Kelly Services, Inc.

Good morning and welcome to Kelly Services' first quarter earnings conference call. All parties will be on listen only 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. Our first quarter webcast presentation is also available on Kelly's website for this morning's call. I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO.

Please go ahead. Thank you, Rich. Hello, everyone, and welcome to Kelly's first quarter conference call. With me today is Olivier Toureau, our chief financial officer, who will walk you through our safe harbor language, which can be found in our presentation materials.

Thank you, Peter, and good morning, everyone. As a reminder, any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC findings for a description of the risk factors that could influence the company's actual future performance. In addition, during the call, certain data will be discussed on a reported and on an adjusted basis. Discussion of items on an adjusted basis are non-GAAP financial measures designed to give insight into certain trends in our operations. References to organic growth in our discussion today exclude the results of our 2022 acquisitions of PTS and Rocket Power, as well as the 2022 sale of our Russian operations. Finally, the slide deck that we are using on today's call is available on our website. Now back to you, Peter.

Thank you, Olivier. I'll begin by sharing some brief thoughts on the broader context for Kelly's first quarter results. For the most part, the macroeconomic and labor market headwinds that existed in the fourth quarter continued in the first quarter, and those headwinds are widely reported and well understood. Overall, employers are being more deliberate about their talent strategy decisions. And as in all challenging times, some industries are showing more resiliency than others. Likewise, Kelly's specialty solutions, where we have intentionally focused our growth strategy, proved more resilient than the others. In our education segment, our investments enabled us to meet rising demand and increase our first quarter fill rates. Our focus on more profitable outcome-based businesses in both P&I and SET also yielded growth in the quarter as customers continued to demand our value-added solutions. As expected in the current environment, our staffing businesses faced lower demand, and we took action early in the first quarter to align expenses and to focus P&I on our local U.S. markets, improving our quarterly fill rates. On the whole, we delivered solid results in the first quarter. Throughout, the entire Kelly team maintained its focus on serving our clients and talent, capitalizing on growth opportunities while managing costs and staying true to our strategic priorities. Their ongoing commitment to excellence is reflected in Kelly being named number one on Forbes' 2023 list of America's top temporary staffing companies. I'll now turn the call over to Olivier, who will provide details about our quarterly results.

Thank you, Peter. For the first quarter of 2023, revenue totaled $1.3 billion, down 2.2% from the prior year, including 80 basis points of unfavorable currency impact. So revenues for the quarter were around 1.4% in concerned currency. Included in that decrease are 140 basis points of favorable impact from our 2022 acquisitions of Rocket Power and PDS, as well as a 230 basis points and favorable impact resulting from the 2022 sale of our operations in Russia. So our revenue was nearly flat at down 0.5% year-over-year on an organic constant currency basis. As you look at first quarter revenue by segment, our education segment continues to report significant year-over-year growth, up 44%, due to our improved fill rate and new customer wins, as well as the acquisition of PTS. Education's organic revenue growth was 35%, and continues to demonstrate that our education business is resilient even as broader economic trends soften. Placement fees in education, primary education executive search with Greenwood Asher, were up 21%. Our OCG segment continued to deliver year-over-year revenue growth, with revenue up 5% over last year in the first quarter, including the results of Rocket Power. Organic constant currency revenue growth was up 4%. OCG delivered strong growth in our high-margin RPO and MSP products, partially offset by declines in PPO. In the set segment, revenue was down by 3%. During the quarter, we saw a continuation of the deceleration of demand that started in Q4 across our staffing specialties. Permanent placement fees were also impacted by a pullback in market demand and declined 32%. Despite these economic headwinds, demand has continued to be strong for our telecommunications specialty and many of our outcome-based solutions. Revenue in our professional and industrial segments declined 12% year-over-year in the quarter. Revenue from our staffing products declined by 19%, reflecting the impact of economic headwinds, which are more noticeable in this segment. The segment's outcome-based business delivered solid revenue growth of 15%, and the market continues to be strong for these value-added solutions. Perm placement fees declined 58% and were impacted by lower demand for full-time hiring, as well as the impact of the prior year comparable, which included about $2 million in conversion fees from a single customer. Revenue in our international segment declined 16% on a nominal currency basis and was down 14% on a constant currency basis. Excluding the impact of the sale of our Russian operations, revenue declined 2% on an organic constant currency basis. Performance varied depending on geography and product. For the quarter, we had good revenue growth in Mexico, Germany, and Portugal, but had challenging trends in France and Switzerland. In total, placement fees were down 1% on an organic concerned currency basis. Overall gross profit was down 1.7% on a reported basis, or 0.8% in concerned currency. Our gross profit rate was 20%, compared to 19.9% in the first quarter of last year. Our overall GP rate improved by 10 basis points. Our organic business mix continues to be a strong driver of our GP rate, generating 60 basis points of year-over-year improvement, with an addition of 10 basis points coming from our recent acquisitions, which are higher-margin businesses. These were offset by the 60 basis points and favorable impact of our lower-perm fees. SGN expenses were up 3.1% year-over-year on a reported basis, or 3.8% on a constant currency basis. Expenses for the first quarter of 2023 include a $5.7 million restructuring charge. We took actions to manage costs in response to the current demand levels and to reposition our P&I staffing business to better capitalize on opportunities in local markets. Q1 2023 expenses also include an additional 5.1 million of intangible amortization and other operating expenses of rocket power and PTS. So adjusted organic expenses were flat year over year in constant currency. This reflects a balance of proactive cost management efforts to align expenses with demand for our services while still continuing to invest additional resources in businesses that are delivering strong revenue growth. Our earnings from operations for the quarter were $10.7 million compared to $23.4 million in Q1 of 2022. As noted, our 2023 Q1 results include the $5.7 million restructuring charge. So adjusted earnings from operations in Q1 of 2023 were $16.4 million, and adjusted EBITDA margin was 2%. As a reminder, Kelly's Q1 2022 earnings before taxes also include the impact of the 2022 sale of our non-core investment in APAC. Notwithstanding the prior year non-cash charges, the APAC transactions unlocked $235 million of capital. Income tax expense for the first quarter was $1.8 million, compared with our 2022 income tax benefit of $13 million. Our effective tax rate for the quarter was 13.9%. And finally, reported earnings per share for the first quarter of 2023 was $0.29 per share compared to a loss of $1.23 per share in 2022. Adjusted EPS for the first quarter of 2023, excluding the restructuring charge net of tax, was $0.40. After adjusting for the personal transactions and related impacts in the prior year, as well as the gain on sale of assets, net of tax, Q1 2022 EPS was 44 cents. So on the lack for lack basis, EPS declined by 9%. Now moving to the balance sheet as of the end of the quarter. As of the end of Q1, cash total 112 million compared to 154 million at the end of 2022. And we ended the first quarter of 2023 with no debt, consistent with substantially no debt at the end of 2022. With our $300 million in available capacity on our credit facilities and our cash balances, we continue to have ample capital available to deploy. As of the end of Q1, accounts receivable was $1.4 billion and decreased 6% year-over-year, reflecting a year-over-year decrease in DSO as well as a decrease in revenue. Global DSO was 59 days, a decrease of two days from year-end 2022 and three days lower than the first quarter of 2022. For the first quarter of 2023, we used 18 million of free cash flow. Our Q1 free cash flow trend reflects the historical pattern resulting from the payment of prior year annual performance-based incentive compensation in the first quarter. Our accounts receive balances have declined since the end of 2022, primarily as a result of favorable DSO trends. But a majority of those receivables are related to our MSP programs and are funded with supplier payables. So the change had little net impact on free cash flow generation this quarter. We have also continued to execute against the 50 million share repurchase program that we announced in November, buying approximately 1.1 million shares for 18.3 million in the quarter and bringing total repurchase to 26.1 million program to date. As for looking ahead, as we noted in our call in February, we are navigating the market environment created by the current economic uncertainty, the continued commitment to the execution of our specialty strategy. So reflecting on our Q1 results and given continuing economic headwinds, we expect Q2 organic currency revenue trends to be consistent with Q1, roughly flat to the prior year. We expect Q2 reported revenue to be down 2% to 3%, including the unfavorable impact of the 2022 sale of our Russian operations of 220 basis points. We expect our Q2 GV rate to be about 20.5%, down 20 basis points versus last year. This reflects a continued shift in mix to higher margin specialties, offset by the impact of lower permanent placement fees. We expect SG&A expenses to be down 1% to 2%. This includes the savings from our Q1 restructuring actions, which are partially offset by investment in our education business as revenues grow and continued investment in our technology initiatives. Based on our outlook for Q2, we expect adjusted EBITDA margin of 2%, similar to Q1. And finally, we expect a Q2 effective income tax rate in the mid-teens, which includes the impact of the Work Opportunity Tax Credit, which has been enacted through 2025. And I now turn it back over to Peter to discuss his observations on the execution of our specialty strategy and upcoming actions.

Thanks for those details, Olivier. In February, I shared that as we are approaching the three-year anniversary of our operating model, we would be reviewing our growth and efficiency objectives to determine how to accelerate Kelly's progress toward becoming a specialty talent solutions provider. We have made progress on our growth journey, growing gross profit and improving our gross margin percentage by shifting to a higher margin, higher growth business mix. unlocking value by monetizing non-core assets and reinvesting that capital in future growth through our inorganic and organic investments. That said, our progress has not yielded the necessary meaningful improvement to the bottom line. Accordingly, we intend to continue sharpening our focus on reducing organizational complexity and inefficiencies and finding new avenues of growth. This will mean creating structural improvements in our business, converting more of our revenue and gross margin gains to a significantly improved net margin, and achieving the profitable results I know we can deliver. That's why we have initiated a comprehensive and intensive transformation initiative to optimize our business and functional operations in a sustainable manner, unlock additional value creating opportunities, and accelerate profitable growth. Our goal is to build on the progress we've made in the last three years to create long-term structural improvements that will benefit our employees, the talent we place, our customers, and shareholders. The success of an effort with this ambition depends on having the right people at the table with a clear line of accountability, undivided focus, and a mandate to act swiftly and decisively. To that end, I have appointed an internal leader to the role of chief transformation officer reporting directly to me. This individual brings extensive experience leading complex transformations at several large enterprises before joining Kelly. He oversees a transformation management office that we have formed to identify value-creating opportunities across the enterprise drive the necessary changes to realize these opportunities and ultimately accelerate profitable growth. Furthermore, we've engaged an outside consulting firm that brings deep business transformation expertise, world-class data and analytics capabilities, and a tested model to inform our efforts. Let me be clear. As a result of our work, we expect to see meaningful improvement in our EBITDA margin rate starting in the second half of this year with full benefits realized in 2024. Achieving our aggressive goals is our highest priority, and we have the full support of the board and management team. Coupled with our newly created transformation management office and external consultants, I am confident that we have the right pieces in place to realize our collective ambitions. We remain committed to transparency and accountability, and beginning in August, we intend to provide regular updates by which you can measure our progress. As we embark on this next phase of our growth journey, I am filled with optimism that Kelly will emerge positioned for long-term growth. The path that lays ahead won't be without challenges, but I have no doubt that our team will persevere and deliver on our commitments. I look forward to sharing more in the quarters to come. Rich, you can now open the call to questions.

Certainly. Ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your touchtone phone. You may remove yourself from queue at any time by pressing 1, 0 again. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 then 0 at this time. And we'll go to the line of Joe Gomez with Noble Capital. Please go ahead.

Good morning, congrats on the quarter, and thanks for taking my questions.

Good morning, Joe. Thank you. Good morning, Joe.

Joe, since you ended up on the business transformation program, let's start right there. Just trying to get a better handle and understanding of all this. You've done something similar in the past, as you just described. What's kind of different this time around? What's the cost to this program? And when you talk about meaningful EBITDA margin improvement, can you quantify those types of numbers for us?

Yeah, Joe, thanks for the question. The transformation is something we're very excited about, think it's going to – proved to be a positive in the long term for Kelly. I'll let Olivier maybe comment on the investment or cost question, but it's different this time, Joe, for a couple reasons. One, we're focusing on both growth and efficiency. We've done a good job of growing our gross profit and our gross profit percentage, and we continue to look for ways to add to those through our higher margin and higher growth solutions. At the same time, we have undertaken a comprehensive review of the whole company in terms of the ways that we work, our business processes, technology, to try to find additional efficiencies that we can apply that are going to convert more of our gross margin to net margin. And that's really what this transformation is all about. And we have retained an outside expert to help us with that. That's not something we've done before, and this is an exhaustive review driven by data, and we have expectations that in the coming quarters we'll be able to share more details about the financial performance that we expect as a result.

Yeah, it's about structural improvement, not only on the cost base, but also on our capabilities to allocate our resources differently to accelerate our growth. Part of the transformation is going to be investing, for instance, in technologies, new products, and so on, On your question about the cost to execute, yes, there are going to be a cost to execute. As Peter was sharing during his prepared remarks, we plan, of course, to talk about our expectations for the second half of this year and beyond 2023 in August, and we are going to talk about the cost to execute as well at this time.

Okay. Thank you for that. Let's switch to... hopefully a little more happier or brighter topic, so to speak. And so you recently released, you know, the Digital Works program, Digital Workers, excuse me, program. I was wondering, you know, Peter, can you give us a little more color on that, the potential, the reception so far, although I know it's been relatively early. I mean, it sounds something that is really interesting. You could drive you know, results at Kelly there for an area where it might be difficult to get people to take jobs these days.

Yeah, Joe, we're very excited about it. The digital worker is, we think, a solution that the time is right for that. We have received very positive reception from our customers, both existing customers and new customers, It is still very early, but the idea is that in today's environment, the cooperation of companies to apply technology and people in a more thoughtful way creates really exciting opportunities for efficiency, productivity, new products, and that's the sort of promise of the digital worker. It's not intended as necessarily a replacement for workers as much as it is an augmentation of workers to make them more efficient, to allow them to focus on meaningful work and use technology to eliminate or compensate for more redundant ministerial work that often gets in the way of employee satisfaction, employee productivity. And, again, we've received very positive feedback from our customers and potential customers.

Okay, thank you. And one more for me, and I'll get back in queue. Obviously, you know, Rocket Power's had a couple of difficult quarters. Maybe give us a little update on that business. And I know one of the things you were looking to try and do was leverage that their capabilities outside of the high-tech sphere, and just wondering how that is progressing. Thank you.

Yeah, so the integration with the legacy Kelly RPO business is going well. As you mentioned, the tech sector has been hit pretty hard, and as a result, Rocket Power has faced some considerable headwinds, but we've We're managing the expenses within Rocket Power accordingly, and we're integrating its delivery model into our other RPO operations. It's still early, but we're seeing positive results and are pleased with the integration results so far.

And we plan, and we have a middle and back office on infrastructure support integration underway that we plan to finish by early July that basically on a cost basis is going to be complementing what Peter was saying.

Okay, thank you.

Thanks, Joe. Thank you, Joe.

And our next question will come from the line of Kartik Mehta with North Coast Research. Please go ahead.

Good morning. As you take a look at maybe structural change and just changing of the company to make it maybe more profitable, do you envision having to complete acquisitions or is this more about looking at the portfolio that you have and just making that more efficient?

Good morning, Karthik. We're going to continue to pursue our strategy of investing organically in our high-growth, high-margin businesses while also investing inorganically to the extent we find high-quality properties that also bring high-margin, high-growth solutions to our portfolio. So there's going to be that's not going to change as part of this initiative. What this initiative is about is looking at how we work our business processes, our technology, the way in which the individual business units go to market. We think there's a lot of upside in capitalizing on the blue chip client base that Kelly has. So we're going to spend a lot of time focused on that. We're considering things like the markets we serve and how we deliver to those markets. So it's a, I would call it a comprehensive review, again, focused equally on growth and efficiency.

And then if you look at the trends that you're seeing in April, how would they compare to kind of what you saw in the first quarter, or maybe how you exited the first quarter?

Yeah, if you think about the outlook we have for Q2, we have said and we anticipate, and this is what we see now when I look at April and early May. Basically, we anticipate revenue-wise a very similar quarter in Q2 as compared to Q1 with the same kind of dynamics. So something where you can say organic constant currency growth is going to be nearly flat. We are going to continue to see education having very, very good traction, and we have seen that for several quarters. We continue to see that in April. And so far, we have not seen any significant changes in early Q2 versus Q1. Our exit rate in Q1 is pretty similar to the average of the quarter, so we anticipate really something very similar on the top line. And as I said, our cost base is going to continue to go down post our Q1 restructuring. The main purpose of this restructuring was really to align our resources on the type of demand we see now.

Perfect. Thank you so much. I appreciate it.

Thank you, Carter. Thank you.

We'll now go to the line of Kevin Steinle with Barrington Research. Please go ahead.

Good morning, Peter and Olivier. Good morning, Kevin. In terms of the transformation initiative, I wanted to ask more about the growth side of the equation there. You mentioned finding new avenues and growth and, you know, maybe better allocating resources to accelerate growth. So I don't know if there's any more color you can add to that, what sort of opportunities you think you can uncover. And then, you know, related to that, I'm assuming that the growth side will take a little bit longer to play out than the cost side and that, you know, the EBITDA margin improvement you talked about in the second half will come more from the cost side. I mean, is that the correct way to think about it?

Well, you're right that the growth side is likely to take a little bit longer, Kevin. But the reality is when we set up the operating model three years ago, we very intentionally wanted the business units to focus on their specialties and their markets, and they've done a really nice job doing that. It shows up in not only the amount of gross profit, but also the gross profit percentage or gross margin percentage, which is at the highest rate it's been in 25 years. But what we need to do is to capitalize on that growth by converting more of the gross margin to net margin. We think that the growth opportunities exist in reallocating resources or allocating resources towards those high margin, high growth businesses. Even in Q1, you see those businesses being more resilient to downturn and or macroeconomic headwinds, and we think there is significant opportunity through this evaluation to allocate our resources in a more efficient way. And it also allows us the opportunity to look for ways to find avenues of growth in collaboration between our business units, which not because of any lack of desire to collaborate, but just because they've been focused on their particular specialties. But the reality is we have a great customer base, and we think the ability to penetrate and gain wallet share within our customers is a significant opportunity going forward.

Okay, great. So, yeah, it sounds like maybe a lot more opportunity for cross-selling between the segments. How much of that, you know, is going on now, and I guess what's the opportunity there?

Yeah, there's a lot of opportunity. There's a lot of upside. We have – Part of the work that's underway is evaluating both the structure and the processes and the go-to-market strategies that we apply. And we believe that there are some quick wins that are available to us, but longer term, we think creating customer relationships that are sustainable and stickier and we have more of our solutions delivered into each of our customers is something that we're spending a lot of time on and expect to come from this effort.

Okay, great. Maybe just an overall comment on the labor market. You know, obviously talked about softening demand in some areas and, you know, some customers delaying decisions and what have you, but Is there still a general imbalance between demand and supply given the low unemployment numbers we see and openings relative to hires and those sorts of metrics? I mean, what's kind of the flavor for the labor market you're seeing right now?

Yeah, the imbalance still exists, Kevin, but it's probably not as severe as it was a year ago. We are seeing some additional talent supply, pointing to education as an example. We've seen our fill rates improve across the board in education as individuals see the teaching profession substitute teaching and tutoring and the like as an opportunity to augment or be their full-time source of income. So that's a sign that there is some slackening of the really tight labor market, but it's still a tight labor market, particularly in the professional and technical space. there's a lot of demand that continues, although it varies by industry and vertical, so it's hard to generalize across all of the sectors.

Just maybe to add on that, when we look at our own wage inflation, in P&I, we continue to see a slowdown. Our Average wage inflation in P&I staffing was 1.8% in Q1. A year ago, it was 14.2%. And we see our fee rate in our P&I staffing moving up by about 9%. In SET, still elevated wage inflation at about 9%. And the shortage and the unbalance seems to be structural, which is not new. Education, we have started to see a little bit of a slowdown in wage inflation. It's about half of where it was. It was 9%. Now we are at 4.5%. And again, as Peter was mentioning, another sign, which is good for us, is the feed rate in education is up by about 10%, which is a sign of improvement. but not, I would say, a very significant improvement. And said clearly, when you look at wage inflation and fee rate, we are pretty much where we were three and six months ago.

Okay, thank you. That's very helpful, Collar. Maybe just a couple more here. You know that education organic growth rate continues to be very strong. In 2022, organic growth was, you know, running 40 to 45%. Now, you know, reported 35% organic for the first quarter here. I mean, just trying to get a sense as to, you know, how sustainable these strong organic rates of growth are. You know, obviously, I would expect a rate to come down just as the business grows larger, but Just trying to get a sense for the legs here and what sort of growth rates we can expect going forward.

It's true that the comps are becoming more challenging, right? Because we have, you know, since basically the beginning of the second half of 2022, on a pure organic basis, we were already higher than the pre-COVID 2019 type of situation, revenue-wise. Of course, we are not going to grow at 30%, 35% organic forever. I think in the near term, we continue to see a very big traction. We have not seen any material change at the beginning of Q2. And one of the reasons is that, as we say internally, we've got growth coming from multiple cylinders, right? New winds. higher demand, better fill rate, better bill rate, and very nice leverage. I believe we are going to start to see a little bit of, in percentage, but not in absolute dollar growth, some potential, you know, slowdown at the far end of this year, but I don't see that happening very soon. I'm still very comfortable that in Q2 we are going to have very, very similar type of traction than what we have seen for now several quarters. So I don't see that changing very quickly, at least, yes, in the near term.

Okay. And then lastly, the restructuring actions you took here, you know, you talked about the SG&A trend you reviewed in the second quarter, but just I don't know if you could quantify the savings from the restructuring, and then obviously that's going to be offset somewhat by investments. I don't know if you could quantify that.

Out of the 5.7 million, about 3 million, so more than half, was really on P&I because this is where we have seen in staffing, as you know, the demand continuing to be challenging. And we have done a few adjustments elsewhere, but I would say main focus was on P&I due to the level of demand we see. When I look at Q2 guidance, minus one to minus two versus where we have been in Q1, that should give you an idea of how we expect to trend in the near future until we have a better visibility on the demand, especially in some areas like P&I. So basically moving from 3.8% growth in SG&A in Q1 to turning negative, minus 1, minus 2, in Q2. And as you were mentioning, it is not that we do not continue to invest in education, where we need to continue to add more people. Although we leverage, but when you grow at 30 plus person, you need to add more people, right? So you need to think about the balance between the two, but clearly we are going to move from a three person plus growth in SG&A to minus one, minus two, as soon as basically Q2. And when you look at our exit rate in Q1, we are starting to turn into negative, meaning starting to overall reducing our SG&A despite of our necessary investment in education. And as I mentioned in my prepared remarks, also related to our investment in technology, especially around our digital transformation.

Okay. Thank you for taking the questions. I'll turn it over.

Thank you. Thanks, Kevin.

We'll now go to the line of Mitra Ramgopal with Sudhoti. Please go ahead.

Good morning. Good morning. Thanks for taking the questions. I just wanted to follow up again on the SG&A and the cost management actions you have taken. I know it's obviously meant to align with current growth opportunities, but trying to get a sense how much of that is going to be on a permanent basis or should we expect some of those costs come back as market conditions improve?

Yeah, on Q1, I would say the triggering event was really adjusting our resources to the level of demand we see now, right? Of course, if the demand is coming back, we may need to add some resources. But in a way, what we are thinking now is to make sure that we look at the current situation not only on a pure tactical basis, but also linked to the transformation Peter was referring to, and take advantage of this transformation initiative to really rethink the way we need to add resources when demand is going to pick up again. So it is likely that some of the savings that we have initiated in Q1 are going to become structural when they are going to be combined with these broader, more structural improvement initiatives that Peter was referring to.

Okay, that's great. I know you're always going to be investing in a business, and you've highlighted the education and technology initiatives. Just curious, how far along are you on that front in terms of your targets?

Are you speaking of the education segment?

And technology investments you're making, yes.

Yeah, so as you noted, it's a continuous investment because we have to maintain our competitive edge, our market-leading position in education, and we'll continue to look for ways to make our front lines more productive, whether it's through the introduction of technology technologies, AI, and other resources like that, or just the systems in which they operate. And that's something that we're focused on because education has such a considerable upside that the amount of attention and investment that education is going to get is more than other parts of our business that aren't growing as quickly and have less of an upside.

Okay. Thanks. And could you talk about the pricing environment right now and your ability to not only sustain but even expand margins with pricing?

Yeah, so the market continues to be competitive and we're We're evaluating our customers against the ideal price thresholds that we use. There is some slackening in demand, which makes the ability to raise prices a little bit more challenging. But we're continuously focused on that, as well as other commercial terms, including the payment terms, which as Olivier mentioned, we're very focused on DSO, making sure that we're making that a priority and it will be going forward.

If you think about one statistic I like to look at is our spread, right, for our time staffing business. In P&I, it's up by about 1.2% in Q1 set it's about 3.2 and we have seen that over time because that's a structural improvement that we have seen ranging from three to four percent every single quarter. Education is about flat which means there is a little bit of pricing pressure but I would say we are still flat meaning we are good at pushing you know wage inflation to our bill rate in education And again, in SET, we are really progressing, seeing this structural improvement in our value profile, and I think the spread is a good way to think about it. And again, in PNI, we see some progress as well. I mean, 1.2% in the current environment, I would qualify it as pretty good.

Okay, no, that's very helpful. And then finally... Obviously, the expectation is in the U.S., the second half, we should see improved market conditions. Just curious what you think on the international front for the second half and beyond.

Yeah, I mean, we have clearly seen some slowdown in international, and again, usually I would like to put on the side FX and Russia because it's creating a lot of disruption and misunderstanding. Things are slowing down. I mean, the I just said organic revenue growth in Q4 was about 5%. We are at minus 2%. But we continue to see very nice bright spots. I mean, Germany is still growing double digit. We see the same thing in Portugal, Mexico as well, and a few other countries. But there are some countries like France and Switzerland where there are clear headwinds. Difficult to know how things are going to move. What I can tell you, is when you look at our PERM placement, we are only at minus two in Europe, like for like, which is the best we have, even if you compare with P&I and SET, with the exception of education, that is plus 21%. So it's still a market where there is supply or talent shortage. There's the fact that the fee business is pretty resilient. On the time side, difficult to know. I think it seems to be stabilizing at the level I was referring to. Difficult to know how H2 is going to look like. But I think some bright spots like Germany, Mexico, and others look pretty much resilient to the current economic environment.

OK. No, that's great. And that's it for me. Thanks for taking the questions.

All right. Thank you.

And with that, we have exhausted all questions in queue. Please continue.

John, I think there's no other questions. We're good to conclude the call.

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