- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to Kelly Services Third Quarter Earnings Conference Call. All parties will be on a listen-only mode until the question-and-answer portion of the presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. presentation morning's available call. webcast website the quarter this for third is on also Kelly's A I meeting host, over now to would like your Mr. to turn the Peter and Quigley, President CEO. ahead. go Please

Peter Quigley

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

Olivier Thirot

you, Peter, morning, good Thank everyone. and

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

be metrics on items In certain adjusted to organic data the a operations. year. both Pediatric financial which measures will certain give of Services PTS, in Discussion on our discussion basis. designed insight and addition, call, on results our are RocketPower References Therapeutic adjusted non-GAAP or discussed reported to basis excludes during an and earlier acquired trends this we of of today into the in an

the organic exclude of quarter. our transaction sale Russian completion the metrics the this addition, operations In results of following our

is website. available Finally, the our call slide you, deck on today's are that now on back we And using to Peter.

Peter Quigley

Olivier. Thanks,

quarterly today's release. to that in developments to press turn address Kelly's were I I'd results, to like Before highlighted

on that commitment a focused reflects investing of strategy the and a and capital Kelly return our Persol use that this capital. follows $XX.X outstanding Class repurchased we one-year a buyback million flexible balanced First, of in A repurchase to is allocation program, Directors maximizing shares on yesterday, This Kelly's authorized of earlier in our million Board common year, is the capital shares. good which confidence $XX from continued

in hiring, our Kelly new full-time reductions diversifying quarters for demonstrates softening acquisition, RocketPower's hiring the portfolio with are candidates light and Second, as high-tech in the capture vertical we for vertical demand optimistic this space. RocketPower may in strengthen market in more pipeline growth. In acquisition the activities, that RocketPower third synergies release, goodwill and triple-digit these additional noted the customers layoffs and opportunities to unlock industries industry we of taking to high-tech two are specializes that identifying Furthermore, the Services quarter where other of in of financial impairment responding incurred in insurance industry, and in IT expected a RPO sectors strong. the we press scaled recent have care, the and services, charge capitalize. RocketPower, high-tech where uncertainty. are growth. value many well differently after dynamics, talent action Kelly established Among remains their integration the them, back to economic related Technology for deceleration and including abruptly to demand health The positioned of to are Softworld how accelerating from in

performance specialty solid growth. and services, acquisition K-XX our on the in deliver remains and to continues pediatric revenue GP education is acquisition and Softworld Our year-over-year healthy track therapeutic delivering firmly latest

specialization their resources market continuing industries of Kelly's we is mixed pattern our impact rates, business are and this deceleration that chain GP their see higher our will -- units. strategy business will change of not energy supply teams commitment constraints improvements structural likely positive some value, specialty as mix creating growth. higher-margin towards our driving on to third five What trend labor and uneven in the quarter and focused in others. shifting QX, of indeed our inflation, the resiliency higher-margin segments, QX Given improvements rate products within we to in We delivered once saw higher-value, interest and each it's results continue is again of and disruption, in

and segment with Our solid growth along SET leverage. and growth delivered good revenue outcome-based in telecom, fee solid technology solutions,

segment strong quarter existing specialty. from captured by revenue improved growth education and produced Executive our -- new and wins sub-scaled K-XX fill of Education Our higher Greenwood/Asher, rates, another led Search customers

Our demand OCG recent GP highest RPO wins its large for segment solid. and began live growth margin MSP remain delivered from solutions, as going products overall

additional strategic of and of our Holdings, March, common new business. investment QX mix shares business. I'll strategy. growth remind investment of acquired capital now, Kelly, Olivier our to this strategy. specialty transactions made end I'll and businesses. units in the at have May, to quarter. constant Persol. business growth shares non-core revenue reflects so shift and Class our These the in a for within the look to active you, sale Persol RPO arrangement advancing segment, currency delivered sold B We growing service common in that continued In assets details Kelly's the transactions the we in outcome-based repurchased with JV. we far cross-shareholding over margin PTS our QX our specialty year reallocate Persol, most within staffing our significant Russian to of the to delivered results. the segment to acquired International commitment good of a growth to par on to and in each fee our add P&I in we the specialties growth creation In organic revenue adjacent closer of monetize higher our demonstrate we revenue and turn RocketPower five value of The sale during Kelly's and support excluding growth impact APAC, completed we trends. Class Our kept our it of revenue education And our with operations, toward drive that commitment And QX, A

Olivier Thirot

Peter. you, Thank

basis includes of revenue which For the prior XXXX, a down totaled currency $X.X from XXX third points impact. the quarter of reported billion, on year unfavorable basis, X.X%

well up FX in Included PTS, constant currency. from points quarter is as of of that Russian sale XXX for basis as impact impact in a acquisitions X.X% the impact a from of increase, favorable basis without point operations. the So resulting RocketPower headwinds, XXX our were the revenues unfavorable and our

So for growth currency was revenue X.X%. the organic quarter third constant up our

As third revenue in the up SET X%. quarter segment, by we revenue segment, look at was

We at and have software technology continued growing, demand including remain but our to see our Science growth are and strong slower in our outcome-based solid. slowing, still practice, pace. telecom is although a specialty a for solutions engineering

also pay year-over-year. despite the off, revenue to to fees, reported PTS, on in robust customers growth the of executive the earlier are Permanent be revenue and to improvement year-over-year continued XXXX. permanent meaningful in we year-over-year. on so year-over-year up rate. XX% new track Greenwood/Asher SET was from of addition, placement of on In to reflect growth Education results pro XX%. placement up our reported well XX% fee an a year our organic continuing continues see include up In in primarily were existing segment, Revenue May business wins Steps continued XX% field broaden trends growth and have environment. education performing challenging economic X% more growth forma The education demand basis in year-over-year and talent acquisition our with search growth with taken QX basis. supply PTS the is higher strong,

basis. the the in a more situation the revenue products the with uncertainty, about a growth offset finally, currency the has declined up our for declined which in my comments. Declines basis quarter. was X% Perm XXXX X% in flat our rates down hire of our by volume, was in up continued with customers. XX% increasing continues provide of large the current been revenue demand excluding reported deliver result call. and be in down upward pressure Revenue the of our by but basis. wages to and total among declined specialty, direct has resulting on the continued outcome-based on growth as Industrial XX% segment with small decline our center especially segment customer OCG outcome-based Consistent quarter, a the as a year in will constant from And revenue the as our second other offset and some and staffing market. in in our revenue revenues revenue Revenue headwind Organic from year-over-year was constant early our which in year-over-year business contraction segment comes in RPO and segment's outlook revenue, growth, our to specialties account, products. of nominal currency on lower QX. August in fees for the that RocketPower call PPO staffing has X% bill prior MSP higher on impacted partially and on later context P&I of impact International XX% discussed customers' year-over-year we economic shift currency staffing XX% The Our to by more outcome-based been Professional offset I About impacted talent part were in in midsized exits a RocketPower services high-margin demand from XX% our a quarter. from than

Excluding currency. our International permanent X.X% in X%. currency And Overall, profit a constant in was constant fees up by on revenue sale placement X.X% the operations, finally, basis growth the of reported currency. segment the impact of in grew or gross Russian year-over-year XX% constant was organic

acquisitions and And expenses Power Power impacted majority points, XX.X% profit look as in rate of our PTS gross higher year-over-year. segment, impact organic for currency is growth by PTS, Our up impacted points. a burn third the as and an the in average. mix towards operations. XXXX basis basis, the GP specialties. Rocket mix, quarter improvement. expenses last grew expenses an were sale X% higher-margin the both gross driver full-time costs higher rate, rates compared the contributed SG&A increase when than continued favorable employee-related higher and amortization more XX margins generate basis gross a on are XX On and basis. also reflecting Lower The favorable business well positively by contributed. expense Russian than profit and in year, our of finally, growth of by constant compensation-related business Rocket and total other we reflects of of This X.X% also products was profit organic XXX quarter Kelly's shift as a across And on constant X.X% primary expense in our The for to company improved result year-over-year reported fees which the a our units, basis the intangible point improving business expenses SG&A basis XX.X% the talent. each operating currency of rate

hiring, of as impact level operations headcount to of and Form further QX The quarters, to commensurate ship the steps charge. growth in pay. the moderate retain charge revenue test, changes to Power's our noncash specializes year increases from reflect in XX-Q. triple-digit quickly the we growth have forma both $XX.X have is We the growth to earlier compared goodwill the to services. top with inflationary reflected uncertainty talent. growth more impairment compensation doing cost attract impairment of has line the moving need Power declined economic broadly available ongoing in have be in and adjustments customers which Many the market impact QX the of economic the recruitment provided reduced in industry us term. selected quarter in pressure and The base this resulted in positions an second vertical first in developments out in level to Even if the market taking and million triggered and year. in for in near revenue pro which specialties process a experiencing Rocket its an charge been uncertainty quarter third full-time Also high-tech forward. of growth adjustments line outsourcing ago. continued and will the of current to item related conditions rocket add the and demand expense demand XX% to our third more condition growth for This our regarding the their After impacted the in market-driven Power on from impairment An This QX, business, Rocket to Rocket with in is reflects Power. react a continuing warrants reducing earnings information impairment charge impairment in

from Our the $XX.X third was quarter for reported operations loss million.

$X.X currency were in impairment million charge, the currency from the XXXX, to QX Excluding adjusted basis. operations of $X.X earnings XX% generally basis, on up on million consistent a compared but constant a earned nominal

see the an expect improving to XXXX, generate Holdings total we flat for And and investment conversion just of rate conversion rate of did move business first in to the we SET improved conversion that Kelly our company the XXXX. continue adjusted venture to our While remain other we APAC monetize units quarter most as Persol Persol in a reminder joint forward. rate in and

comparable there Income include will although quarter further transactions. tax impact with the no those prior related gains of expense tax and anniversary we period be income losses was compared will So the million. for until -- XXXX third those our investments, year P&L periods benefit the $X to million from $XX.X investments

decrease all to loss those $X.XX quarter share tax compared tax, related XXXX earnings per in of to was was quarter effective EPS net shares, per earnings the was QX the from primarily reported the Our adjusted The gain QX share for third Persol RocketPower rate with transactions, share of in EPS impairment And and an the XXXX. $X.XX resulted for XXXX of share $X.XX impact charge XX.X%. finally, in on per $X.XX, for of XXXX. of XXXX adjusting of the consistent per

Now to sheet. the moving balance

As of to significant five monetize of quarter, transactions to Peter non-core so our demonstrates the strategy. as end mentioned, specialty third our year this we're the assets, balance the and capital and reflects our commitment sheet advance allocating completion far of

In have third million of million Russian of consistent the our capacity QX, ago. At €XXX XXXX. our to a debt in we addition, With credit operations $XX of the July. of available deploy. sale we in cash end essentially to facilities, ample on $XXX had with no million We compared totaled continue the our completed end quarter year capital available to the

€XXX quarter of increase supplier increasing €XX Persol an income million from to cash resulting customers increased, over XXXX increase XXXX, XXXX. As and and Free CARES terms of of of investment XXXX was in year-over-year to also lesser mix stock and an third cash was flows the we timing pay of of mitigating MSP days, of taxes DSO. primarily and includes well result than also of the in higher approximately free deferred as cash days the payment under use the quarter other of day Global $X.X increased in which a increase receivable repay reflecting payable payments. a increase Accounts to the the a capital. working MSP result customer revenue as common of increased the the one free and end well to Holdings an impact you, DSO and the now, the of QX, $XX back accounts partially of of federal XXXX Global reflecting payables, use in in liabilities four to as DSO Through an used increase extended billion balances, our as as in with sale Act. third XX X.X% flows. million flow, as were And the some year-over-year, extent, year-end accrued million higher approximately tax of DSO Peter. payroll in

Peter Quigley

details, two-year of quarter operating five model formation for optimized the anniversary Last those distinct our Olivier. business of marked the Kelly's and units. Thanks

is as good of ramps we our fill this delivered revenue our wins full within to they said RPO and we start segment. in, specialties higher and businesses only strategic telecom in education, organic performance, including on fill creating delivered our And is delivering also expand We've not further to own meaningful In year quarter, fast-growing those rates QX. see capture higher Kelly's model, new operating deliver both significant higher third adjacencies. our growth, implementing begun value PTS to segment are margin promise growth In those returns. leverage. to In committed our this solid mature K-XX Softworld contributions we GP segment, up, the the within returns invested acquisition inorganic. in contributing investments, fee would we The and SET in to and overall our SET we've specialty. rates its As wanted We on solid said growth we year and the also and business. invest OCG, each improve the

we notwithstanding our in to year-over-year began see organic outcome-based market In business, RocketPower unusual softening our the staffing continued in Our some demand triggered growth will solid we P&I quarter, bring economy, RPO since believe center first that call this impairment conditions that long-term in the We've to value typically the a acquisition slowing the this to strategic explained not growth segment year-over-year third by our in the and with diversification segment, quarter. our and deliver QX. P&I in impacted specialties charge, delivered contraction is integration, business business.

International our regional macro about with expect QX in back growth in conditions. Finally, and local in said now challenging Olivier I'll even specialties expected pockets in delivered to continued and of specialties resilient thrive we designed we we more fourth segment, the welcome growth to that quarter. share what

Olivier Thirot

Peter. you, Thank

As impact on OCG the we for a the businesses, we that look and our uncertainty ahead, growing and but will quarter reflect our education to P&I will and demand economic that begin expect results steady third be SET, services. International there

and We industries will talent increasing are expect wages signs remainder challenges rates forward. unusual Kelly, to businesses pressure growth of as consumers to of that of will our there to although year. continue wage the the on these may continued impacted related rates. put that have some And all and results certain inflation a two upward pressure as are on move at events impact and we higher skill Specific there react the QX pace gradual interest more levels continue, supply to

sale First completed July. Russian we operations, the of our in is which

work mentioned their heavy use its our decided customer earlier instead and rely changing that of hiring scale of differently to calls. by on A with as customers' employees. talent labor talent one today that of we labor directly Second containment full-time staffing and to one address is on will large change large challenges the strategy

Given on XXXX, start of US our against our remains providing outlook reflect with including only. insight fourth impact euro. into several that only I quarter the XXXX. my comments expected the the results dollar the for highlighting in will full in year one of We'll strengthening return currencies, quarter expectations to the

and experienced QX on rate. We have a more expect from negative our significant FX continue reported growth revenue impact to

inorganic nominal and unfavorable up in FX other headwinds revenue of RocketPower outlook XXX growth an an the is and and unfavorable that flat sale X.X% basis the of expect of currency to points about of business. be from I growth. points XXX points revenue our Russian from PTS With we to in year-over-year This currency of expectation impact. Included growth impact mentioned, XXX that QX X% includes All constant challenges to in, basis year-over-year organic basis X.X% revenue reflects currency.

not revenue traditional a will While expecting the material we will include segment in seasonal from changes lift no of are be in session quarter. growth our full a P&I our And macroeconomic assumes full outlook quarter our quarter the finally, for as schools conditions. Education in business, entire

rate the partially continued from GP is basis XX improvement QX XX.X% based we rate in expectation and a in deceleration our This structural point our improvement a expect improvement QX We placement fees. by to XX.X%, XXXX. for permanent product our be around mix, GP reported offset specialty of in on in

economic the nominal a revenue by run a as that our given our and GP in we dollar headwinds. X% grow quarter rate GP as basis, Given much on will the outlook, expect nice

alignment all cost market with remain expense improving to be cost to offset up in management to SG&A by across our a reported growing with acting ensure partially respect urgency on response inflationary in conditions. We and reflecting line in business pressure to of environment, We X% with to basis, committed growth. current efforts top change productivity X.X% management to the units expect

EBITDA improve As from X.X%, adjusted outlook, profitable Based of margin we margin the delivered inorganic organic adjusted to EBITDA are we X.X% EBITDA to strategies, a execute utilizing QX our we adjusted margin additional of improvement our as on XXXX. and measures delivering in EBITDA QX progress basis adjusted in expect point and our XX growth.

high, effective non-deductible on QX retirement XX%. losses used adjusted rate an tax income expect approximately driven to of policies of by is impact unusually also the certain insurance life We fund This liabilities.

the in effective tax expect For program. approved one a single to be of finally, our low And share has million full the year, digits. year Board $XX as repurchase open noted, rate Directors Peter the market we

few that a repurchases We market within And you, back such now expect Peter. begin will to open weeks.

Peter Quigley

The share to buyback program to allocation Thanks, capital change Olivier. it using strategy. commitment It and our complements maximize returns. capital doesn't our Kelly's demonstrates

value, deliver inorganic criteria, climate will on We are Though, organic and to inorganic that in and to for firm balancing the fewer we margin high-quality investments in with properties our to may continue result current our higher our desire businesses. specialty growth the value. mix shareholder accelerate our economic pursue specialty acquisition market, commitment creating holding growth higher

performance quarter drive we making GP. higher improvements that our structural that business third Our on indeed are and progress mix confirms shifting delivering

specialties. While and signals in capturing more education well-defined the strategy. demand segments, are in the OCG future macro strong economy remain hold and set mixed, resilient our confidence specialization our steady these face in in to with we demand We we expect

continue changes, a to to leadership Leah, company call our now by specialty from market committed model, growth we that on which wholly more questions. value attention adapt open seasoned proactive creation. to guided a to optimized quickly operating you our growth will as firmly nimble, and move team, focuses forward benefit can the and We

Operator

Thank Instructions] NOBLE Joe first from go question with you is Gomes And [Operator our ahead. Capital. Please

Joe Gomes

taking for Thanks the morning. questions. Good

Peter Quigley

morning, Good Joe.

Olivier Thirot

morning, Good Joe.

Joe Gomes

challenges out there? what kind seeing more this talent start the loosening maybe detail of to markets? any talent you supply a type the a in talking to doing little with Are guys you the up of market. wanted are and talent I you of What and you attract across about see are supply to get try do So end the as

Peter Quigley

participation rate relative to historic low continues be participation. the So Joe, to stubbornly force labor

that's labor ongoing market. the So contributing tight to

job openings openings as job of as number the come twice our people. Although down many still has somewhat, unemployed it's

having using to all new demand. come extent attract an people, measures creating try back We're including structural our never more appropriate to challenge channels it that's retirees to the that workforce, So continues used to before. meeting social practice, our we've using for education customers' into media a issue that

So career we're to Kelly levers aspirations. we to value to a proposition pulling try further can career their individuals create work for with the to all and

Joe Gomes

Education a Thank bit here, multipart operating Okay. that I'm I segment, switch the a mostly to that. there Education assuming that anything of for question but flipping in year. segment little you that operating the To time that that's But an noticed onto else caused loss, show the through related was release just of did you would to two, note loss wins a Is about And the the just then lot trying stand that you've the kind discussed still a in additional see this attracting the today? to you little get where in new bit that segment. wins able wins business of that you the space. some of I'm past segment? of in pace were in

Peter Quigley

Joe, is... Yes, the operating loss

Olivier Thirot

Seasonal...

Peter Quigley

that's starting only related fact the open quarter, -- in Seasonal. third so schools seasonality. the are the It's that to directly just to

the classrooms for on shortages. for an outstanding services. in of there ramping market very In the most we're in believe the during terms severe quarter. instructors being enjoy pipeline good. into teacher proposition wins of customers the based to share we fourth implementing environment to school full quarter our new the see We're that best the we We've year wins, are value company to where wins of taking that of for And We a wins deliver going our looks year are continue demand now. that's our those up new -- new to significant had

Olivier Thirot

at XX%, similar Yeah. of And you outlook QX, growth we QX and our clearly, for above when QX XX% anticipate XXXX, QX, have than meaning, very we look seen the what mark. in

Joe Gomes

then, about? And agreement, or I the Thanks levels also this some I to into ability you if you do morning that. give little up us may, restricted an Okay. entered is all credit a for free could on that restricted some just Maybe with the that cash details saw guess, more what agreement. last one one I

Olivier Thirot

One on is, things Yeah. I common companies. mean that. to many two

You rate is place. know that, longer the LIBOR, interest that is something no in reference

the which our today. sorry, to long on disclosure XXX basically And So LIBOR, change we point to is, fund I moving to and what expand basically basically share agreement of pages covenants so -- some this over from basically, agreement, a second possibility this is new that Peter bank a repurchase know a is far. mentioning in labor some of I call basically, the were

of governance basically an to mentioned today. amendment XX bank it's we fund to have basically enable million that, us again, So some to the basically initiatives these

Joe Gomes

Okay. get appreciate Great. Thanks for that. that. I'll you. queue. back Thank in I

Olivier Thirot

Joe. Thanks

Peter Quigley

Thank you.

Operator

our And ahead. go Research. Please from question Barrington Kevin Steinke with is next

Peter Quigley

Good morning, Kevin.

Olivier Thirot

Good morning.

Kevin Steinke

Peter and diversify Good wanted up asking and speed morning. I you to Good start morning, Olivier. just wanting base. to its the mentioned there RocketPower out and by about customer integration also

offering and both it industries, that simply involve? what taking integration more existing Just their wondering, a bring to it little get Tech on I Is business? a matter to there's specific want that's offering Industry? different then tailored of things? it And would how, their Just something or the guess, about easy is if those to diversify to the of color

Peter Quigley

really execution the vertical. operations seeing combination And industries is that QX Well, the Kelly had abrupt the vertical, where the of of given as and that exposure. that And already industries growth we achievable. We and was hands full, other that this in we'll and think original the the QX be was demand RocketPower's enterprise-size pivoting its just win we think its tech will of we Kevin, variety RocketPower be blue-chip Kelly exposure a result mentioned, is enjoying significant had successful has plans underway, a a those other -- It's year the RocketPower of part in of have customers time of across to falloff specifically, to anyway. to downturn and even well-run in in thesis in end the investment RocketPower focus the triple-digit high-tech actually significant Resources. implemented before the as to unique industries specifically the opportune given and operating model delivery and

Kevin Steinke

margin for be gross previously. hear. that the assumption the of or XX.X% fees, guidance to that correct the think for lower…? a just full good about That's And placement now permanent function Is XX.X%, is versus year, Okay. lower I they'll guess, when year primarily the we

Olivier Thirot

So mean on a I about we is yeah, the practical is basically -- matter, as what today QX. the specific that discussed have outlook

QX. XX.X%, the related to is Kevin, So

Kevin Steinke

Understood.

Okay.

Olivier Thirot

many QX, up we we is is our and years for XXX in terms have five is good improve that gross business XXX some QX, this to a still structural to basis XXX, improvement seen mix The our to main is improving basically business we traction the is or to of not continue of It basically XX GP, news have fee that points, The going the what that specialty over rate. difference is decelerating. continue provide year. in years, or see mix QX seen margin on continue

Kevin Steinke

it. I that fourth that's Okay. to the got Yeah, quarter, specific XX.X%.

Okay. you that mentioned the prior you've just quarter. or at third your slowdown in expense last looking the And growth growth slowed in to provided SG&A you just thinking calibrate about that down I'm expense SG&A outlook SG&A, quarter. trying

of, I X% a think was expect…? still, to up been or organically. that that, we change in X% what there it should kind Has is

Olivier Thirot

growth we versus SG&A basically points. XXX year, months three full at have look basis you the by our outlook ago, about if Kevin, gave we So downgraded

QX, at constant and organic you QX, to about going QX, trend If look I'm over the here, talk currency.

further basically, that, at as and reasons the bit, of way going to course, we the September, according necessarily we the to like-for-like mentioning. level is slowing X% starting to down react, Two are second in very to QX management, today. QX, as we thing be in on visible that our one SG&A provide did fluid up Our that is it and based And down this performance when in in X.X% not in go on Peter XX.X% was little in that because QX work is more a that's a environment, is uncertain QX. QX line have Making the a is started of outlook the top deploy target. basis, X% QX, resources cost sure were for going should is, right? And incentives on

a but expenses, see going to on have more are to example. more Education we So this it's significant redeployment also still and in is opportunities. likely depending very that where good continue basically, slowdown we

to is Our resources are we still have make continue to growing. areas growth. sure some to Technology, a to software, capture good example. BPO business sufficient going including overall where very are continue we There

Kevin Steinke

things guess, I results might selling M&A economy slowing it's the just types fewer any fairly more when result softer. you want the of and be a their just pursuing how targets what that targets. on in But be might now? high-quality softer is be yes, comment might just to Great. wouldn't M&A Okay. you mentioned and I market pipeline guess self-explanatory

Peter Quigley

therapeutic Well, the specialties, we're pediatric would higher adjacency pleased growth the education. to in also, that acquisition our are with And so the focus margin, services very on set. of continuing to higher be we therapeutic

we months six it set We assets of continue that less look changed our the two would come lens. to to that But It's as are ago. currently the continue attractive say, quality to The look haven't be think companies we're haven't on that acquire is the we high -- was, use that's portfolio. well those So our we'll we've strategy, but quantity the at and we'll off through bar will think pipeline we're a to changed our our for that market areas a economy that companies using properties. permanent. capital companies to to properties, high-quality or don't add sidelines come the than We in criteria acquire to as year as improves.

Kevin Steinke

questions. taking for you Thank Okay. the

Peter Quigley

Kevin. Thanks,

Olivier Thirot

Thanks, Kevin.

Operator

is from Kartik go Research. Mehta Please Northcoast Our question ahead. next with

Kartik Mehta

Hi. morning. Good

Peter Quigley

Good morning.

Olivier Thirot

Good morning.

Kartik Mehta

Thank the detail of on I the technology on companies know, you any sector. as would really give wondering mix said, more from that type granularity seeing it's as the there great. if you. you're a could you're type all little and bit Because type you maybe was of to demand be weakness I seeing of

Peter Quigley

and architects so we our all to on. either in there's most continue either very coming businesses. continuing script, demand as sector talent because technology as It's press when professionals. I and we're impacted. solid Valley, being to app because meta, or in And slowdowns potentially That's macro of particularly small I provide high as job that's of well companies in Slack that least pending over talk the large at we are technology technology demand sometimes areas pandemic. layoffs question medium-sized in uncertain the Yes. the developers to that demand mentioned cybersecurity and think for strong Austin, Texas, is announcing sector, the need soft think and they And seeing experts. world, But enterprise near-term, for or hiring, There tech, any don't Lyft, including institutions been still slowdown the on high-quality out high-quality high-tech hiring technology very in we technology the with has the the network which a conflate and the hit important Silicon industry, by about is the in other types

Kartik Mehta

as underwrite does then you future? future targets how and it change you them the targets, RocketPower, change does looking be -- charge on at might at how you're considering how And look maybe you M&A impairment the or might that M&A in

Peter Quigley

high-growth strategy and quality, new looking legacy for high create Kelly properties RocketPower, the acquisitions the underlying to to opportunities of attract The decline they very reflect high we're the in timing change cause but exposure high-tech synergies to our with significant with Well, topline will businesses that totality. the doesn't company both had that on pleased it it, create the think add to margin, vertical of us will in we the abrupt Kelly. performance to primarily customers the to

Olivier Thirot

on reflecting of Yes. Peter If I at performance the some just was I recent looking little acquisitions. add, bit recently a with may

in specialty revenue NexGen International said, is X% the telecom Just of growing to growth, in do in growing Software, our interestingly PTS, We call over in XX% give as technology an you XX% now about and which which GTA, we revenue what and plus is we QX. all, XX%. idea, first at

we in margin gross expecting but of So acquisitions, RocketPower, the also value are additional of the rest profile time a terms them course, the them recent that value reflecting with much of we all but plan that, of have Kelly. profile of providing margin acquisition, have for us on got or course, gross the now margin all you higher of we because to capture the additional some we a at for on is, of but see are the creation have challenges average track than growth,

Kartik Mehta

just you at far demand of said, labor, you then Olivier, you've what about supply gross so question. said last the margins just look your And demand Based profit one and on what in there there and make and as over in could would or demand you to see that that you the -- months. them are continue growth Do profit is contracting, you next should enough margins? you gross XX -- headwinds see business

Olivier Thirot

from down last coming not traction higher boost specialty a we of margin probably had from we that much think coming about Out what downturn. of seen basis In GP I quarter, seen we boost fee are mix, business high QX, right? the improvement improvement, mix, the already XX that XX. our have gross seen and have it the we was we the five XX margin in growth basically for So, going businesses. see to QX, points. what are structural the what grow will the including is points the XXXX slowing continue points coming this economic XXX years, see during improvement for five QX the years have we to again, is call to to from structural we this the going basis and meaning continue basis in is continuing is of last was provide What year, basis lower, it's to XXX points, is about is

I where the sorry, down. seen traction basically well, not our continuing rate -- because GP in this that's have future one for So something I'm since with year XXXX, see went we

QX, on organic meaningful yes. or we definitely, yes, mix Now XXX, pure improvement basis that we points have a specialty XXX don't structural expect seen but in QX

Kartik Mehta

so much. I you it. appreciate Thank

Peter Quigley

you. Thank

Olivier Thirot

Thank you.

Operator

go we Please next, And go Mitra with Sidoti. Ramgopal to ahead.

Mitra Ramgopal

morning, for taking and questions. thanks Good the Yes.

Peter Quigley

Mitra. morning, Good

Olivier Thirot

Good morning.

Mitra Ramgopal

Yes. Thanks.

First, it you more a next your you to you just look and is that to workforce, lot have fair a as given the because year, visibility for going would at uncertainty, like? investments assume you're be technology macro don't just both cautious

Peter Quigley

the going we're a where get we to meaningful we invest in return. think Well, continue areas to can

to continue and as significant, is Olivier So services the mentioned, we'll there. for invest education demand

adaptable see mindful lever as to company. set continue in economy. OCG Olivier forward practices. demand We we'll outlook parts in XXXX. adapting of we're to continue described a QX more going SG&A in also we're current to the for our certain very more And and that uncertainty We're that the the deceleration and in But use nimble,

that than XXXX. we is in been, continue flexible see it structure has more to cost Our and expect

Mitra Ramgopal

in of what just saw then expectation Europe. given macro or But from year we're terms UK, areas terms switching surprising softness maybe environment? in And a the little given Italy, there, Thanks. stabilization of softness Europe. some Yes. gears into well France, your hearing should we in continued We next what's expect not

Peter Quigley

and look QX, is are more Russia, when -- which Interestingly, we of which growing you is about And in creating like X%. of at noise Yeah. externally at we exclude, also a course, FX, driven. think lot I

about X%. similar are very X%. the to at XXXX QX QX, we So around we're entire

and we fee the Russia that -- has benefit been historically fact including Russia XX% a have business. So and fee QX, our business lost was still nice of the up in

bit, It far little have so it's we specific honestly, but a very signs a very, seen slow moment, we the but going is to believe don't come, down. For business in we see may that of down slowing resilient a Europe. what

are bit a going looking moment, to say, fee I be seems we getting on, is it's down what at very, it changing, ready bit. something slow very Of hours our But looking going little basis, to a resilient. a is course, if the would for at business, weekly little scrutinizing I believe on

Mitra Ramgopal

you and look for of should But guidance, the then, level, companies. obviously, you And known again you know, headwinds. the to as providing portfolio environment, XXXX guess, most but your not I despite expect should Thanks. expect we just growth? finally, the you're -- we to very year-over-year it macro still Okay. at as businesses, a look is, year high into still not on despite next I company continue grow

Peter Quigley

structure, the our the Yes, we business, specialties difficult have a it's these feel with OCG resiliency business environment each when of portfolio about probably business knowing now. speak have you of about But we and we have now, question, education, that think segments. we the Ed in and we the can

area believe when we business, environment. and going that, set P&I our to for economic we in than near extent, businesses economic other would probably strong think the was OCG past. better in say, we to have there future, model, to enough, have them, we least, the And terms see that are some the in are certainly, cyclical more of the believe than But we international future Of challenges resilient right? future. of subject near environment the better pretty probably each challenges to, course, education, that enough resilient believe For likely a exposed we are at it you I some now be whether may to more about and in

Mitra Ramgopal

Okay. taking very questions. Yes, Thanks for the helpful. again that's

Peter Quigley

Thank Yes. you.

Olivier Thirot

you. Thank

Operator

[Operator Instructions] And have we questions. no other

continue. may You

Peter Quigley

for I Thank you all think set, help your we're Lea. today.

Olivier Thirot

you, Lea. Thank

Operator

You're Ladies participation gentlemen, and does and conference using conclude very for that your today. welcome. AT&T teleconference. you your for Thank for

disconnect. now may You

Kelly Services (KELYA) 10 Nov 222022 Q3 Earnings call transcript