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spk00: Good morning and welcome to Kelly Services' third quarter earnings conference call. All parties will be on a 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. A 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.
spk06: Thank you, Keeley. Hello, everyone, and welcome to Kelly's third quarter conference call. Before we begin, I'll walk you through our Safe Harbor language, which can be found in our presentation materials. 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 these suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings 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. Finally, the slide deck that we're using on today's call is available on our website. We have a lot to cover today, so let's get started. Before we turn to Kelly's third quarter results, I'd like to cover our recent announcement regarding another transformative and bold step in our specialty growth journey. On November 2nd, Kelly entered into a definitive agreement to sell our European staffing business to GI Group for €100 million, with €30 million of additional earn-out potential. Under the terms of the agreement, we'll transfer the European staffing business within Kelly's international operating segment to GI Group, while retaining our MSP, RPO, and FSP business with customers in the EMEA region. We expect the transaction to close in the first quarter of 2024, after which Kelly will maintain its global footprint and continue to provide MSP and RPO solutions to customers in the EMEA region through Kelly OCG and our fast-growing FSP solutions through Kelly Set. This transaction will unlock significant capital to pursue organic and inorganic investments in our chosen specialties. Furthermore, it sharpens our focus on our higher margin, higher growth MSP and RPO solutions globally and specialty outcome-based and staffing services in North America. Together, we expect these outcomes will accelerate our transformation efforts to significantly improve Kelly's net margin. I'm joined today by Olivier Giraud, our Chief Financial Officer, who will share more details about our expectations later in the call. Turning to the third quarter, we continued to make progress on the business transformation initiative we launched earlier this year. Following the implementation of strategic restructuring activities at the outset of the quarter, we remained laser-focused on sustaining these structural improvements across the enterprise. Our continued emphasis on organizational efficiency and effectiveness throughout the quarter resulted in a 9.1% decrease in SG&A on an adjusted basis. a substantial year-over-year improvement. With the efficiency phase of our transformation on track and delivering results, our expectation of an adjusted EBITDA margin around 3% exiting 2023 is within sight. As we shared in August, our expectation assumed no change to the market conditions we faced in the second quarter. In fact, macroeconomic headwinds in the third quarter proved to be more pronounced than anticipated. Amid a more challenging operating environment, we remain focused on what we can control, achieving significant improvements on an adjusted basis to EBITDA margin and earnings. As market conditions begin to improve, we're confident that the structural changes we've made across the enterprise will continue to deliver significant improvement to Kelly's bottom line. Notwithstanding persistent headwinds, we're keeping our sights trained on the horizon. As I shared with you in August, we've undertaken several strategic initiatives that are positioning Kelly to accelerate profitable growth over the long term. We've made progress since then, which I'm pleased to share with you today. At the enterprise level, we've developed a comprehensive strategy to deliver the full suite of Kelly offerings to our largest enterprise customers. This strategy is transforming the culture, capabilities, and technology across our segments to serve critical accounts more efficiently and effectively. We've begun to operationalize this approach within our large enterprise account teams, and I'm pleased by the way they have embraced the change. By successfully implementing this strategy, we'll accelerate our progress on increasing our share of wallet, improving our business mix, and optimizing expenses over a large subset of our business. In our professional and industrial segment, we're enhancing service delivery to industrial and commercial staffing customers and building our new business pipeline by enhancing our localized delivery model. At the heart of this model is a network of branch locations enabled by new technology through which our teams are meeting customers and talent closer to where they are. Our approach is designed to yield several benefits, accelerated responsiveness to customer and talent needs, deeper insights into local market dynamics, and greater collaboration, empowerment, and accountability among branch team members. In the third quarter, we completed a successful pilot of this delivery model in branches in select markets across the U.S. The outcome validated our assumptions. Our pilot markets delivered both top and bottom line improvements, along with a healthy pipeline of new business opportunities. Feedback from customers and talent was positive as well. Based on this success, we're moving swiftly to implement this strategy in additional U.S. markets, and early results continue to be encouraging. We're also aligning our capital allocation priorities to support our growth ambitions. In the third quarter, we completed our $50 million share repurchase program, which returned considerable value to our shareholders. While we're pleased with the outcome, we're confident that the best way to create value in the current environment is by reinvesting in our business. We continue to have ample capital available to deploy toward organic and inorganic growth initiatives with improved free cash flow driven by the efficiency phase of our transformation further strengthening our position. And as I mentioned previously, the sale of our European staffing business will add more than 100 million euro of liquidity when the transaction closes in the first quarter of 2024. As such, we're continuing our efforts to identify high-margin, high-growth inorganic opportunities. We remain focused on pursuing additional acquisitions in our SET and education segments, and more opportunistically, OCG. With a strong balance sheet, a disciplined approach to evaluating opportunities, and clear board-approved inorganic priority, Kelly is positioned to pursue deals notwithstanding the macroeconomic environment. We're also investing in technology, having developed a comprehensive roadmap to transform our business processes, tools, data, and the way technology is delivered to our people. Our vision is to leverage technology to both enable growth by improving efficiency and generate growth through innovative offerings that create value for customers and talent. With our roadmap focused on maximizing business impact at each step, We're committed to a disciplined approach to evolving our technology infrastructure, prioritizing opportunities through which there is greater potential for Kelly to differentiate itself in the market. I look forward to sharing more about our expectations for growth in 2024 on our fourth quarter earnings call in February. With that, I'll turn the call over to Olivier to provide details on our financial results for the third quarter.
spk01: Thank you, Peter, and good morning, everybody. For the third quarter of 2023, revenue total $1.1 billion, down 4.3% from the prior year, including 150 basis points of favorable currency impact. So revenues for the quarter were down 5.8% in concerned currency. As we look at third quarter revenue by segment, our education segment continues to report significant year-over-year growth, up 23%. due to our improved feed rate, strong demand from existing customers, and net new customer wins. Overall, continued double-digit revenue growth demonstrates that our education business, including our market-leading pre-K-12 and PTS therapy solutions, is a significant growth engine, even as broader staffing market trends remain challenging. In the set segment, revenue was down by 8%. During the third quarter, we saw a continuation of the deceleration of demand for our staffing specialties, as well as lower revenue trends in our outcome-based business. Permanent placement fees were also impacted by a continued deceleration in market demand and declined 39%. In our OCG segment, year-over-year revenue declined 4% on a reported and constant currency basis. Year-over-year declines in RPO continued as slower hiring in certain markets. Sectors have had a disproportionate impact. MSP revenue declined year-over-year in the quarter but was flat sequentially, and PPO year-over-year revenues improved. Revenue in our professional and entrepreneurial segments declined 11% year-over-year in the quarter. Revenue from our staffing products declined by 15%, reflecting the impact of economic headwinds which are more noticeable in this segment. The segment's outcome-based business revenue grew by 3% year-over-year, which is a moderation of the trend we have seen in the past few quarters. Excluding our contract center specialty, where demand for certain customers has decelerated, the segment's other outcome-based revenues have continued to grow at a double-digit pace. Placement fees in P&I declined 50%, and continue to be impacted by lower demand for full-time hiring. Revenue in our international segment increased 2% on a nominal currency basis and was down 6% on a constant currency basis. Performance varied depending on geography and product. For the quarter, we had good constant currency revenue growth in Mexico and Portugal, but that was more than offset by revenue declines in Switzerland, France, and Italy, as well as the impact of the sale of our Russian operations, which was completed in July of 2022. And the national placement fees were consistent with last year on the constant currency basis. Overall growth profit was down 5.1% on a reported basis of 6.3% in constant currency. Our growth profit rate was 20.4% compared to 20.6% in the third quarter of last year. a decrease of 20 basis points. The primary driver was 40 basis points of unfavorable impact from lower perm fees and 20 basis points of higher employee-related costs. These impacts were partially offset by 40 basis points of continued improvement in structural business mix. SG&A expenses were down 1.2% year-over-year on the reported base. Expenses for the third quarter of 2023 include 15.4 million of charges related to our ongoing transformation efforts. So on an adjusted constant currency basis, expenses declined by 9.1% or 21 million in the quarter. The reduction reflects the positive impacts of our transformation efforts which are designed to reduce costs on a structural basis, as well as lower performance-based incentive compensation. For the third quarter, on a reported basis, we produced break-even earnings from operations. This compares to a loss of $21.4 million in the third quarter of 2022. As noted, our 2023 Q3 results include the $15.4 million of charges related to our transformation activities. So adjusted earnings for operations in Q3 of 2023 were 15.5 million. Our 2022 Q3 loss includes a 30.7 million goodwill impairment charge, resulting in adjusted earnings for operation in Q3 of 2022 of 9.5 billion. So on the like-for-like basis, Q3 2023 earnings for operations increased by 60%. Adjusted EBITDA margin for the quarter also improved at 2.3% compared to 1.6% a year ago, a 70 basis point improvement. Income tax benefit for the third quarter was $4.9 million, consistent with our 2022 income tax benefit of $5 million. And finally, reported earnings per share for the third quarter of 2023 was 18 cents per share, compared to a loss per share of 43 cents in 2022. Adjusted EPS for the third quarter of 2023, excluding the transformation-related charges net of tax, was 50 cents. And after adjusting for the 2022 goodwill impairment charge net of tax, Q3 2022 EPS was 25 cents. So on a lag-for-lag basis, EPS in Q3 of 2023 doubled from the prior year. Now moving to the balance sheet as of the end of Q3. At the end of Q3, cash total $117 million compared to $154 million at the end of 2022. And we ended the third 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, as well as the outcome of our EMEA transaction, we continue to have ample capital available to deploy in the near future. As of the end of Q3, accounts receivable was $1.4 billion and decreased 9% year-over-year, reflecting a year-over-year decrease in revenue as well as a decrease in DSO. Global DSO was 63 days, up to days from year end 2022, due primarily to the impact of seasonality in our education business. DSO is one day lower than the same period in 2022. For the third quarter of 2023, we generated $7 million of free cash flow, and year-to-date free cash flow now totals $21 million. For the quarter, we have continued to maintain lower accounts receivable balances in line with our revenue trends, and the ESO improvement. A portion of those receivables are related to our MSP programs and are funded with supplier payables. So the lower net position has a limited impact on free cash flow generation. In the quarter, we completed the 50 million shares repurchase program that we announced in November of last year, buying approximately 3 million shares during the program. Now I will move on to our expectation for the rest of 2023. We assume a continuation of the current market conditions, which, as Peter noted, are more challenging than we had anticipated a quarter ago. We now expect fourth quarter nominal revenue to be down 50 to 150 basis points year-over-year. We expect our Q4 GP rate will be down 50 basis points year-over-year to about 19.8%, as continued softness in demand for full-time hiring compresses permanent placement fees. The lower Q4 GP rate also reflects a normal sequential trend due to the seasonality of our education business and continuation of the structural business mix improvement that is expected to keep our full-year GP rate above 20%. We expect fourth quarter adjusted SG&A to be about 9% lower than the same period last year, consistent with Q3, and better than our expectations that we shared a quarter ago. We reacted to the more challenging top-line trends and accelerated our transformation efficiency actions. As a result, we expect adjusted EBDA margin in the fourth quarter to be between 2.8% to 3%, reflecting the more challenging market conditions. For additional perspective, with the benefit of full year of expected transformation-related saving, the impact of the sale of our European staffing business, and our current top-line expectations, we would expect to reach a normalized adjusted EBDA margin in the range of 3.3% to 3.5% as discussed three months ago. That is more than 100 basis points of improvement from our historical levels of adjusted EBDA margin, all since we began the transformation journey earlier this year. And now I'll turn it back over to Peter for additional comments.
spk06: Thanks for those insights, Olivier. Change at this scale and speed is never easy, but together, Team Kelly is proving that it is achievable. When I announced this transformation in May, I committed to you that we would optimize our business and functional operations in a sustainable manner, that we would unlock additional value-creating opportunities, and most importantly, that we would find new avenues of growth. Six months into our journey, I can confidently say that we are delivering on our commitments. The measures we implemented in July to further optimize the company's operating model have taken root, catalyzing a significant improvement in our EBITDA margin with additional runway ahead. We've further strengthened our balance sheet, and with significant capital available to us, recommitted to unlocking value through organic and inorganic growth. And through our large enterprise account strategy, We formulated a comprehensive approach to sales and delivery across business segments that will unleash the full revenue generating potential of our blue chip customer base and accelerate profitable growth over the long term. Through these efforts, we're closer than ever to realizing our collective ambitions for this great company. I'm grateful for the work of each and every member of Team Kelly for embracing this moment and acting with urgency and agility to deliver on our commitments. With our team moving forward together, united by our noble purpose, I'm confident that Kelly's best days are ahead of it. Kaylee, you can now open the call to questions.
spk00: Thank you. And ladies and gentlemen, if you'd like to ask a question, please press 1, then 0 on your touch-tone phone. You will hear an acknowledgment that you've been placed into queue, and you can remove yourself from queue at any time by repeating the 1-0 command. If you're on a speakerphone, please pick up your handset before pressing the numbers. Once again, for questions, please press 1 and then 0 at this time. We'll go to the line of Kevin Stanky with Barrington Research.
spk06: Good morning, Kevin. Good morning, Kevin. Good morning.
spk04: I wanted to start off by asking about the growth initiatives that are part of the transformation You mentioned driving early results or favorable early results. I think you touched on the local branch initiative. I guess is that part of the transformation and maybe any others that you'd want to highlight?
spk06: Yeah, Kevin, thanks for the question. Yes, that is a significant part of the transformation, as I mentioned. We are revitalizing and reengaging our local branch network, adding resources to local markets, the high-growth local markets, adding new technology, and essentially creating our resources or putting our resources closer to the talent and customers as opposed to... supporting them in a more centralized manner. And we've seen successful results in the pilot markets, and that's why we're moving quickly and aggressively to roll it out in more U.S. markets as we speak.
spk04: Okay, yeah, I was going to ask about that, if this signals, you know, a de-emphasis of the centralized staffing model or, you know, how meaningful that will continue to be going forward?
spk06: We will continue to deliver large enterprise customers through a centralized model where it makes sense. In markets where they have very large locations, a single location or a few locations, but where large enterprise customers have distributed products facilities, we found that the local delivery is more efficient and effective, and we have a higher customer and talent satisfaction. So we're going to optimize both models, and we will continue to look for ways to do that and expect to see the significant benefits when the macroeconomic conditions improve.
spk04: Okay, great. Can you touch also on the macro headwinds? I guess they were more pronounced in the third quarter. Maybe what you've seen in the environment and what maybe kind of changed since you reported second quarter results.
spk06: Well, we typically, as you know, Kevin, in our industry, typically see... an improvement in Q3 and then in Q4 in terms of demand. And that just hasn't materialized this year. I don't think there's a significant change. It's just a continuation of customers being more cautious. They're uncertain about their own economic outlook. So they're taking longer to make decisions. They're dialing back on permanent hiring. and being very judicious about how they spend their dollars. So, again, we don't expect any significant change relative to what we've seen in the last few months.
spk04: Okay. I want to dive down into a couple of the segments here. Really, when I look at education, the operating leverage you're getting there on SG&A has been impressive in terms of improving operating margin over time. It doesn't look like you really took cost out there related to the transformation, but maybe just speak to the operating leverage you've been seeing there and the opportunity for further leverage going forward in education.
spk06: Yeah, thanks, Kevin. I'll turn it over to Olivia to provide some details. But, you know, we're very pleased with the impressive growth we've seen in education, not only with existing accounts and customers, but with new school districts that we're winning. A pipeline looks strong. The fact is that our business is growing exponentially at a pace that we need more people to support the school districts, the new wins and standing up some of these big programs. But the education business unit did participate in the transformation review and analysis and in fact created a number of, took a number of optimizing steps that will continue to in order to benefit of their overall results.
spk01: Yeah, we continue to see the top line growing despite of a growing base. We had 22, 23% growth in revenue in Q3. On the leverage, I would say, yeah, I mean, we continue to leverage. And one of the key KPIs we use is incremental conversion rate. It's still very, very good. We expect that to continue. in the near future. And on the transformation, I agree with Peter. It's a high-growth business. We have done some transformation initiatives, but it was more streamlining, simplifying the structure, and continue to invest in growth in our people because of the top line that is continuing to grow at a very fast pace.
spk04: Okay, great. Thank you. I also wanted to ask about the OCG segments, that continues to generate strong gross margins, about 36%. Although the SG&A expenses is a percent of revenue, kind of in the low 30s, and that's always been meaningfully higher as a percent of revenue than some of the other segments. It looked like you took a small... charge there, transformation-related charge in the quarter, but can you just refresh me on just the SG&A expense base there, and is there opportunity to get that lower over time and really get more profitability out of that high gross margin, those gross profit dollars than you currently are?
spk01: Yeah, definitely, yes. I mean, in terms of the efficiency side of our transformation, you are going to see it in a more visible way in OCG and Q4. And that's going to continue in the near future in terms of optimizing our delivery model in various locations and various products. So that's something that is... more a timing point than anything else. You're going to see more of that in Q4 and later on. Now, having said that, it's a high margin business, especially around RPO and MSP. Of course, the cost to deliver, especially MSP, is also the cost of our footprint outside of the U.S., but we are still confident that we can continue to leverage this business in the future. Our pipeline is very good in OCG as it is in most of our segments, and I believe we are going to start to see some additional traction in the next coming months on the top line as well.
spk04: Okay, great. That's good color. Just lastly, just from a reporting perspective going forward, once the – say all the European staffing business is closed, does the international segment just completely go away? I know you still have Mexico in there, just wondering what happens there.
spk01: Yeah, if you think about it, basically, if you want to look at some of the numbers and figure out a little bit the scope of what we are selling to GI, It's basically the total international segment excluding Mexico. Just to give you an idea on revenue, if you extrapolate our international business, the revenue is at about $880 million. I would say Mexico is around $70 million. You can see that on our 8K. So what basically we are transferring to GI or selling to GI is about 810 to 820 million of revenue. The Mexican business basically is going to move to P&I, so the international segment will no longer exist. We'll have four business units. So the big change is going to be P&I is going to include Mexico because that's where it is best seated for the future in terms of synergies and continue to accelerate growth. Our Mexican business now is very successful. We grow at a very fast pace, and we expect that to continue.
spk04: Okay, perfect. Thank you. I'll turn it back over. Appreciate the answer. Thank you, Kevin.
spk00: Thank you. We'll go next to the line of Kartik Mehta with North Coast Research.
spk06: Morning, Kartik. Good morning.
spk00: Mr. Mehta, your line is open.
spk02: Can you hear me? Yeah, now we can. Morning. Sorry about that. No, congratulations on the sale of the European business. And I'm wondering, as you look to deploy that money, are there opportunities in the marketplace which would enhance maybe the revenue growth, the margin profile of the company, and is the pricing at the current time something that makes sense, or is it something that you would wait on considering what's available out there?
spk06: Cardick, as I said in my comments, we're unlocking significant capital with the deal that we've signed with the GI Group, in addition to our very strong balance sheet. We think there are opportunities to enhance our portfolio, high margin, high growth businesses, and we're aggressively seeking to identify those properties. The market right now is the pipeline for properties is less robust than it has been, say, 18 months ago. But we expect that to turn around as greater visibility into the future economic conditions and companies come off the sidelines. But there are still quality properties that are – interested in a combination or a sale to a company like Kelly, and we're actively pursuing those to, as I said, to add to our portfolio, particularly in our science, engineering, and technology and telecom business, as well as education and opportunistically in OCG.
spk02: And then as you look at the trends throughout the quarter and into October, Any changes? Are they getting better or worse, the same?
spk01: I would say when you look at our September exit rate, we are in concerned currency basically at minus 2.4, which is basically the midpoint of our guidance. If you move it from nominal currency to a concerned currency, we expect about 140 basis points of favorable effects. So this is where we have ended the quarter. One other point to consider, of course, for September, but also Q4, is basically the education seasonality that we have started to see again in September that is going to continue to get us some good traction on the top line. Apart from that, when you really look at without education or excluding education, We have not seen a lot of changes between total Q3 revenue-wise by segment versus September exit rate. We have not seen, of course, improvement either, but not really something that will tell us that the trends are going to be significantly different in Q4. Item is, of course, for Q4, high seasonality in education. That, of course, with the same type of growth we have seen so far, would contribute more dollar-wise to the total revenue of Philly simply because of the fact that Q4 is high seasonality for education.
spk02: And then just one last question. Have you seen any change in competitive behavior, pricing or anything as the market continues to struggle a little bit?
spk06: Well, we always see certain competitors that respond to a challenging macroeconomic environment by adjusting their pricing. We continue to maintain our price discipline and sell the value of working with Kelly, and we will continue to do so. We haven't seen, I would say, wide-scale changes among the The largest players typically is smaller regional players that will try to compensate for slower demand by taking a price decrease for a period of time. So we haven't seen it on a wide-scale basis. Thank you very much.
spk02: I really appreciate it.
spk06: Thank you.
spk02: Thank you.
spk00: Thank you. We'll go next to the line of Joe Gomez with Noble Capital Markets.
spk06: Morning, Joe. Good morning.
spk05: Good morning, guys. This is actually Joshua's old fulfillment for Joe. Oh, okay. Morning. So I just kind of wanted to get a quick start on looking at your segments here. Everything seems to be kind of neutral. Sorry, it's hard to see a little bit down. I just kind of want to get a a basis on like what was going on in the quarter that led to that?
spk06: Well, yeah, the big, big, uh, uh, outlier is obviously education, uh, which we've discussed. Um, the, the challenging macroeconomic conditions, uh, because of our being in a cyclical business were, um, impacted by that as, as, um, customers, uh, reduce their permanent hiring, which shows up in the significant drop in, in, um, our fee-based business. As I mentioned earlier, customers are cautious about the outlook or their own outlook, and so they're taking longer to make decisions. They're not adding shifts. They're just sort of maintaining their operations, and that's what we're seeing in the results. We haven't, as Olivier mentioned and I mentioned, we haven't seen any significant change and don't see on the horizon any significant change and would expect that we will continue to pursue our growth initiatives to take share in this environment. And as I mentioned during my comments, we're encouraged by the early indications of some of the initiatives that we've started whether it's at the enterprise account level or within our P&I business segment. But we have initiatives underway in all of our business units to capture share during this relatively sluggish period of demand.
spk05: Okay, great. And it's obviously kind of shifting to the international staffing. So it's kind of, I know, You touched on it a little bit briefly, but how does that sale really kind of impact Kelly in terms of revenue in the beta? What should we expect in 2024? Does any kind of additional color on that would be helpful?
spk01: So you mean just to clarify the impact on the pro forma basis of basically getting international, with the exception of Mexico, being monetized?
spk05: Yes, that's right.
spk01: Yeah, if you take the transaction and the perimeter of this transaction and you apply it to 2023 to get a sort of pro forma and you think about the impact, yes, there are going to be a visible impact on revenue. As I said a few minutes ago, that's going to reduce our revenue base by about $820 million. Now, thinking about that, it's going to improve our mid- to long-term growth potential on the top line. It's going to reduce our FX exposure, because most of it is coming from this international business. It's going to improve our growth margin rate by about 100 basis points, simply because the international business is doing a good job. market reason, their GP rate is lower than the average, so it should lead us to get a 100 base point growth margin improvement. And on the pure ABDA margin, as Peter and myself did share during our preferred remarks, if you just look at the current year and you exclude the perimeter of this EMEA staffing transaction, basically it has an impact, a positive impact on our net margin by about 30 basis points. And it would just add also an impact on DSO. Historically, and it's not just Europe, DSO are usually on average higher than in North America, so it should create a benefit of about two days of DSO, so improving our working capital and free cash flow generation.
spk05: Okay, great. And then just the last one from me, we'll get back into queue, is that I didn't hear much about the kind of the digital workers program you guys put out earlier in the year. I kind of want to just kind of get a handle on that. Are you guys getting any additional interest since you last spoke about it? How has the pipeline been looking for that program?
spk06: We're very encouraged by the, I would call it the digital innovation and ability that we've demonstrated to bring technology and incorporate it in solutions to our customers. I mentioned we have technology we're deploying in our professional industrial segment in the optimized local delivery. Kelly Helix continue, which is in our OCG segment, continues to develop new tools and expanded solutions. The digital worker automation product that we launched earlier continues. A lot of customers are asking about it and trying to figure out how to capitalize on that. We announced a Kelly Arc, which is a robotic process automation jobs platform in the quarter. So all of these are the culmination of a very intentional strategy to deploy technology, including generative AI, both in our processes, but also in solutions that benefit our customers and also the talent that we place.
spk05: Okay, great, guys. Thanks for asking that question.
spk06: Thanks, Josh.
spk00: Thank you. We'll go next to the line of Mark Riddick with Sedoti.
spk06: Morning, Mark. Morning.
spk03: So it's certainly been a busy year for you. I wanted to just sort of touch a little bit on the growth initiatives and maybe what we're thinking about from a standpoint of sort of the rollout and implementation and timeframe. And then also as those were developed and if you could talk a little bit about maybe sort of incremental investments needed either in personnel, technology spend, or the like that we should be thinking about and whether there's any lumpiness to that or any concentration in that.
spk06: Yeah, so the transformation initiative that I announced in May, as I indicated then, really had two components, one efficiency and the second growth. And just by way of the speed to execution, we focused on our efficiency objectives and now are in full swing focused on the growth initiatives. And there are initiatives, as I mentioned earlier, in each of our business segments. There are initiatives in our enterprise function to try to enable our business units to focus on growth. And then there are initiatives at the enterprise level, all of which are at you know, different stages. And we're mindful of needing to sequence our investments consistent not only with our top line results, but also with ensuring that we have a sort of consistent spending and don't overburden the enterprise in any particular way. But most of these initiatives are going to occur because of some of the efficiency initiatives that we took with reducing spans and layers, putting more resources on the front line, enabled by technology. So I don't expect there to be any significant – I think you used the word lumpiness – in terms of our investments in either technology or resources with the possible exception of, and it's not necessarily lumpy because we have the top line to support the growth in education.
spk03: Okay, great. And then I was wondering if you could, you touched on this a little bit. I just wanted to follow up on the potential acquisition pipeline and congratulations on the on the sale in Europe, and so with the cash flow you're going to be able to work with. I was wondering if you could talk a little bit about maybe just – I understand that maybe the pipeline is not as good, I guess. Maybe I think your words were that it wasn't as attractive as maybe it was 18 months ago or so. Are there any particular pockets that you think can improve or target areas that you think that you kind of have an eye on that have the opportunity to improve over the next few months? And is it really more of a pricing issue or just availability of some attractive targets?
spk06: Thank you. I would say on a reactive basis, so companies that are bringing themselves to market, it's still a little bit tepid. I mean, we see a lot of the quantity is there, but the quality isn't there. And we're not going to, we're not going to chase, you know, properties unless they are high growth, high margin quality, and that would be a good fit for Kelly. But about, you know, three years ago, when we set up our operating model, we recognized that we needed to be more proactive in generating a pipeline of acquisition targets, and we've been at work doing that. And that's the areas that we're focused on are in technology and education and set in general, so science, engineering, technology, and telecom, and opportunistically in OCG. So we continue to plan on deploying our capital in which we have now added to or will be adding to in those areas, and we think that's going to accelerate the growth and net margin improvement that we have on an organic basis.
spk03: I appreciate it. Thank you very much.
spk06: Okay, thanks.
spk00: Thank you. Once again, for questions, please press 1 and then 0 at this time. And presenters, there are no further questions in queue at this time.
spk06: Okay, Keely. Thanks. I think we can call it a day then. Thank you. Thank you.
spk00: Thank you. And ladies and gentlemen, this conference is available for replay beginning at 1130 Eastern Time today, running through December 7th at midnight. You may access the AT&T replay system by dialing 866-207-1041 and entering the access code of 702- 7637. International participants may dial 402-970-0847. Those numbers again are 866-207-1041 or 402-970-0847 with the access code of 702-7637. That does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.
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