Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kelly Services Inc (KELYA, Financial) achieved double-digit revenue growth in its Education segment, driven by strong fill rates and new customer wins.
- The company successfully integrated Motion Recruitment Partners, contributing to a 37% reported revenue increase in the SETT segment.
- Kelly Services Inc (KELYA) maintained its position as the #1 K-12 staffing firm in the U.S., according to staffing industry analysts.
- The Professional & Industrial segment showed sequential revenue growth of 4%, indicating stabilization and improvement.
- The OCG segment delivered solid year-over-year revenue growth, primarily due to increased demand for Payroll Process Outsourcing solutions.
Negative Points
- Overall revenue for the third quarter of 2024 was down 7.1% compared to 2023, primarily due to the sale of the European staffing business.
- Organic revenue was essentially flat, slightly below the company's expectations for the second half of the year.
- Permanent placement fees declined 31% organically, reflecting lower demand in certain industry verticals.
- The SETT segment experienced a 5% organic revenue decline, attributed to lower staffing market demand and industry-specific challenges.
- Gross profit was down 3% as reported and 6.4% on an organic basis, with pressures from business mix and lower permanent fees.
Q & A Highlights
Q: How much more integration costs for Motion Recruitment Partners (MRP) should we expect in the next quarters?
A: Peter Quigley, CEO, explained that during the earn-out period, which runs through Q1 2025, MRP will operate separately. Olivier Thirot, CFO, added that most integration costs in 2025 will be related to technology integration, with expenses in line with typical IT investments, becoming more visible in Q2 and Q3 of next year.
Q: Can you explain the year-over-year decline in gross profit rates across segments, except for SETT?
A: Olivier Thirot, CFO, noted that in P&I, the gross profit rate remained stable due to a positive mix impact despite fee business pressure. Education faced margin pressure due to seasonal factors. OCG's decline was due to product mix, with growth in lower-margin PPO business. SETT maintained its GP rate by focusing on outcome-based solutions.
Q: Why was the adjusted EBITDA margin lower than expected in Q3?
A: Olivier Thirot, CFO, explained that the adjusted EBITDA margin was 2.5%, lower than the expected 3%, due to unexpected revenue pressure in SETT during July and August. However, there was an improvement in September, and the company is optimistic about Q4 based on current trends.
Q: How is the MRP business performing compared to expectations?
A: Peter Quigley, CEO, stated that MRP is meeting expectations despite industry headwinds. The business is well-positioned for when demand rebounds, and its complementary nature with Kelly's existing operations is promising for future growth.
Q: What are the factors driving market share gains in SETT and P&I?
A: Peter Quigley, CEO, attributed market share gains to Kelly's solutions, such as the omnichannel strategy in P&I and the statement works suite in SETT. The company's technology-driven solutions, particularly in OCG, also contribute to winning large MSP business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
