Kelly Services(KELYA)2024-08-08 18:26Financial Data and Key Metrics - Revenue for Q2 2024 totaled $1.06 billion, down 13.1% YoY, primarily due to the sale of the European staffing business, partially offset by the acquisition of MRP [6] - On an organic basis, YoY revenue improved 0.6%, reflecting strong growth in Education and stabilization in other businesses [7] - Adjusted EBITDA margin improved 180 basis points to 3.8%, driven by transformation efforts and the MRP acquisition [14] - Adjusted EPS for Q2 2024 was $0.71, nearly doubling from $0.36 in Q2 2023 [15] - Free cash flow for the quarter was $55 million, up from $32 million in the prior year period [16] Business Segment Performance - Education segment revenue grew 22% YoY, driven by new customer wins and increased demand [7] - SET segment revenue was up 10% on a reported basis but down 3% organically, with stable sequential trends [7] - OCG segment revenue improved 3%, driven by PPO specialty growth, while RPO and MSP revenues declined YoY [8] - Professional & Industrial segment revenue declined 9% YoY but stabilized sequentially [8] Market Performance - The company saw stabilization in demand across most businesses, with positive signs in Technology & Life Sciences [3] - The acquisition of MRP strengthened the company's position in technology, financial services, and healthcare markets [20] Strategy and Industry Competition - The company's strategy to deliver a full suite of offerings to large customers is gaining traction, improving share of wallet [4] - Kelly increased its position among the top 20 staffing firms in the U.S. by the widest margin from 2022 to 2023 [4] - The acquisition of MRP is expected to enhance revenue growth potential and EBITDA margin expansion [20] Management Commentary on Operating Environment and Future Outlook - Management expects modest sequential revenue improvement in P&I, SET, and OCG segments in H2 2024 [17] - Organic revenue growth for H2 2024 is expected to be 2.5% to 3.5%, with MRP adding $260-$270 million in revenue [17] - Adjusted EBITDA margin for H2 2024 is expected to be 3.2% to 3.3%, with MRP contributing an additional 30 basis points [19] Other Important Information - The company's debt to capital ratio is 14.1%, with $210 million of debt outstanding [16] - Global DSO improved to 57 days, down 4 days from Q2 2023 [16] - The company expects to sustain efficiency improvements from transformation-related actions, with adjusted SG&A expenses expected to decline 3.5% to 4.5% YoY organically [18] Q&A Session Summary Question: MRP Business Trends and Outlook - MRP revenue for H1 2024 was $260 million, with H2 expected to be flat to slightly down YoY [23][24] - Long-term optimism remains high for MRP due to its complementary nature with Kelly's business [25] Question: Pricing Trends Across Segments - Pricing trends remain stable, with no significant pressure on spreads observed in P&I, SET, or Education segments [26][27] Question: Future Acquisition Plans - The company is focused on integrating MRP but remains open to future acquisitions, particularly in high-margin, high-growth businesses in Science, Engineering, Technology, and Telecom or Education [28] Question: Organic Growth Drivers - Organic growth in Q2 was attributed to transformation-related initiatives, omnichannel strategy, and focus on large enterprise customers [29] Question: SG&A Expense Trends - Adjusted SG&A expenses are expected to decline 3.5% to 4.5% YoY organically in H2 2024, with MRP adding $60 million in expenses [18][33] Question: MRP Integration Progress - Integration of MRP is progressing well, with collaboration between teams and early signs of market and customer benefits [36][37] Question: Acquisition Pipeline - The acquisition pipeline remains active, with a focus on high-quality, high-growth, high-margin businesses [38] Question: Kelly Arc Update - Interest in Kelly Arc remains high, with a dozen-plus customers and hundreds of AI automation professionals on the platform [39][40] Question: Leverage and Future Acquisitions - The company's debt to EBITDA ratio is 1.7, with progress in deleveraging expected to continue [43][44] Question: Technology Investments - Annual CapEx is expected to be $20-$25 million, with potential increases due to MRP technology integration [45][46]