Kelly Services, Inc.

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's services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Scott Thomas, Kelly's head of indesolations. Please go ahead.

Thank you, Liv. Good morning and welcome to Kelly's fourth quarter and full year conference call. With me today are Kelly's president and chief executive officer, Peter Quigley, and our chief financial officer, Troy Anderson. Before we begin, I'll remind you that the comments made during today's call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any 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, we'll discuss certain data on a reported and on an adjusted basis. Discussion of items on an adjusted basis are non-GAP financial measures designed to give insight into certain trends in our operations. For more information regarding non-GAP measures and other required disclosures, please refer to our earnings press release presentation and once filed, Form 10-K, all of which can be accessed through our investor relations website at .kellyservices.com. I will now turn the call over to Kelly's president and chief executive officer, Peter Quigley.

Thank you, Scott, and good morning, everyone. Before I share my reflections on our fourth quarter and full year performance, I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After 22 years with Kelly, I intend to retire as president and CEO by the end of this year. The board has initiated a process to identify my successor, engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates. I plan to continue serving in my current role until the board of directors appoints Kelly's next CEO and we can facilitate a smooth transition. Over the past few years, we have made meaningful strides on our specialty growth journey, and Kelly is well positioned to realize the value creation opportunities that lie ahead. I'm proud of the progress we have made, and I look forward to concluding my tenure with a strong 2025 defined by continued growth and strategic evolution. With new leadership and as market conditions improve, the board and I are confident that Kelly will reach new heights and create even more value for our clients, talent, employees, and shareholders. With that, let's review the highlights from our performance in the fourth quarter and full year. In the fourth quarter, Kelly delivered both top and bottom line growth on a year over year basis, increasing organic revenue by more than 4%, and adjusted EBITDA by 34%. This reflects strong profitability for the quarter as we delivered 110 basis points of margin expansion through targeted organic and inorganic initiatives. Total company performance exceeded the outlook we provided in November and continued to outpace the market. At the segment level, education delivered another quarter of double-digit revenue growth and accelerated the expansion of our higher margin therapy business through the acquisition of Children's Therapy Center. In set, the revenue deceleration we experienced early in Q3 subsided in Q4, and we captured growing demand for our life sciences specialty and our higher margin statement works solutions. Both OCG and P&I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share. Our positive performance in the fourth quarter bookended a year of significant strategic progress. Last February, I said that 2024 would be an inflection point in Kelly's journey, by capturing a greater share of customer demand and by more effectively converting top line growth to bottom line profitability. Today, I'm pleased to say that we delivered on our commitments and are poised to continue doing so in 2025. We continued to accelerate profitable growth, delivering positive organic revenue growth on a year over year basis and outperforming the market across our specialties. We remained laser focused on improving profitability as well, delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full year EBITDA margin to .3% on an adjusted basis. This represents a significant increase over our recent historical average of approximately 2%. We unlocked additional value creating opportunities and further streamlined Kelly's operating model, completing the sale of our European staffing business for more than $100 million. We also completed the sale of Ayres Group in June, enabling OCG to sharpen its focus on global RPO and MSP solutions. Finally, we redeployed capital in pursuit of inorganic investments in higher margin, higher growth specialties with the transformational acquisition of motion recruitment partners. The addition of MRP has strengthened the scale and capabilities of our staffing, consulting and RPO solutions in attractive customer end markets. We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in-demand specialties in which Kelly is well positioned to compete and win. I'll share more later on how we'll leverage our momentum to propel us forward on the next leg of our specialty journey. First, I'll turn it over to Troy Anderson, who will lead the financial discussion on the call today, having completed a successful transition with the Libby AT Row in December into the role of Chief Financial Officer. Troy, over to you for more details on our results in the fourth quarter and full year. Troy Anderson Thank you, Peter,

and good morning, everybody. Before I get into the results, I want to thank the Kelly team for such a warm welcome during my first quarter with the company. It's been a pleasure diving into the business and seeing this team's dedication and commitment. I'm incredibly excited to execute on the opportunities in front of us to drive more value for our shareholders, customers, talent, and employees in 2025. As Peter said, we're pleased with our strong fourth quarter and full year results and encouraged by the momentum we're building across our segments. As a reminder, for comparison, our reported results for 2023 included the European staffing business that was sold on January 2nd, 2024, and for 2024 include motion recruitment partners since the May 31st acquisition date. To provide greater visibility into the underlying trends in our operating results, I'll discuss year over year changes on a reported and on an organic basis with the organic information excluding these items. Revenue for the fourth quarter of 2024 totaled $1.19 billion, a decrease of .3% versus Q4 last year. On an organic basis, year over year revenue was up 4.4%. This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook. In the quarter, staffing revenue trended up positively and we saw moderating declines in perm fees which have a higher gross margin rate. Our outcome based offerings, which on an organic basis is just over a third of our revenue in P&I and SET, and an even greater portion of gross profit also trended up positively. Drilling down into revenue results by segment, I'll start with education, which was up 12% year over year in the quarter, continuing its trend of double digit revenue growth. The growth in the quarter reflects ongoing fill rate improvement and higher bill rates in our existing business as well as net new customer wins. In the SET segment, revenue was up 38% on a reported basis driven by the acquisition of MRP. SET organic revenue was down 4% which was an improvement versus the prior quarter and outperformed the market despite the continued challenging environment. SET's organic revenue decline for the quarter reflects lower staffing market demand with revenue down 5% across the staffing specialties, consistent with the third quarter decline, and down 2% in the outcome based solutions, which improved relative to the quarter and was down overall primarily due to lower demand in certain industry verticals such as telecom. We continue to see the outcome based business, including our statement works suite of solutions, as a growing portion of the market where we are driving our focus and continuing to innovate. In the OCG segment, revenue grew by 9% driven by continued strong performance in the year. Year over year declines in RPO and MSP reflect reduced hiring and labor demand with our customers. Adding lower margin PPO revenue pressured gross in that margin for the OCG segment as a whole again this quarter. Going forward, OCG is well positioned to drive revenue growth in both the MSP and RPO offerings which have measurably higher gross margins as recent wins are implemented during the year and momentum in the sales pipeline is realized later in the year. Revenue in the professional and industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends. Revenue from staffing improved .7% year over year and reflects the success of our omnichannel strategy. Revenue in the outcome based specialties was up .9% driven by strong demand in semiconductors, logistics, manufacturing, and distribution. Consistent with SET, TNI is seeing stronger demand for its innovative portfolio of outcome based solutions that meet clients' talent needs across a variety of skill sets. Reported gross profit was 241.5 million, reflecting a gross profit rate of 20.3%, an improvement of 100 basis points compared to the prior year quarter. On an organic basis, the GP rate declined 80 basis points in the quarter, with 70 basis points from business mix and 10 basis points from lower permittees. The business mix impact showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates. During the quarter, we saw GP rate improvement in SET as a result of the MRP acquisition, modest declines in education and P&I, and a more significant decrease in OCG, reflecting the growth in PPO in the quarter. We continued improving our SG&A expense profile in the quarter, with reported SG&A expenses of 217.4 million, down 6% year over year. On an adjusted organic basis, SG&A expense declined 4%. This decrease reflects our focused efforts to improve productivity and better align resource levels with volumes, as well as the impact of performance related incentive compensation expenses. You'll note in our financials that we had some impairment activity during the quarter. As a result of positive subleasing activity for unused floors in our leased headquarters facility, we recognized an $8 million non-cash impairment charge for certain right of use assets related to the facility. Additionally, we recognized a 72.8 million non-cash goodwill impairment charge related to the soft world acquisition that we completed in 2021. While soft world delivered revenue growth in 2024, measurably outperforming the market, its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year. We firmly believe that soft world's specialty IT staffing, statement of work, and its outcome-based clinical science offerings are well positioned to generate additional value as demand improves. Peter will provide more insight shortly into how we plan to accelerate that value capture in 2025 as we further integrate MRP with SET's portfolio of specialty businesses, including soft world. Reported loss per share for the fourth quarter was 90 cents compared to earnings per share of 31 cents in Q4 2023. On an adjusted basis, earnings per share was 82 cents compared to 93 cents in the prior year quarter. The decline versus the prior year reflects increased net interest in the expense of 12 cents following the MRP acquisition in a one-time deferred income tax valuation allowance for lease benefit in 2023 of 25 cents. Adjusted EBITDA was 43.5 million, an increase of 34% versus the prior year period. While adjusted EBITDA margin improved 110 basis points to 3.7%, beating our expectations for both measures. The 110 basis points of margin expansion includes a 50 basis point organic improvement. All four segments improve their organic adjusted EBITDA margin in the quarter versus last year. Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years. Before we look ahead, I'll reflect briefly on our full year results. Revenue was 4.3 billion, down 10.4%. However, organic revenue grew .5% for the year, reflecting solid execution and market share gains amid persistent market headwinds and overall double-digit market declines according to major industry analysts. Our 2024 GP rate improved 50 basis points. On an organic basis, our GP rate declined 110 basis points due to business mix and lower permities. We reported a loss from operations of 15.1 million the full year, primarily due to 86.3 million of non-cash impairment charges. Adjusted EBITDA was 143.5 million, up 31%, and our adjusted EBITDA margin improved 100 basis points to 3.3%. We had a reported loss per share of 2 cents and earnings per share of $2.34 on an adjusted basis, an increase of 14 cents. We ended the year with total available liquidity of 154 million. Comprising 39 million in cash and 115 million of available liquidity on our credit facilities. Total borrowing was 239 million at the end of the year, reflecting an adjusted EBITDA leverage ratio of 1.7. We'll continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns. Indicative of that, in the fourth quarter, we completed 10 million of our $50 million Class A share repurchase authorization leaving us with 31.6 million Class A shares outstanding at the end of the quarter. Our operating cash flow and available liquidity give us ample financial flexibility to fund our operations and capitalize on attractive organic and inorganic investment opportunities. For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we've experienced the past few quarters and expect to see modest improvements in market conditions as we progress through the year. Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth. We also expect to continue to expand our net margin and ultimately cash flow by efficiently converting more of our top-line growth to bottom-line profitability. Our initial outlook will be for the first half of the year where we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition with modest organic revenue growth. The MRP benefit will be slightly higher in Q1 than in Q2 given the May 31, 2024 acquisition date. The first half growth will largely be driven by the education segment although their -over-year quarterly growth rates won't be double digits like they were throughout 2024 as a result of their strong performance during the year. We expect the other segments to range from flat to showing a significant increase in the number of new market declines. Moving on to gross profit, overall we expect to see GP rate improvement of approximately 80 basis points in the first half of the year, reflecting the benefit of the MRP acquisition. We expect the organic GP rate to be roughly flat with Q1 down slightly. This is measurably improved relative to the 110 basis point organic decline for all of 2024. The improved GP rate performance reflects our expectation of overall mix improvement with outcome-based solutions and higher margin specialty offerings. Reflecting on SG&A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation-related actions over the past two years and will continue to actively manage resources in line with revenue trends in each segment. Total adjusted expenses will increase gradually in the first and second quarters relative to the fourth quarter of 2024 in conjunction with revenue and the normal payroll tax and performance incentive resets the beginning of the year. For depreciation and amortization all in, we expect approximately $13.5 million each quarter. Given all of the above, we expect adjusted EBITDA margin to improve roughly 10 basis points for the first half of the year to approximately 3.6%, with Q1 being slightly lower and Q2 higher. We expect our effective tax rate to be in the upper teens for the first half of 2025. And finally, we expect to increase our capex and software development spending in 2025 as a result of the MRP integration and our overall enterprise technology modernization plans. In closing, I want to thank our teens for the strong performance during the year and their dedication and commitment to the company overall, as well as our customers for giving us the opportunity to support them and for their continued partnership. With that, I'll turn the call back to Peter for his closing remarks.

Thanks for those insights, Troy. We move forward into 2025 propelled by positive momentum from our recent achievements and well positioned to accelerate profitable growth as staffing demand rebounds. Our priorities for the year are clear. First, we'll deliver top line growth by continuing to increase scale in our chosen specialties. To this end, we'll continue to execute our organic growth initiatives, including our omnichannel delivery strategy and P&I and our large enterprise account strategy, both of which we expect will continue to deliver gains and market share. In addition to these initiatives, our primary focus is the integration of MRP. Since completing the acquisition, we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business. At the core of the value case for this deal is the highly complementary nature of MRP's portfolio of businesses and our SET and OCG businesses, respectively. To maximize value creation, we're integrating each of its respective business lines within our SET and OCG segments. We'll combine motion recruitment, IT staffing, and consulting business with SET's technology specialty, which includes SoftWorld. This significantly increases the scale of our IT staffing and consulting business, propelling Kelly into the top 10 providers in the category. TG Federal will come together with SET's government specialty. This builds upon the life sciences and engineering workforce solutions we currently bring to our sector partners and adds a strong IT solutions capability. Motion recruitment's telecom staffing and SOW managed services business will integrate with SET's telecom specialty, enhancing our market leading staffing and solutions provider in the telecom market. Finally, we'll combine MRP's seven-step business with Kelly OCG's global RPO specialty. Differentiated by innovative technology, they'll create a leading talent solutions offering that will rank among the top five globally. Each of the combined business lines will be ready to go to market beginning in Q2, following the conclusion of the year now period included as part of the MRP transaction. Among the leaders we have designated for each of the combined businesses are members of the experienced management bench at MRP. By leveraging the unique strengths of each business, we're creating a clear pathway toward achieving revenue and cost synergies. We expect synergies to ramp throughout 2025 and into 2026, culminating in an EBITDA benefit of approximately $10 million. Second, we'll continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness. To this end, in the first quarter of 2025, we're bringing together Kelly OCG and P&I under common operational management. This decision reflects shifting buying preferences among large enterprise customers as demand grows for integrated -to-end workforce solutions that bundle traditional staffing services with advanced outsourcing and consulting capabilities. Unifying OCG and P&I positions Kelly to address these preferences more effectively by simplifying our -to-market approach and unlocks new value creating opportunities. The combined OCG and P&I business, along with our SET and education businesses, will underpin a more streamlined operating model designed to accelerate profitable growth. Finally, we're laser-focused on driving incremental EBITDA margin expansion. The integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026. In addition, we'll continue to shift our business mix towards higher margin, higher growth areas, including outcome-based solutions. With strategic initiatives targeting both growth and efficiency, we're positioned to deliver top and bottom line results that outperform the market on a consistent basis, reinforcing that this is a different Kelly. I have great confidence in our team's capacity to execute against these ambitious priorities and achieve our performance expectations for the full year. With our team focused on our specialty growth strategy and guided by our noble purpose, I look forward to building on the positive momentum we created in 2024. Together, we'll deliver long-term value to all our stakeholders, connecting our talent and customers to limitless opportunities and rewarding our shareholders for placing their trust in our company. We're grateful for their support as we move forward on our journey to unleash Kelly's full potential. Liv, you can now open the call to questions.

Certainly. Ladies and gentlemen, if you wish to ask a question, please press star 11 on your telephone keypad. You may withdraw your question by repeating the star 11 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press star 11 at this time. Our first question will go to Joe Gomes with Noble Capital, Yolana Snellen.

Good morning. Nice morning, Joe. Thanks for taking my questions. I wanted to start off on the education segment. Again, really strong revenues were up over 12 percent, but that was down. If you look at the full year, I think they were up 15.5 percent. Anything unusual, whether you're expecting more in the education segment, was that in line with your expectations for the quarter?

Yeah. Thanks, Joe. The education segment in Q4 was impacted significantly by the hurricanes in the end of September, early October timeframe. That was not anticipated. While a hurricane can be common, the fact that there were two -to-back created significant disruption in school districts, in markets in which we participate. That was a significant contributing factor to the performance of education in Q4.

Okay. Even with those, it still grew over 12 percent, so that's fantastic there. Then in the release, you talked about some new customer wins in the sales pipeline momentum. Peter, I just wanted to give us a little more color on that. The number of wins or growth in the pipeline, what more could you add to that statement that you had in the press release?

Well, in terms of education specifically, Joe, we have, based on staffing industry analysts' market share numbers, we continue to take share. We're taking share not just because we're competing on price, but we're competing on value. We're the market leader for a reason. We deliver a higher fill rates and better performance for school districts across the country, and they recognize that value. We're very confident in our ability to continue to win more than our fair share of schools. We also are very encouraged by the performance of our traditional K-12 core education business, and we expect in the quarters to come to see meaningful contributions from the combination of traditional K-12 and therapy.

Okay. On the M&A front, anything there, how's the market, I guess, our pricing, is it trending in your favor? Are there more opportunities coming across the fill layer? Maybe give us a little more color on that also.

Yeah, Joe, it hasn't changed meaningfully in terms of the deal flow. It's still in a bit of a trough, I would say, relative to prior periods. And the anticipated or hoped for realignment of sellers' expectations about valuations is not immediately evident. There still appears to be some disconnect between valuation expectations and performance. But we're actively monitoring the deal flow and actively engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.

Great. I'll get back into you. Peter, it's been great work with you. I know it's early and you're going to be here hopefully to the end of the year, but I just want to congratulate you on the career.

Thank you. Thank you, Joe. I appreciate it. Likewise, it's been a pleasure to work with you.

Thank you. Our next question coming from the lineup, Will Brinman with North Coast Research. Hey,

guys, how's it going? Good, Will. How are you? Good morning. Good. So, you said staffing revenue trended higher and maybe you already gave a little bit of color on this, but you said staffing revenue trended higher in the fourth quarter. Was that mostly demand or is that more so on the pricing side? And then if you could give me some insight on demand for perm and temp staffing and how that sort of progressed throughout the quarter?

Yeah, sure. This is Troy. Good to talk to you, Will. Thanks for the question. The staffing, so P&I was where we saw the strong demand on staffing in the quarter. They do tend to have a seasonal uptick in the fourth quarter, tend to progressively grow through the year and have a seasonal uptick. We have been talking about the improvements in P&I throughout the year with their omnichannel strategy along with their large account strategy and the outcome-based solutions. So, they had a good quarter, up .7% on staffing and up 5% on outcome-based. And it was pretty consistent throughout the quarter. I mean, they finished strong in December, but you start to get some anomalies with the holidays and weather and things like that. But overall, it was consistent performance. We've seen consistent performance, improving performance throughout the year on the P&I side. Set, the staffing was pretty much consistent with Q3. Some ebbs and flows across the months, but down 5 in Q3 and down 5 in Q4, we saw some good improvement on the outcome-based side with Set, which helped them pull back a little bit from their Q3 decline. Okay, great. That's all. Thank you.

Thanks, Will.

Thank you. Our next question coming from the line of Kevin Steinke with Barrington Research.

Good morning. Morning, Kevin.

Morning. Morning. Just wanted to start off by asking about overall customer sentiment. And as you talked about your outlook for the first half of 2025, you mentioned that you just expect the environment to be similar to what it has been. So are we just kind of still seeing general consciousness? How are customers, in your view, thinking about the overall macroeconomic environment and how that might be impacting their plans and overall demand?

Thanks. Yeah, Kevin. So post the election, there was clearly a shift, I would say, towards more optimistic points of view from our customers in terms of the future business environment, tax policy, tax changes, relaxing of certain regulatory restrictions. But as the administration took over and with a flurry of executive orders, I would say companies are taking a little bit more cautious approach, a wait and see, to understand the downstream impacts of some of the executive orders that have come out as well as the pending legislation around budget and tax policy, etc. So that's why we've landed on the first half of the year being a continuation of what we've seen the prior few quarters. And again, we're pleased the fact that we're continuing to take share across our specialties and we will execute with that end in mind.

Okay, that makes sense. Yeah, just with regard to the organic growth outlook for the first half of 2025, you talked about education continuing to grow nicely, although, you know, probably not at double digits, I assume that's just kind of a comp issue. And then on the other segments, I think you said flat to down modestly, maybe if you could touch on the other segments in terms of the assumptions there as well. Yeah, you've had some pretty nice momentum going here in professional and industrial and also outsourcing consulting. So maybe just talk about by segment what you're factoring in in terms of that outlook for the first half of 2025.

Yeah, sure, Kevin. This is Troy. Appreciate the question. Our first half, you know, up 10, approximately 10 with MRP and then, you know, roughly flat or modest growth on organic is not significantly different than our two-h performance from 24. We were up about two if you look at second half. So when you think about the market conditions as we were just discussing and the customer sentiment, you know, again, it's not entirely different. And then you get some of the dynamics you mentioned education. Yes, is predominantly on the compares. Keep in mind, they operate more on a school year basis. So their new wins come in in the spring and summer, they're implementing going into September. So the benefit of any new wins we've entirely captured at this point in the revenue performance. And, you know, that we'll see that uptick in the back half of the year as we as we capture more share and expand into greenfield areas on the education side. So I would expect, you know, not double digits in first half, but maybe some uptick in the back half on P and I, a little bit of a pullback maybe relative, again, very strong Q4 outcome based again, drove a good bit of that. There was a little bit of a favorable compare on outcome based versus Q4 of the prior year where we had a bit of a pullback in some seasonality. So P and I probably in the more roughly flat range set, you know, again, coming off, you know, minus three, Q2 minus five, Q3 minus four, Q4, good performance and outcome based, but still a lot of challenge in the IT market. And I think, as you've seen probably in some of the peers and just some of the industry data that's come out, you know, probably a little bit of a pullback here earlier in January and looking for some better performance as the quarter progresses. So probably down, not inconsistent with Q4, maybe a little bit better than that. And then OCG, a dynamic going on there, you know, the growth in 2024 was driven entirely by PPO and as we've talked about all year and you've seen in the GP rates, that puts a lot of pressure on the GP side. And we're looking for more of a remix in 2025. We've talked about the pipeline and new wins there, which takes a while for those to implement. So we see a lot of MSP and RPO opportunities that have been won in our implementing. And PPO is a bit of a countercyclical and softer markets. People will go more to the payrolling route of contractors they've had before versus going out for net new. And so really, you'll see a remix on OCG where we have lower PPO growth, but being replaced by MSP and RPO growth, which will net benefit us from a margin perspective, but you won't see the growth rates in OCG in 2025 that you've seen this year.

All right. Thank you. That's helpful, Coller. And when you were talking about bringing together professional and industrial and outsourcing and consulting under common operational management, is that also going to be brought together from a segment reporting perspective? Or how will you approach that going forward?

Sure. We're going through the segment reporting for 2025, the analysis associated with that as we speak. So we haven't made any definitive conclusions yet. We have some other elements of customer accounts and some offerings and the like that we're looking at making some changes with as well. So we'll have a full readout in the Q1 and of course bridge you all very clearly from our reporting structure for 2024 any changes in 2025.

Okay. Sounds good. Thanks for taking your questions. I'll turn it over. Thanks, Kevin. Good. Thanks,

Kevin. Thank you. Our next question coming from the lineup, Mark Riddick with Sudoti.

Hey, good morning. Morning, Mark. Morning.

So first of all, Pierre, I just want to say it's been a pleasure working with you and looking forward to working with you through the remainder of the year at least. And Troy, welcome. Looking forward to working with you going forward as well. So I did want to touch a little bit on the actually, no, I want to go back for a moment. You did have a smaller acquisition that was announced back in November in education space maybe because maybe spend just a little time talking about that and sort of how that opportunity came about with Children's Therapy Center.

Yeah. Thanks, Mark. Yeah. Small acquisition, a little over $3 million Children's Therapy Center. Very interesting space for the therapy business part of Kelly Education because CTC operates brick and mortar clinics that complement the in-school therapy that PTS provides to our school disc customers. And because they're clinics, they're not bound only to school hours or even the calendar school calendar. So it provides us with an opportunity to provide services outside of school time and even during the summer months. That can be very attractive to therapists that want a more regular schedule. And so we're very excited to essentially pilot this complement to our PTS business. And so far, we're very pleased with how the integration is going. And as you know, the therapy business commands significantly higher gross margins than our traditional K-12 business does. So we're excited about the possibility to further expand our therapy practice through CTC.

Excellent. And then shifting gears, as far as the sort of cash usage and the likelihood, we did sort of notice and prepared remarks around the share purchase activity during the fourth quarter. I wanted to sort of touch a little bit on sort of that appetite going forward, as well as it seems as though there seems to be some comfort at least and you know, with the prepared remarks that you already had regarding the valuation gulf, I suppose. But maybe if you could talk a little bit about what acquisition prioritization you may have now and if that's shifted at all over the last year or so.

Thank you. Sure. Thanks, Mark. This is Troy. Yes, completed the $10 million share repurchase, $10 million share repurchase in Q4. It's a two-year authorization. You know, clearly there was a pretty significant disconnect in the fourth quarter on the share price coming out of the Q3 report. And so we felt it was important to be in the market there. You know, we continue to think, believe very strongly in the Kelly strategy and our ability to execute against that in 25 and over the coming years and still believe there's a disconnect. But we also want to make sure that we're focused on investing in the business to support that strategy, drive growth both organically and inorganically, you know, maintain the dividend and of course, look for opportunities for debt repayment. Our net debt went up about $4 million in the quarter, but that included the $10 million of share repurchase plus the $3 million or so that Peter referenced with CTC. So I think, you know, our bias probably in the near term is a little bit more toward the repayment and investing in growth to drive further shareholder value creation. But we have the authorization available there and we'll continue to look at return to shareholder as an option throughout that time horizon.

Good. Thank you very much.

Thanks, Mark. Thank

you. Nicely done. No further questions in the queue at this time. I will now turn the call back over to Mr. Peter Quigley for any closing remarks.

Yeah, thanks. I think we can conclude the call. Thank you, everybody, for your time this morning and appreciate your participation. Thank you, Liv. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference call and you may now disconnect.