing our growth At investing aggressively time, Softworld, in of technology, dramatically on fronts. multiple our we solutions are We presence fast evidenced same opportunities as growing organic in are the which in

For as ed example, adjacencies our pursuing higher Education such segment. in tutoring and

in As the market are to equities likely labor the underlying recovery in economic remain. strengthens,

taking too Kelly there So action. is

the Our increase talent to that barriers by prevent connecting equity-at-work systemic tackling available with helping pool initiative is work. from people

in confident can brighter call here to customer specialization in our in The talent to labor and lie attraction in questions. our XXXX you incentives is growth a clients also to customers to Tony, are encouraging increasingly role ability it. new the the Kelly competitive is drive move inspired taking some open help and their already early support and and design talent We attract ahead. days diverse in organic an results We’re retention commitment and helping ready initiative, recovery strategy, by that and to and we now consultative rates. this around brands improve economic enthusiasm forward thrive inorganic talent employer market. Kelly and seeing our for is

Operator

[Operator Research. Northcoast Instructions] the Our from ahead. John Please question you. comes go line Thank of first Healy with

John Healy

of trying Thank does outlook, the square run outlook you. Softworld I under I numbers that that those XX%, to does benefit the or was Olivier, hoping SG&A does around. of that of was kind of margin some just could you gross again. include some the on And it? just just – exclude through

Olivier Thirot

morning, John. good going start to the on SG&A. and you I’m Thank

set of mention the one-time difficult wanted So just we a events because of reference I to up XXXX course, is little multiple X% bit X%. point to in XXXX. that, of

you to base XXXX. So I think basically base modeling see could you of your about for to which XXXX use at is base buildup – million, about a need $XXX a that

the also probably about second going an Softworld Softworld. the opportunity to don’t do a little Peter The and I exclude current the shy no, And broader if – give GP Softworld. for the GP, about to of about and does business view know, talk to now, financials about bit Peter, year you it’s question want is XX% think And it I Softworld.

to of what really So call, we to talk about company. the profile growth just bit, the a profile wanted value and briefly this Softworld explain little

Softworld, if XXXX growth give look think of CAGR growth revenue you about you will two I an you XX%. the Softworld and the XXXX per-year revenue at So of was profile, the of numbers, trend between simple average

course, is look Softworld was XX%. now at XXXX, year, revenue which of you always by their growing as a very specific seen If

On key help Softworld. I’m to profile going to you out financials this to company, the our use of related value basically some outlook figure to

the make a a looking quality that A end expected business million at it’s range math, basically XX% full Softworld, if to up to nine we XXXX to months GP very on a this between XX%, look with a would opposed XX% to $XXX at of you the basis make kind type rate that high sharing of of I you the year very, GP to forma acquisition of Softworld the repeat, revenue is commensurate a about little EBITDA And so XX%. end again, Peter you months on price well, an that, at and that. end you of you about a margin of very and and a the at to multiple XXx. Softworld? between that, Peter, range full can conclude look $XXX of year X maybe the a for basis business of million. base XX%, to at want on will up rate XXx bit impact million, of information financials, you easily probably give with basis, to take And if $XXX course, XX in little would it’s you about XX-month acquired you of multiple math If And basis. you get not the expand $XX about But as on view was look pro EBITDA, have EBITDA of – I up the more would with month million; bit EBITDA with an we

Peter Quigley

Thank you, and John. morning, Olivier good

space. would guess set is I among exciting a And the they which growth actually services, is provides technology, sciences, our the Kelly The So, the They growth statement Olivier behind in reason synergies high forward. an spot engineering, technology that to relatively think has why developer, and some Kelly such going light, software engineers, is greater solutions work not And the we with accelerated. make, addition last life but a that sweet have and of recruitment in only that for importantly, practice numbers they never financial you nicely in the has attractive technology opportunity staffing results a Softworld’s been we data Application demand analysts, that. specialist also science. reflect provides. the shared for growth John, demand complement services, high solutions believe span areas: that customer Softworld the one provide I cybersecurity, government portfolio data solutions the basis overlap extremely is staffing, just surprisingly sit

John Healy

to In kind what think provide school to and wanted just kind you and guys guess school are XXXX? the ask of do one so? are expecting business, that kind – XXXX kind the how picture Education positioned XXXX do did think reopening you that this. tone you about to more operate I helps at of of from that Great. of pre-pandemic business And expect education pandemic question business, the you start the kind levels? that municipalities fall it hurt on getting of bigger And as districts in is here think I we to perspective a I – would uniquely year in-person and of Are you space,

Peter Quigley

I and financial thanks Yes, some John. provide Olivier perspective. comment to share question, maybe some the color for let will then

the – school seeing We half the the We the at expect schools talking level, fall. in are the in reopen this to we fully the are in in geographic districts place local in-person level, about first what are the plans be to think of year, federal, instruction fall. the providing both what

some to barring our demand fully is to going and reopened challenge, that going that So for unforeseen is scientific robust. services expectation are be be schools our

have expect with, are the last pandemic wins clients the Education history. that Kelly X before productive only and we of that periods from had We we we months and we in – not the working most in who saw but also significant new one

Olivier, to… a it’s you clients going So, coming online. to be combination of existing our reopening and wins new want

Olivier Thirot

Yes.

our Peter inflection the XXXX. believe of and where is the time on And business XXXX we until point, second in XXXX, going cross, revenue. pre-COVID second basically to type the what we our the of a revenue half the we map, going what in overall which XXXX could, half is but by maybe adding of believe are we probably necessarily has on units Just education exceed said that to revenue, base not

We will XXXX. trend but when cross compare in this inflection XXXX versus point you not Education our versus

John Healy

you, guys. Thank Great.

Operator

Thank you.

Please next ahead. from Vogel Our Josh go Sidoti. with comes question

Josh Vogel

Thank morning, Olivier. Peter and you. Good

Olivier Thirot

Good morning, Josh.

Peter Quigley

Good morning, Josh.

Josh Vogel

in of to excess but much, million release about said I they press Softworld did don’t $XXX the harp XXXX. want was I initial too in curious, just on

comp, at it pent-up like XX%, against up a rate type the little are are X but XX%, bit good CAGR guidance seems you is a year, or going XX% growth. extrapolated about it demand months both? Is out for mentioned You that like your full looking of over you just seeing the

Olivier Thirot

Peter NextGen a No, going further for environment, of we already are overall surpass revenue. seeing was complement double-digit to is on terms accelerate immediately that we of it’s U.S., top and is the And some I start that, can double-digit. the did initiated are of difficult growth XXXX I’m going organic further even and we mean, we year knowing in continue IT in of including to to that that and basically GTA in that. confident Softworld we type are, the in growth investment XXXX, in on as in very

Peter Quigley

a when Good is stand morning, the demand, consider were that significant there remote significant cyber a And with pent-up the high-end kind of foreseeable the deal – and of in exist. Josh. regarding need result it future. heightened as add the the that having really work for pandemic, talent would threats to to is the all I excellent going that forces before is companies pandemic organizations only demand are and Softworld up position forward accelerated there you security supply the going to

XXXX, worst Softworld So of will expect saw the only it and growth the pandemic continuing that during accelerate. is part us, as behind we

Olivier Thirot

in talk Kelly. with when Josh, forma historical And of basically, combination instance, going probably issue as then are to Well, around the about information, when have to for fact, million. as Softworld And Yes. we an $XXX well we say the between and going we the are million. access X-K more mid-June all Softworld in pro to you $XXX

for XXXX, $XXX basically when will pro we referring you So get slightly the were the that revenue was you to. million higher forma see mark than the

Josh Vogel

is typical happy M&A little XXx just and or it. forward tangent, insights. you the pipeline with Education And market given the And comfortable a the what bit I paying slight about the you a Softworld, type profile we a in on on company, just in multiples Thanks. business? more think are a going the growth the paying been education appreciate you have appetite are is to XXx sector? the are SET technology or got I that when and those paying for

Olivier Thirot

Yes, range as growth, of the and I I would pretty we comfortable today. a mean, strategic profile because as describing the the XXx I value I we and feel fit to with use high that, say XXx that well say rate. hurdle a were can Peter

that rate right that’s sure use And to several we return filter table. internal yes, talking of crossing at, said make on XX%. pricing of going We we consider believe the we Education, probably certainly and of internal of that probably On I’ve already we the the pretty the are as XX% rate is a sure basically to You put know the times, but we I make low critical rate about adjacencies that of always a hurdle efficiencies rate multiple. I double-digit, for type to return mean use price. type hurdle be acquisition high double-digit, put looking

Peter Quigley

three we’ve targets over Olivier a also measuring last hurdle been space, the Yes, we made to primarily the other line factors as it’s track also against good ability integrate, synergies, we’ve record therapy in especially K-XX an the our are other high a set, cultural that think Josh, To-date, ability as top important are but I attractive internal demonstrated of rate necessarily or But the years, rate, example, the which four create as very the to factor. have including occupational adjacencies the with acquisitions speech, synergies. in and that’s but well to the in in with margin, going higher not command some of said, those higher return for multiples. adjacencies, we’re

Josh Vogel

Okay, great.

Just a and when spread? goal ability any supply at wanted high from about understanding gears current the business demand the your we to pre-pandemic, dynamic, look bit and set trends does to little around and environment, end pricing general the versus categories and thoughts entire maintain think lower the and what pricing for switch both the it here

Peter Quigley

at I and talent shortages having in workers. the very of end, production the Well, there it’s companies enough Professional SET the & opportunity reveal as the professional not of think in dealing our think consequences our attractive themselves, business. is with Industrial, But are higher I

not on competitive with talent the higher customers, taxes, result because to demand result only of working states for but the and but deliver higher of also the of a capture having that to businesses. more they talent, a have capturing as wages, run costs And we some to payroll not benefit only their our need ability of that also as potentially margin so,

Josh Vogel

in expense it in million? report, the you. of presentation other Alright, the line, slide maybe great. either quick but just hit two $X.X Yes, was missing I in that the what earnings income the Thank ones.

Olivier Thirot

other mean Josh? income you expense, Yes, and

Josh Vogel

Yes.

Olivier Thirot

as The the I items time. other or currency we explanation, one have is Yes. more that mean, we less usual is fluctuation, which were some, all two innovation but basically one Kenzie a happening acquisition $X.X basically company of we what cost of is, call, on linked investment Academy. the Kelly a one-time million. That’s write-off Softworld. one called second And from through to our non-cash of a had course item

Josh Vogel

lastly, just And great. on the last the the was April Alright, read do first of month pandemic you an given have early year? exit rate full that

Olivier Thirot

rate for of month minus X.X%. Yes. We March the – was exit Our

as start OCG, in we that look we as revenue as had turning see well basically to International mentioned, segment. even the a is And see positive see And as a the What as point the type we in compared have usually, have to we it, we inflection gradual seen comparing progress XXXX, April, also course, you the We Education confirming is ourselves of trends to at March, before. now have we said to basically our continue with is improvement. XXXX. seen of with pre-COVID we growth well versus concerning well way

Josh Vogel

for thanks all guys. and insights Have Well, and day, remarks. my details in it. Got questions prepared the taking for great a the

Peter Quigley

Thanks, Josh.

Olivier Thirot

you, Thank Josh.

Operator

Thank you.

comes Steinke Our Barrington go ahead. Kevin next question from Research. with Please

Kevin Steinke

Hey, good morning.

Peter Quigley

Kevin. morning, Good

Olivier Thirot

Good morning.

Kevin Steinke

in follow-up to to XX% increase XX% to your growth to a wanted X% versus outlook expected organic on XXXX of the rate and XX%. prior outlook I

can on outlook you that confidence organic what’s the to the color more any quarter Just increase one you into provide year? growth giving just

Olivier Thirot

QX mentioning of revenue-wise. seen what see have beginning also in first, the we and would reflection we we the exit rate, It’s we what say, of I seen as have Yes, have what May. April in it’s and a March

of because we bit much overall. might account these information. what say, is also if is I seen into narrowed taking have on on you have which visibility have that better we basically down type that’s the you want year. last our remember but in slow improvements. of Brazil you – Internationally, continuous because August our I sold mean, have we excluding I Brazil, anticipate can revenue, QX That currency, constant we discussed. might operation have Education expand would a going And beyond little So range, we that all

entire We International, the the cautious are, we quarter, economic around stay pandemic-related because but up the of for environment. for X.X% uncertainties

have our continue, to business. science, We today, thanks outcome-based cautious based OCG, SETs, but in And we the to we we we and said that on we little monitor environment. to XXXX margin International, in expect pipeline, type fee in we momentum cost invest need a new to of level are bit are to already expect external markets going of exceeding in very positive believe healthy continue wins. selected be and continued QX. and momentum revenue X.X% by

X.X% – We because fee fees, late like in P&I mainly more fast business. QX, little we XXXX, & growing we better, second little continued the to at were that the delivery some color, early growth should on interestingly, moving was staffing see in Engineering that’s still is P&I half are probably bit good. Telecoms; a our which of pretty up in we and in said, QX of And Peter P&I. our also already the XXXX, oil in sign sign also inflection QX current continuous to bit is inflection we And a up have. a maybe outcome-based QX, is And business XX% believe that point XXXX, model. up Our are point P&I, was in in going in the fee XX% QX, because of SET QX driven and on a But year. probably expect QX overall, specifically XX% good that We up of little still we so getting some but due slow sorry, staffing improvements that. are momentum standard business our can is right, which improvements our the XXXX bit in by we our momentum acceleration gas, about expect crossing in Technology business our reach add year, in good you versus we OCG challenging. probably

Peter Quigley

Well, Yes, businesses. about talk the first I’ll all Kevin.

as I encouraging clients to think existing signs well renewals of the new the our customer as adding confidence. across regarding board, the acquisition is

the in demand continue to going is technology we think to the as the has we returned talent well year, are issues and as see Professional the drive we of pre-pandemic going of to & earlier, as supply, improve, in second and particularly continue levels. believe the the well noted, And in that half to think large it’s we some And mentioned year. that to I half throughout pleased to second I recovery as Industrial, accelerate of customers the the expect that year.

Kevin Steinke

appreciate so color helpful. It’s at that. that’s Okay, a nice segment the level,

about you perspective, together? deal combine that their Softworld, there what can But on for like about it just a you. And lot bit Softworld a talk to with of are characteristics Kelly? attractive obviously, from made larger them came maybe attractive organization a how back little circling Just more for

Peter Quigley

that from I growth Well, the think we the very our start opportunities evident were began discussions. when

customers the in a – customers all we customers and – of Kelly you – our earlier, not the earlier was noted overlap fact technology I and support. support when of lot the has, As need consider that breadth that that noted there as

further management, Kelly’s very to base data as So development the embedded what think And the application bear to organic some as was solutions grow well development, a opportunity investment services Kelly Olivier is that bringing Kelly attractive base was customer already growth. to the and business to promising and sciences, I opportunity in mentioned, historically Softworld provide an attractive. I investment the that Softworld willingness as think they as see accelerate in customer exciting because life to of participate to systems IT functional very to in

Kevin Steinke

Makes sense.

investments In you about terms any we recruiters Softworld, in the of of making talking are investments more other be might organic headcount, types there?

Peter Quigley

investment of and record our capital It’s recruiters, of warrants, we Softworld sales year-over-year Kevin, in track there. delivering think Yes. people, that the and the impressive growth primarily

Kevin Steinke

Great.

to in or talked in area do wanting in the you you’ve continue acquisition, add Softworld for to IT opportunities necessary gives think get scale staffing Do the more the while this solutions? scale with staffing see to that IT a about you space. you So and acquisition

Peter Quigley

fastest and platforms there we’re in that Kelly’s them IT significantly It when business, Well, it. complement technology. would Kelly’s considerable of one that we there solutions-based they able Olivier improved to combination high the as you opportunity. if is couple our would of to earlier, largest certainly staffing were at the attractive rate and consider And acquire able are that Softworld the hurdle well scale And certainly – mentioned growing opportunities is and markets. as outcome-based with solutions Softworld’s in we it think

Kevin Steinke

Great.

You the external factors forward. will talked as about of we move talent you supply some think that increase

P&I as initiatives talked some also of Maybe about if you you’ve doing want I update internal think segments specifically the on to would well, talents. that to touch but other great? on a was and to things about you’re that any talent? attract attract thinking I more be the

Peter Quigley

with gets the some well, time, technology time deployed think And and in know that doing deployed people especially created – themselves continue us by technology as pandemic, well probably of a the QX them. taking issues, the adoption and pandemic. is lower or rely mentioned, – I we it’s responsibilities last wage The demand, we’re the on on space. contributing to whether P&I new – and more that’s address those external effect because that’s ensure masked inefficiencies we’re with And front sort doubled existing systems that demand to happening. fairly depressive factors way the recruiter only successfully either action that impact office workers that’s our are issue. internal for we’ve I the demand the the we to to demand. have back and to of quantify significantly the identified a talent I recruiters politically legacy our about to of are – Well, sidelines. staying optimized. think down supply pandemic a concerns efforts I spending The the also the on year pandemic but period and think, packages charged known or base in internal the new factors due those the early depressed are care-giving the is external of think We’ve hard are of came – late in some on to Kelly office. inefficiencies. recruit not in The sidelines I stimulus there in that to both the also front revealed But to requires of schooling of contributing QX, There not is there the number may the as

Kevin Steinke

Okay. for all had That’s Well, all now. thanks for I Thanks. insights. the

Peter Quigley

Thanks, Kevin.

Olivier Thirot

Kevin. you, Thank

Operator

Thank Instructions] next Our Joe NOBLE you. Capital. with [Operator Gomes comes from question

Peter Quigley

Joe. Good morning,

Joe Gomes

my taking question. for Thanks

back of circle the to on I segment kind here. So wanted Education

You means had mentioned quantify was significant care – best Education of questions on months, other of of I in statement answering that what A. the Kelly’s wins over the new B history. kind in you’ve would if the X one segment. one to the And last wondering that you part part

lot of teachers positively reports segment? Education a the seen least conditions. retiring of that Kelly’s partly and How does to at negatively either You’ve due the or impact pandemic

Peter Quigley

an school with deal well demand how not services, you needed in to when but let the – Kelly Yes. just be to be Good have instructors. very a refresh to number cleaning need at refresh in positioned. force. services to for retired, a are about think all the students well, at increased that the that the the time, going leaving And there often number to instructors as And work education think only you’re classrooms will instructors morning, are But we We that instructors the are Olivier Joe. environment, in I’m have of large post-pandemic levels. the numbers number – or the correct went classrooms, is going when the that same teachers schools think cleaned; is earlier. financial you will as support think that well we increased be demand that of about there to he through in going spacing that also the of believe of

We are substitute leading the we – have provider teachers. of a

them across see have like school We We The more for to well think support needs revenue to tutoring. districts recognized will the outsourcing as need that in And the reason the we space, acquisition school that brand company are We federal – there be area. to Kelly government tutoring. as and believe also talent streams small during way support the year for created help be medium, is their that their part with a in as X will extremely districts, a looking significant other the school of districts that mentioned additional months. Kelly. services, of throwing seeing support to that year regard. a this districts are districts is well value its them of – in the not past And and we growth result help why that federal instructors. board, It’s using behind new all tutoring custodial meaning a we think school districts. the think saw the between funding school is they are of tutoring, value as for in in such school small but And wins is large going and pandemic, I

feel bullish about why we space, investments. Olivier, Education do want which is And that? So additional to on making we have the been comment

Olivier Thirot

in QX what pre-COVID I revenue of second I proof half recovering. I summarize to positive are just I’ve is this well think growth year, which is and mean, that. Education. And we in think before. that we mean, I points, meaning we feel positioned mean, a XXXX rapidly I to is the said of that are of haven’t capture the inflection crossed Education, we we very think there a exceeding momentum sign

starting and positive come. to about very months the still are with we assume I optimistic So Education,

Joe Gomes

the that today that down profit segment in than showing revenues. was the was looking other the on Okay. in segment segment segment, your on Thank then at And drop level, down that of you X.X%. year-over-year, on XX.X% for P&I any the was from The release gross gross side declining you the – revenue services larger the much which a profit saw that.

than drop on segment? be profit the drop gross in revenue wondering bigger might the P&I what Just behind the

Olivier Thirot

I I will that. briefly talk about mean, Yes.

to the that at in in very is continue. and good is again start in over a business. P&I, going going So much dynamics And versus positive the basically That’s piece, course, P&I, basically we some ago. to our you margin to the of thanks business QX, see, stable momentum when a believe staffing we look year is fee staffing XX%

us So a year much our margin with get where it pretty ago. helping that’s, to aligned was of course,

our call center and has additional get there reason the training down. the actionable margin on coming mention these as margin these the specifically business, basically training specific the come. for specific And training in is majority months outcome-based business, the because – are bit that one is almost why basis revenue of On got center we’ve by in But down next we we that’s I business pushing ramp-up remarks, sign customer, non-billable for to XXX are basically unusual is that need P&I versus demand usually a is basically our people to during basically lot of And prepared – briefly year. little did that call last in to is going not points the extent. it’s good trying our happening, this

billable of which of We show basically area, months course investment. next preliminary to have in non-billable activity training is this of the it. this I going kind in few again, But are path think ramp-up

Joe Gomes

the Okay, thanks of existing you for did just acquisition? utilize back for your cost you a Softworld balances, to that. And you approach, to to for kind here pay one utilizing different circle that or mentioned the second of are cash

Peter Quigley

Yes, we… I mean

Joe Gomes

million you year do end to of the roughly CARES still the Towards this Act. deferrals the tax $XX have repay of under

or think the cash do in you have time some of you that that credit point at over pay of generating facilities? to maybe dip to into you’ll be enough year So course their

Olivier Thirot

Yes.

working fund is Softworld what continue million, is is up, And happening to progressively to end moving did now you capital, cash. business the at as entirely almost up, the So the is transaction Because our basically, to working all, of position we that to have going cash yes, $XXX we pay First seen in continue right? as our our moving have was right? of right. capital QX

which The deferral, half to about is end this end second the need tax before we next of other to of was half right the year. say and the $XXX pay million of half you’re at the point that payroll year

are and growing But have our of QX that Act during we completely that versus are I was it’s bit little especially year, the still capital So half leverage this leverage capacity with of low going the that be a the still to liquidity mentioning. we CARES going working maybe very you requirements, a with debt intact. combine the to if at

Joe Gomes

space guys me, last Okay. minor a in Thanks the write-off, announcement goals. fanfare relatively there. One for was made I when the of was one Kenzie of that. for it’s and I everything, of in know Academy one the November of appreciate the Training you tech it. ‘XX, investment that lot

just, kind give Peter, there? of you us what If could happened

Peter Quigley

Yes. Thanks, Joe.

we of sweet our was thought So as to a a talent IT Kenzie the changed model into more complement figure exactly spot. model the course try often excellent times Academy And in to workforce. number bringing do that’s business relationship. The to start-ups the of out

the I amount excited going toll entrepreneurs sort of to to and hence unless there housed regain we some about could – those the pandemic be and the new bring a own. than a more we struck than that novel classes. be going type, going anticipated won’t and with a new university but a more recognize traction there on spread really the that risk when recognize the lot It’s was be fore. was that that over but models recognize deal to are stabilize of terms risks education and that ability investment we within unique investments anticipated, the to And proposition than also of the the that on we attract more investors in Academy university they make Kenzie just they – think say they the potentially took are Kenzie its make and traction business cohorts, of just to can is fanfare, value potentially had investments that’s we their Yes. platforms that future. I’d its or to

Joe Gomes

thanks for update. Right, that. taking understand right. my questions. And Thanks for the again, I

Peter Quigley

Good Joe. Yes. talk to to you,

Olivier Thirot

Thank you, Joe.

Operator

remaining are There Please no continue. the questions queue. Thank in you.

Peter Quigley

further can are Thank Well, probably call. think end no you. we I Tony, if questions, there the

Operator

for replay XX:XX through be you. gentlemen, Ladies a.m. this conference XX, will thank Great, June today, and after available XXXX. Eastern

today. You XXX-XXX-XXXX. the conclude with are We XXX-XXXX. for participants for code dialing AT&T may access access does and numbers service. conferencing may our AT&T system X-XXX-XXX-XXXX and replay Those by you access That X-XXX-XXX-XXXX XXX-XXX-XXXX conference International for participation dial using your and code any time entering again thank XXX-XXXX. at

may now You disconnect.

Kelly Services (KELYA) 14 May 212021 Q1 Earnings call transcript