Kelly Services, Inc. (KELYA) Earnings Call Transcript & Summary

I second the motion.

Thank you. Cynthia, what are the results of the election on the 4 proposals?

While a final tabulation will be made following today's meeting, all 4 proposals are approved, having received the necessary vote of the class B shares outstanding and entitled to vote at this meeting.

At this point we will address any questions or comments received from class B shareholders on the proposal.

Mr. Chairman, there are no questions at this time.

Excellent. Being -- no questions being submitted from Class B shareholders. I will ask for a motion to adjourn the business meeting.

Mr. Chairman, I move to adjourn the business portion of the meeting.

Thank you. May I have a motion to second that.

Yes, Mr. Chairman, I second the motion to adjourn the meeting.

Thank you. The motion is carried, and the business portion of the meeting is now adjourned. And now I'd like to invite Kelly's President and Chief Executive Officer, Peter Quigley, to provide you with an update on the state of the company. Peter?

Thank you, Don, and hello, everyone. It's great to be with you today for our 2023 Annual Meeting of Shareholders. Before I begin, I'll refer you to the safe harbor statement that's included as part of the rules of conduct and agenda slides found on both the annual meeting website and on kellyservices.com. This applies to any forward-looking statements that I may make as part of my comments during today's webcast. As Don noted, 2022 was a year of progress for Kelly as we continue to shift toward higher margin, higher-growth specialty business. amid turbulent geopolitical macroeconomic and labor environments, we remain focused on executing our specialty strategy, and we took bold actions to reallocate capital in support of that strategy. We ended our cross ownership arrangement between Kelly and Persol Holdings and reduced our ownership interest in our Persol Kelly joint venture. We redeployed a portion of the net proceeds from those transactions to advance our inorganic growth strategy while preserving capital to pursue additional high-margin, high-growth acquisitions in the future. We monetized non-core real estate holdings throughout the year, unlocking even more capital to invest in growth initiatives. We acted decisively to sell our Russian operations as a result of the war in the Ukraine. And to complement these elements of our capital allocation strategy, we increased our dividend to its pre-pandemic level and authorized a $50 million repurchase of outstanding Class A common shares. In our operations, each of our specialty business units made strategic contributions to Kelly's progress in 2022. Our ability to capture strong demand in the first half of the year, set the stage for our team to deliver quality revenue growth for the full year. And by intentionally pursuing higher-margin, higher-value business opportunities, we succeeded in expanding our GP margin in every segment, lifting Kelly's overall GP margin above 20% for the first time in more than 25 years. We entered 2023 committed to continuing our pursuit of profitable growth despite the ongoing macroeconomic and labor market headwinds. As is typical during times of economic uncertainty, some segments of the economy are showing more resiliency than others. Likewise, Kelly's Specialty Solutions, where we have intentionally focused our growth strategy are proving more resilient than others. As I shared on last week's Q1 earnings call, our specialty growth strategy paid off in several areas in the first quarter. In our Education segment, our investments enabled us to meet rising demand and increase our first quarter fill rates. Our focus on more profitable outcome businesses in both P&I and SET also yielded growth in the quarter as customers continue to demand our value-added solutions. As expected in the current environment, our staffing businesses faced lower demand and we took action early in the first quarter to align expenses with revenue and also focused P&I on our local U.S. markets, improving our quarterly fill rates. Despite ongoing headwinds, we capitalized on growth opportunities, manage costs and stayed true to our strategic priorities. The entire Kelly team maintains its focus on serving our clients and talent, earning Kelly the #1 spot on Forbes 2023 list of America's best temporary staffing firms. It's clear we have made progress on our growth journey. We have grown gross profit and improved our gross margin percentage by shifting to a higher margin, higher growth business mix. We have unlocked value by monetizing non-core assets, and we have reinvested that capital in future growth. It is clear that our progress has not yielded the necessary meaningful improvement to the bottom line. That's why, as Don mentioned in his opening comments, Kelly has begun an initiative that ushers in the next phase of its growth journey with Don's support and the support of the full Kelly board. Our collective goal is to build on the progress we've made in the last 3 years to create long-term structural improvements that will benefit all of our stakeholders, including you, our shareholders. This is not merely a cost-out effort. The initiative I announced last week drives us toward a comprehensive and intensive transformation to accelerate profitable growth. In addition to sharpening our focus on reducing organizational complexity and inefficiency, we intend to unlock additional value-creating opportunities and find new avenues of growth. This will mean creating structural improvements in our business, converting more of our revenue and gross margin gains to a significantly improved net margin and achieving the profitable results I know we can deliver. For an order -- for an effort of this magnitude to be successful, we need the right people at the table with a clear line of accountability, undivided focus and a mandate to act swiftly and decisively. Our newly appointed Chief Transformation Officer, who reports directly to me, is leading a transformation management office that we've established to identify value-creating opportunities drive the necessary changes to realize these opportunities and accelerate profitable growth. We've also engaged an outside consulting firm that brings deep business transformation expertise, world-class data and analytics capabilities and a proven model to inform our efforts. With the right internal and external pieces in place, I'm confident that we are positioned to create new value and realize our collective ambitions. I was clear on last week's call, and I'll be clear here today. we expect our work to yield meaningful improvement in our EBITDA margin rate starting in the second half of this year with full benefits realized in 2024. Achieving our aggressive goals for growth is our highest priority. We remain committed to transparency and accountability. And beginning in August, we intend to provide regular updates on our earnings calls by which you can measure our progress. As we embark on this next phase of our journey, I'm filled with optimism that Kelly will emerge position for long-term growth. I share Don's confidence in the strategic efforts we're making to accelerate profitable growth and to reward you, our stockholders, for your patience since we set out on this journey to transform Kelly into a specialty talent solutions provider. Though it's difficult to know how macroeconomic conditions will unfold as we move forward in 2023, I have great confidence in our team's capacity to meet the moment and deliver on our strategic priorities while staying true to our noble purpose. This has been a defining characteristic of Kelly People since our founding more than 75 years ago and has contributed in no small measure to the longevity of this great company. In closing, I would like to thank Kelly employees for their dedication to serving Kelly, our clients and our talent throughout our growth journey. since our founding more than 75 years ago and has contributed in no small measure to the longevity of this great company. In closing, I would like to thank Kelly employees for their dedication to serving Kelly, our clients and our talent throughout our growth journey. I'd also like to thank our Chairman for his tremendous leadership of the Board and each of our Board members for their unwavering support and their commitment to Kelly. And 2 of our valued Kelly shareholders, thank you for your confidence that Kelly's best days lie ahead. I share that confidence, and I look forward to providing updates on our progress as our transformation continues to unfold. Don, back to you.

Thank you, Peter. We'll now address general questions that have come in. Jim?

Mr. Chairman, there are no questions at this time.

Very good. Being no further questions or no questions, I hereby adjourn this meeting and wish to thank you for attending this morning. As a reminder, if you have any questions at any point, please reach out to our Investor Relations department. The phone number there is (248) 244-4586. Thank you, and have a good day.

This concludes the meeting. You may now disconnect.