KELLY SERVICES INC Q1 FY2024 earnings call

• Kelly entered into a definitive agreement to acquire Motion Recruitment Partners for $425 million in cash with additional earnout potential up to $60 million. The acquisition will strengthen Kelly's capabilities in technology, telecommunications, government specialties, and RPO solutions globally, expected to close in Q2 2024.
• In Q1 2024, adjusted EBITDA margin was 3.2%, up 20 basis points from 3% at the start of 2024. This improvement resulted from actions implemented in 2023 and the sale of the European staffing operations.
• SG&A expenses were down 22% year-over-year reported and 10% organic, with $2.3 million restructuring charges and $5.6 million expenses related to the sale of the European staffing operations in Q1 2024.

Revenue for the first quarter of 2024 totaled $1.05 billion, down 17.6% from $1.27 billion in 2023 primarily due to the sale of the European staffing business. On an organic basis, revenue declined 2.6%. The Education segment's revenue grew 16% year-over-year. The SET segment had a 6% revenue decline, OCG segment declined 6%, and the Professional & Industrial segment declined 11% year-over-year. Overall, gross profit was 19.7% reported, or 8% on an organic basis, with the GP rate reflecting a 90 basis point improvement from the sale of the European staffing operations but an 120 basis point decline on an organic basis due to business mix and lower perm fees.

• For Q2 2024, on an organic basis, revenue is expected to be up 1%-2% midpoint $1.03 billion with no significant FX impact.
• GP rate is expected between 20.1%-20.3%.
• Adjusted EBITDA margin is expected to be about 3.3%, an improvement versus Q2 2023.

• Market conditions impacting staffing revenues and business mix.
• Regulatory approvals and closing conditions for the Motion Recruitment Partners acquisition.
• Uncertainty in the macroeconomic environment affecting demand for staffing services.

Q: Joseph Gomes asks about revenue contribution, adjusted EBITDA margins, growth rates, customer concentration, and management of the Motion Recruitment Partners acquisition.

A: Olivier Thirot states revenue of Motion Recruitment Partners is in excess of $500 million, and Peter W. Quigley highlights the complementary capabilities, strong leadership, and compatible culture of MRP.

Q: Kevin Steinke inquires about the breakdown of MRP by areas, organic revenue trend, and gross margin.

A: Olivier Thirot mentions MRP revenue is heavily weighted in SET business, particularly IT, and Peter W. Quigley discusses complementary tech capabilities; Olivier Thirot explains gross margin decline due to business mix.

Q: Kartik Mehta asks about April trends, customer conversations, and future acquisitions.

A: Peter W. Quigley states trends were consistent throughout Q1, customers are optimistic, and Kelly is still looking for high-quality acquisition assets.

Q: Marc Riddick asks about balance sheet and pipeline beyond the MRP acquisition.

A: Olivier Thirot talks about liquidity, DSO at 58 days, and opportunities for inorganic growth post-acquisition