Kelly Services(US:KELYA)2023-11-09 16:35Financial Data and Key Metrics Changes - For Q3 2023, revenue totaled $1.1 billion, down 4.3% from the prior year, with a 150 basis points favorable currency impact, resulting in a 5.8% decline in constant currency [95][130] - Adjusted EPS for Q3 2023 was $0.50, doubling from $0.25 in Q3 2022 on a like-for-like basis [11] - SG&A expenses decreased by 1.2% year-over-year, with a significant 9.1% decrease on an adjusted basis [10][39] - The company generated $7 million of free cash flow in Q3, totaling $21 million year-to-date [21] Business Line Data and Key Metrics Changes - In the OCG segment, revenue declined 4% year-over-year, with MSP revenue also declining year-over-year but flat sequentially [9] - The Education segment reported a significant year-over-year growth of 23%, driven by improved fill rates and strong demand [18] - The Professional and Industrial segment saw an 11% year-over-year revenue decline, with staffing product revenue down 15% [43] - The SET segment revenue decreased by 8%, with permanent placement fees declining by 39% [128] Market Data and Key Metrics Changes - International segment revenue increased by 2% on a nominal basis but decreased by 6% in constant currency, with performance varying by geography [129] - Accounts receivable decreased by 9% year-over-year, reflecting a decrease in revenue and improved DSO, which was 63 days [107] Company Strategy and Development Direction - The company is focused on a comprehensive strategy to deliver a full suite of offerings to large enterprise customers, transforming culture, capabilities, and technology [6] - A $50 million share repurchase program was completed, indicating a commitment to returning value to shareholders while also prioritizing reinvestment in the business [7] - The sale of the European staffing business is expected to unlock significant capital for organic and inorganic growth initiatives [135][124] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic headwinds in Q3 were more pronounced than anticipated, leading to cautious customer behavior and longer decision-making times [46][82] - The company expects Q4 nominal revenue to decline by 50 to 150 basis points year-over-year, with a GP rate expected to decrease to about 19.8% [46] - Management remains optimistic about the structural changes made across the enterprise, anticipating significant improvements in profitability as market conditions improve [15][47] Other Important Information - The company is actively pursuing high-margin, high-growth acquisition opportunities, particularly in technology and education sectors [127] - The transformation initiative is expected to yield a normalized adjusted EBITDA margin of 3.3% to 3.5% by the end of 2023, reflecting over 100 basis points improvement from historical levels [141] Q&A Session Summary Question: What is the outlook for growth initiatives? - Management highlighted that the transformation includes efficiency and growth components, with a focus on local branch initiatives and enhancing service delivery [144] Question: How is the competitive landscape affecting pricing? - Management noted that while some smaller regional players may adjust pricing, they maintain price discipline and have not seen widespread changes among larger competitors [158] Question: What impact will the sale of the European staffing business have? - The sale is expected to reduce revenue by about $820 million but will improve gross margin rates and free cash flow generation [118][64]