Kelly Services, Inc.

Good day and thank you for standing by. Welcome to the Kelly Services Second Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star, 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Scott Thomas, Head of Investor Relations. Please go ahead.

Good morning and welcome to Kelly's Second Quarter 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-GAAP financial measures designed to give insight into certain trends in our operations. For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release presentation and once filed, Form 10Q, all of which can be accessed through our investor relations website at .KellyServices.com. With that, I'll 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 second quarter results, I'll discuss the CEO transition update that we announced earlier this morning. Following a rigorous search process with the full engagement of Kelly's board of directors, including myself, Chris Layden has been selected to serve as the next president and CEO of Kelly. Chris will formally join Kelly and step into the role on September 2nd. I will remain with the company as a strategic advisor to Chris and the board to ensure a smooth transition. Chris is a dynamic industry leader with extensive experience leading organizations through transformations to advance -to-market initiatives and accelerate profitable growth. He joins Kelly from Workforce Solutions provider ProLink, where he served as chief operating officer and oversaw a period of rapid growth. Prior to ProLink, Chris spent nearly two decades at Manpower Group, where he served in a range of senior roles spanning general management, regional leadership, corporate strategy, and sales. After many conversations with Chris, it was clear that his skills and experience are uniquely suited for this moment in Kelly's strategic evolution. He brings a track record of executing enterprise scale transformations and driving commercial excellence, as well as visionary leadership that aligns well with our commitment to accelerate profitable growth and value creation. Under Chris's leadership, I'm confident that Kelly will build upon the strong foundation we've established and reach new heights of profitability and growth. I look forward to formally welcoming him to Kelly when he joins us next month and introducing him to our talent, customers, and shareholders. With that, let's review the highlights from our second quarter earnings. In the second quarter, we saw the benefits of our focus on more resilient markets to drive growth with each business unit delivering strategic contributions to Kelly's results. Our education business achieved another quarter of revenue growth as we maintained strong fill rates in the K-12 staffing business. In SET, we capitalized on solid demand within the engineering and telecom verticals. Payroll process outsourcing remained a source of strength within the ETM segment and delivered robust revenue growth over the prior year. Across both SET and ETM, outcome-based offerings, excluding our contact center business, sustained positive momentum with customers as we continue to shift our business mix toward higher margin, higher growth solutions. Results were impacted by acute demand reductions with certain large customers. These reductions were largely the result of cost controls implemented by these customers in response to the increasingly dynamic trade and geopolitical landscape. More broadly, the current environment continued to drive employers in some sectors to take a more measured approach to hiring. As such, demand for staffing services decelerated in ETM. Volumes within our U.S. federal government business declined at the outset of the quarter but leveled off in May and June. This was in line with our expectations which we previously revised in light of reduced demand for federal contractors in the first quarter. As market conditions evolved, we doubled down on our commitment to operational discipline and took decisive action to align resource levels with demand. Our differentiated capabilities and agility in adapting to changing market conditions enabled Kelly to pursue attractive new business opportunities. Our unique solutions provide employers with a flexible, scalable approach to bridge the transition to an AI-enabled workforce in a way that unlocks the combined power of people and technology. They also position Kelly to harness the potential of AI and turn it into an opportunity to drive profitable growth for our customers and our shareholders. We'll continue to leverage our position as the partner of choice as employers increasingly integrate AI into their operations to drive efficiency and growth. While delivering near-term results, we're also laser-focused on executing our growth and efficiency initiatives to position Kelly for the future. We advanced our efforts to integrate MRP's portfolio of businesses with our existing SET businesses, completing the realignment of sales, recruiting, and functional teams as part of our redefined -to-market strategy organized by specialty. We're also making excellent progress on the implementation of modernized front and back office systems with inset that will leverage MRP's leading technology stack and consolidate disparate systems to reduce complexity and drive efficiencies across the organization. Our progress in the second quarter reflects our agility in both seizing and creating opportunities in any operating environment while accelerating profitable growth over the long term. We're deliberate about staying close to our customers, evolving workforce needs, and leveraging our differentiated capabilities to provide them with innovative solutions. The decisive actions we took earlier in the year to improve efficiencies and drive simplicity in our operating model have positioned us to better serve our customers and execute on our near-term and position Kelly to compete and win over the long term. For more details on our results in the quarter, I'll turn the call over to our Chief Financial Officer, Troy Anderson.

Thank you, Peter, and good morning, everybody. We're pleased with our performance in the first half of the year given the evolving macro environment and are encouraged by the adaptability and resiliency of our teams and that we're seeing across our business. As referenced last quarter, we made changes to our operating model for 2025, which reduced our reportable segments from four to three, Enterprise Talent Management, or ETM, Science, Engineering, and Technology, or SET, and Education. We realigned certain customers and businesses as part of these changes. The 2024 results of ETM and SET have been recast accordingly. Please refer to our prepared remarks from the first quarter and our 10-Q for further details. As a reminder, our reported results for 2025 include MRP and its portfolio businesses and Children's Therapy Center, while our 2024 results only include them from their acquisition dates. To provide greater visibility into the underlying trends in our operating results, I'll discuss -over-year changes on a reported and organic basis. With the organic information excluding these items, MRP will be fully in our -over-year comparisons beginning in the third quarter. Revenue for the second quarter of 2025 totaled $1.1 billion, an increase of .2% versus Q2 last year. We saw a number of positive trends across the business during the quarter. However, we also experienced a larger than anticipated negative impact from the evolving macro environment. On an organic basis, -over-year revenue was down 3.3%, including a .3% negative impact from reduced demand for federal contractors in the SET and ETM segments, and a .5% impact from a few large customers within ETM who materially decreased demand in conjunction with internal cost reduction initiatives. We expect the full impacts of these actions to be realized by the end of the third quarter. For Q2 organic revenue by service type, staffing services reflects continued strength in our education business and pressure from government, large customer, and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding contact center solutions, demonstrated resilience and were up 2% -over-year driven by ETM. Perm fees, which were 1% of revenue in total, reflect growth in ETM offset by a moderating decline in SET. Drilling down into revenue results by segment, education grew .6% -over-year in the quarter, or .3% on an organic basis. Each of the education specialties grew in the quarter, with the primary driver being ongoing fill rate improvement on stable demand for services in the K-12 space. In the SET segment, revenue was up 19% on a -R-P. SET organic revenue was down .5% in total and was down only 3.2%, excluding lower demand for federal contractors. This reflects -over-year sequential improvement, building upon the positive trend we saw last quarter. Staffing services was down 10%, and outcome-based services down 4.5%. Lower staffing revenue was primarily due to the federal contractor impact. Outcome-based solutions revenue was down primarily due to lower demand in certain industry verticals and with a few key customers. Excluding the government impact, SET continues to outperform the market as a result of its targeted mix of specialty offerings in industry verticals, despite the variability in the macro environment and weaker demand in the technology segment. This includes the outcome-based business and the statement works suite of solutions, which are a growing portion of the market where we've sharpened our focus and are driving innovation, most recently by expanding this capability across the -R-P sales team and customer base. In the -T-M segment, revenue declined .9% -over-year on a reported basis, or .1% on an organic basis. Staffing services revenues declined 7.7%, driven primarily by the large customer demand reductions and lower demand for federal contractors. Outcome-based revenues decreased by 6.2%, reflecting demand pressure from a large customer within our contact center offering. Declines for this customer accelerated materially in the quarter and they'll be fully run off by the end of the third quarter. Excluding contact center, -T-M outcome-based revenue increased 5%, reflecting strong demand from a variety of industry verticals, including semiconductors and manufacturers. Talent solutions revenue increased 8% overall, or 2% organically, with overall growth driven by the addition of the seven-step business from the -R-P acquisition and strong performance in the -P-O specialty, partially offset by a sequentially lower -over-year decline in MSP. We continue to gain momentum in the talent solution space with new customer wins, the seven-step integration and enhanced -to-market efforts, and positive industry recognition. A recent example of this being the -P-O, a top-performer in -P-O in its latest industry rankings. Reported gross profit was $225.5 million, reflecting a gross profit rate of 20.5%, an improvement of 30 basis points compared to the prior year quarter. This includes 70 basis points of improvement from the acquisition of -R-P and 40 basis points of organic decline from lower perm fees, business mix, and employee-related costs. The business mix impact is similar to last quarter and reflects the strong growth in education, which has a lower relative GP rate. During the quarter, we saw a GP rate improvement in set as a result of the -R-P acquisition. Education's GP rate was flat, while ETM's GP rate was down slightly, with benefits from the addition of seven-step and growth in perm fees offset by growth in -P-O, which carries a lower GP rate. We remain focused on improving our SG&A expense profile in the quarter, with reported SG&A expenses of $207.3 million. On an adjusted organic basis, SG&A expenses decline 1% -over-year. Expenses increased in our education segment in conjunction with revenue growth, while expenses declined in ETM and SET. We remain focused on improving productivity and aligning resource levels with demand, while also driving structural and sustainable efficiencies in our operating model through technology enhancements, including leveraging AI, process efficiencies, and other levers. Actions like the formation of the ETM segment and the integration of -R-P will drive efficiencies throughout 2025 and into 2026. In connection with these efforts, we recognize six million of charges in the quarter, down from 11 million in the first quarter. Included in these charges are costs associated with improving technology and processes across the enterprise, as well as severance expenses. We expect to see this reduced level of charges over the next few quarters as we execute these initiatives. Also included in our Q2 result is a $4 million gain on the 2024 sale of our EMEA staffing operations as a result of the final networking capital and other adjustments. For the quarter, reported earnings per share were $0.52 compared to earnings per share of $0.12 in Q2 2024. On an adjusted basis, earnings per share were $0.54 compared to $0.71 in the prior year. The decline over the prior year reflects lower earnings from operations and increased net interest expense as a result of the debt incurred for the -R-P as a result of the sale of the EMEA staffing business. Adjusted EBITDA was $37 million, a decrease of 9% versus the prior year period, while adjusted EBITDA margin declined 40 basis points to 3.4%, which reflects the incremental revenue pressure I previously noted. Education achieved -over-year improvement in its adjusted EBITDA margin for the second straight quarter. Both set and ETM expanded margins versus the first quarter, but were down -over-year timing of expense management actions relative to reduced demand. Moving to the balance sheet, we maintained a disciplined yet opportunistic approach to capital allocation in pursuit of attractive returns. We ended the quarter with total available liquidity of $301 million, comprising $18 million in cash and $283 million of available liquidity on our credit facilities, leaving us ample capital allocation flexibility. We had seasonally strong operating cash flow in the quarter, and we benefited further from favorable working capital timing and $22 million of cash proceeds related to the final true-up from the sale of our EMEA staffing operations. As a result, we had a $130 million net paydown on our debt, leaving us with total borrowing of $74 million at the end of the quarter and an adjusted EBITDA leverage ratio of 0.6. We expect our net debt to increase over the balance of the year relative to the current level based upon our normal seasonal cash flow and capital deployment activities. For the year, we should see an overall reduction in net debt relative to the prior year in balance. For the third quarter outlook, while the macroeconomic environment appears to be stabilizing, a number of our clients are taking a measured approach to their workforce management strategies. Given that, we're assuming current macroeconomic conditions persist for the foreseeable future. Also, with MRP fully in our comparable results, I'll only speak to the overall totals as the organic difference is immaterial. For revenue, we expect a decline of 5% to 7% in the quarter, which includes 8% of negative impact associated with reduced demand from discrete, large customers and for federal contractors. Excluding these items, our underlying revenue growth would be 1% to 3%. For adjusted EBITDA margin, we expect an increase of 80 to 90 basis points year over year in the third quarter. We also continue to expect modest year over year adjusted EBITDA margin expansion for the full year. As we progress through the balance of the year, we'll continue to adapt as conditions evolve while remaining opportunistic and focusing on achieving or exceeding our expectations. I'll now turn the call back to Peter for his closing remarks.

Thanks for those insights, Troy. As we move forward into the second half of the year, I remain confident in Kelly's ability to navigate this dynamic macroeconomic environment. Building on the meaningful progress we made in the first half, the company will continue to execute on its priorities. As employers' needs continue to evolve, we'll quickly adapt alongside them. Whether driven by macroeconomic shifts or advancements in AI, we stand ready to provide tailored workforce solutions that will enable them to maintain a competitive edge. From staffing and outcome-based solutions to managed service provider and recruitment process outsourcing, our differentiated portfolio of solutions leads the market. This is how we've continued to capture the potential of our new market share and why Everest Group named Kelly both a leader and star performer in each of its contingent talent and strategic solutions peak matrices, marking the first time a company has achieved this feat. We'll further refine our -to-market approach within our realigned set and ATM businesses to ensure that our teams, processes, and technologies are optimized to enhance efficiency and effectiveness while making it easier for both employers and talent to engage with Kelly. And we'll continue to align resources with demand, leveraging our operational discipline to respond quickly to changing trends and maintaining our capacity to capture growth in more resilient markets. Executing on these priorities and remaining agile in the face of the current pandemic, we'll continue to work with our teams to ensure that our teams are able to continue to deliver on the commitments we outlined at the start of the year. And with greater scale in our chosen specialties, a streamlined operating model, and enhanced profitability, the foundation is set for the next generation of leadership to take Kelly into a new phase of its strategic evolution. As I prepare to conclude my nearly 23-year career here, I'm grateful to each member of Team Kelly for their contributions on our journey to realize our collective vision for this great company. Their resilience, agility, and unwavering commitment to our noble purpose are the driving forces that continue to propel Kelly forward in pursuit of profitable growth. As the team moves forward together with Chris at the I'm confident in their capacity to unleash Kelly's full potential and create long-term value for all of the company's stakeholders. Operator, you can now open the call to questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from Joe Gomes of Noble Capital. Your line is now open. Good morning, Joe.

Thanks for taking my question. So you touched on it briefly on me as part of the business, but I wanted to try and see if we get a little more colors, how the quarter trended on a monthly basis or sequentially. Did we receive any improvement throughout the quarter, or was it more very lumpy throughout the quarter overall for the business?

Yeah, hi, Joe. This is Troy. Thanks for the question. You have to remember our business portfolio is not as monthly sensitive as maybe some of the other players in the space. With our education business, which has a distinct seasonality associated with the summer holiday or the summer break from school, the school season, our outcome-based businesses tend to be more stable. Really, the ETM staffing business, which is only about 25% of our revenue, is where you see more of that monthly up and down fluctuation. We did see a little bit of incremental pressure there as the quarter progressed. That's one of the areas that, or the primary area, where we saw a little bit more macro impact beyond the large customer impact that we called out. As we're looking at July, we've seen some more stability there, and we feel good about the expectation we set overall. For the quarter, if you look at Q2 relative to our Q3 outlook and you make the adjustment for government and the large customers, we're about the same, roughly around point and a half at the midpoint of expected growth, which is roughly where we were for Q2 when you take out the government and large customer impact, we call it out.

Okay, thanks for that. Going back to these large customers, which I'm assuming was somewhat unanticipated, I guess the question is, what steps do you guys take or are taking? Because as quickly as that switch has gotten thrown off, it can get thrown back on. So I'm assuming you're not wanting to cut too far too fast, but it's a challenge, I'm sure, trying to figure out how far that is without carrying that cost when you don't know how quickly that switch could get back on. So maybe just give us little colors, how do you do the thought processes and how dealing with customers in an environment like this that are moving rapidly one way or the other?

Joe, it's Peter. Yeah, as you noted, this is a feature of working with really large global enterprise-sized customers. They can flip that switch on and off very quickly. And in this case, due to the macroeconomic conditions, they responded, as you said, in an unanticipated way. But we are in a much better position than we have been historically to both flex with the decrease in demand, but also to ramp up. We're more streamlined in our operations and we're very confident that when, whether it's the specific customers that had an impact in Q2 or just overall demand when it returns to more normalized levels, we're confident we can quickly ramp up to respond to that.

And yeah, Joe, I'll just add this, Troy, the one, there's three specific customers and we understand we can't just pick and choose what we call out. There's three specific, one we highlighted in the contact center space. That will end in the third quarter. Still an important relationship from a customer perspective and we'll look for other ways to service that customer. But that particular element will be completed in the third quarter. The other two are just material reductions in demand as they're addressing their business needs given their macro exposure. Okay.

And then one more for me, if I may, kind of on the guidance. I went back and looked in the second quarter, or excuse me, in the first quarter, your guidance for the second quarter, you're pretty confident in that. And obviously, if we look at the numbers that you provided and the numbers that actually were derived, we're off from those. And just given this environment, the question is how confident are you in the third quarter guided numbers?

Look, we're using the best available information at any given point in time to provide expectations to the investment community and even setting our own expectations how we manage the business internally to Peter's comments earlier. So we feel confident based on the information we have as a commenter. And the first question you asked, we see some stabilization. We have good visibility into our pipelines and many elements of our business. The macro, keep in mind back in May, we were 30 days out from liberation day. We were 90 days out from initiating actions. I mean, there's quite a few moving pieces that are not things that we directly control, not that we control everything inside how we operate. But overall, I think we all see a little bit more stabilization and we have a little bit better predictability in terms of what we see and how we're executing.

Thanks, and I'll get back in queue.

Thanks, Joe.

Thank you, Joe. Thank you. Our next question comes from Karthik Mehta of North Coast Research. Your line is now open.

Good morning, Peter. First of all, it's been a pleasure working with you. Thank you for everything. Thank you. Troy, I wanted to go to your third quarter guidance. I've seen EBITDA margin expansion, even though you're going to have a revenue decline, is very positive. And you also said that for fourth quarter. I'm wondering, what are the drivers to that? Is that you're taking cost out or is it that you're anticipating just a higher margin revenue to continue to grow faster?

It's both. And we reference in the prepared remarks about taking decisive actions. We came into the year, we realigned the two segments, P&I and OCG into the ETM segment. We've been with the passing of the earn out period with the MRP acquisition. We've had been spent that time planning for the integration efforts and now are rapidly executing on integration efforts. Those are all driving efficiencies. We've continued looking at all of our cost structure, driving efficiencies throughout, leveraging AI, leveraging technology. We've talked about with the MRP integration and enhancing our moving toward a modernized technology stack initially with the set business unit, but that has benefits to other functions. So a number of different actions across the business really continuing the efforts that the company has been executing against for the last several years, while also improving our go to market, focusing more on the higher value specialties, driving growth in the areas where we can generate higher margin. We have a declining, lessening decline in the set segment, which is higher value. Education will come back with a bit stronger growth in the back half of the year than the front half of the year. And we continue seeing growth in the outcome based business within ETM, which is a higher margin business. So it's a mix of all factors, but frankly purposeful and intentional.

And

then just

from

an industry standpoint, what are you seeing in terms of price competition, especially if you look at it as each individual business? I'm wondering if any one of them is seeing pricing pressure or what the market is currently like.

Yeah, generally speaking, I'd say we're stable. The one area we do see a little bit of pressure is more in the light industrial commercial space. We are seeing some aggressiveness in the market as different players are trying to navigate the sustained demand challenges there. But otherwise, education is stable. We see actually some lift in a number of the areas within set. So we feel good about our positioning and our offerings. And again, to your first question, driving toward higher value and higher margin opportunities in the market.

Perfect. Thank you very much. I appreciate it.

Thanks, Carter. Our next question comes from Kevin Steinke of Barrington Research Associates. Kevin, your line is now open.

Morning, Kevin. Good morning. Thank you. I wanted to start off by asking again, following up on your comments there just now on the impact that you mentioned in your prepared remarks that excluding the government impact, you think you're outperforming the market. Can you just add a little bit more color on that statement about the outperformance and the evidence you're seeing to support that?

Sure. Good question. And so when we parse out the public competitors' information and we get a -for-like view relative to our set business, as close as we can at least, geography and offerings mix, again, just based on public disclosures, we see that we are consistently a point to two points better than their performance in aggregate. Again, so there's some puts and takes across there. And that's been a fairly consistent trend really over the last two years or so, 18 months to 24 months.

Kevin, we also take a look at industry sources like staffing industry analysts who analyze both public and private companies. Troy's comments reflect our ability to look at public company disclosures, but we also refer to industry indices to gauge our performance versus the market.

Okay, great. And you mentioned there are some ranks in the telecom and engineering areas within SETS. Can you just elaborate on what you're seeing there currently?

We're well positioned in the market. We're top player with the scale that we've built through the MRP acquisition and organically. So we're just continuing and we've now refined that -to-market strategy with SET reorganization that we spoke about now with the post the earn out from MRP acquisition and realigning the five distinct verticals within SET. And so we're just seeing good traction in the market and we have a really strong existing customer base and we continue to identify new opportunities as well. So it's no one specific new contract or anything like that. I think it's more just a continued evolution of that business and are more deeply penetrating the opportunities in the marketplace.

And Kevin, we do think in specifically your reference to engineering and telecom, we do think that the big beautiful bill capex tax advantages could boost some R&D investments in particular those areas.

Okay, understood. That's helpful. Going back to the third quarter guidance, the underlying revenue growth of one to three percent excluding the government impact. Can you just kind of walk us through how you get to that underlying revenue growth number?

So yeah, to be clear, the headline of down five to seven, there's about eight points of impact between government and the three discrete customers we referenced, which is elevated relative to Q2. Q2, it was about 1.4 on government and about 3.5 on the customer. So five aggregate goes up to eight. That's peak. So that will be at full impact in the third quarter. And it's roughly evenly across government and each of the three customers, that relative impact. So when you back that out, that gets you the one to three. When you now parse out, well, where does that come from? Education will continue to grow likely at an elevated pace relative to what we saw in the first half of the year. SET has been on the lessening decline as we commented on a favorable trend the last few quarters. And we expect to see some continued improvement there. And then some puts and takes within ETM between talent solutions and staffing, you know, maybe some stabilization and staffing, but not improvement, but some improvement in talent solutions as we land some of the or implement some of the new wins that we've had in the MSP and RPO space.

All right. Yeah, that's helpful. Appreciate that. And you mentioned there that you're expecting stronger growth in education in the second half of the year. What leads you to believe that that will be the case?

Well, it's a very predictable business. The school year starts in some cases July, but August, September at the latest. And the new business cycle, the renewal and new business cycle largely occurs in the first half of the year and is complete. Usually by May, June, we did have some lingering decisions given some of the broader macro environment, but no real lost or funding concerns in that space. So as we go into the back half of the year, we have a high degree of talent. We sustain them in the accounts where we're mature and we ramp them in the newer accounts and up to 90 plus percent in most cases. And so it's at this stage, we have very good line of sight into what the back half of the year looks like.

Okay, good. And then lastly, just, I think you mentioned that the integration and realignment costs will be coming down. Is that correct? And I think there were 6 million in the second quarter. Just trying to think about run rate of costs over the next couple of quarters in the second half here.

Yeah, clarification, maybe my comments were not as clear as I was hoping. We had 11 million in Q1 and that decreased to 6 million in Q2 and that's what we expect the run rate for the next few quarters given the timeline of the execution and implementation work that we're doing.

Okay, thanks. I probably didn't hear that correctly. I appreciate the clarification and Peter, let me add my congratulations and best wishes to you.

Thank you, Kevin. Appreciate it.

Thanks for

your questions, Kevin.

Thank you. Our next question comes from Mark Riddick of Sudoti. Your line is now open,

Mark. Good

morning,

Mark. Hey, good morning. Good morning. I wanted to echo a similar sentiment, Peter, congratulations and certainly it's been a pleasure working with you. I was sort of curious as to, most of my questions have already been answered, but I was sort of curious as to how we should be thinking about cash usage and prioritization and then maybe as an offshoot of that, are there any thoughts as to sort of maybe what you're seeing currently or how you're viewing a potential acquisition pipeline or maybe what you're seeing out there in evaluations in this space?

Yeah, sure. Good questions. From a usage perspective, again, we had a nice quarter from a cash flow perspective, both seasonally strong as well as some incremental benefits from timing of collections and also the final settlement on the sale that occurred at the beginning of last year. So that, as we indicated in the last quarter, our near-term priority given the macro backdrop was more focused on debt pay down and reducing interest expense and so that all the extra cash went towards that this quarter. We continue to actively explore acquisition opportunities. We have a team that's focused on that. We have an active pipeline. We have many different sources of opportunities for that pipeline. We've kicked the tires on a few different things. At this point, more on the smaller scale tuck-in type assets, but nothing popped, nothing to announce at this juncture, but that's been an important part of our model and will continue to be as we've now accumulated scale in a number of areas through acquisition and organically. We have the opportunity to be a bit more selective and really more gap fill or look for adjacencies versus really trying to build scale, although we certainly wouldn't turn down a good opportunity to do that. So that's really how we're thinking about it, how we're focused on it at this juncture.

That's very helpful. And then I might have missed this, but where did we end on the share repurchase authorization at the end of the quarter?

So we didn't execute any additional share repurchases in the quarter, so we still have the $40 million remaining on the authorization. And again, that doesn't expire until December of 26, so we have plenty of time to execute against that as we navigate through the macro landscape. Okay, excellent. Thank you very much. And again, that's an option, by the way, from a capital allocation perspective. It's not a guarantee, but it's certainly one of the paths we could deploy capital to be opportunistic and generate value creation for shareholders. Thank you. Yep. Thank you,

Mark. Thank you. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I am showing no further questions at this time. I would now like to turn it back to the President and CEO, Peter Quigley, for closing remarks.

Thank you, Amber. I think we're good for the call, so we can end the call. Thank you very much. Thank

you, everyone.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.