KELYA - NASDAQ

Good morning and welcome to Kelly Services Third Quarter Earnings Conference Call. All parties will be on listen-only until the question-and-answer portion of the presentation. Today's call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. 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.

Thank you, Kailey. 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 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 Thirot, our Chief Financial Officer, who will share more details about our expectations later in the call. Turning to the third quarter, we continue 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 assumes 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 US. 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 US 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 towards 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 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 road map 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 road map 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.

Thank you, Peter, and good morning everybody. For the third quarter of 2023, revenue totaled $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 constant 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 fill rates 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 sector has 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 Industrial segment declined 11% year-over-year in the quarter. Revenue from our staffing product 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 continued 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 base. Performance varies depends on geography and product. For the quarter we had good constant currency revenue growth in Mexico and Portugal 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. International placement fees were consistent with last year on a constant currency basis. Overall gross profit was down 5.1% on a reported basis or 6.3% in constant currency. Our gross 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 term fee 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 a reported basis. Expenses for the third quarter of 2023, includes $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 impact of our transformation efforts which are designed to reduce cost on a structural basis as well as lower performance based in incentive compensation. For the third quarter, on a reported basis, we produced breakeven 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 $15.4 million of charges, related to our transformation activities, so adjusted earnings from 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 from operations in Q3 of 2022 of $9.5 billion, so on a like-for-like basis, 2023 earnings from operation 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 $0.18 per share, compared to a loss per share of $0.43 in 2022. Adjusted EPS for the third quarter of 2023, excluding the transformation-related charges net of tax was $0.50. And after adjusting for the 2022 goodwill impairment charge net of tax, Q3 2022 EPS was $0.25, so on a like-for-like 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 totaled $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-date 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 DSO 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 share 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 expectations 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 the 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 EBITDA 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 savings, the impact of the sale of our European staffing business, and our current top line expectations. We would expect to reach a normalized adjusted EBITDA 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 EBITDA margin, all since we began the transformation journey earlier this year. And now, I'll turn it back over to Peter for additional comments.

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 further strengthened our balance sheet and with significant capital available to us, we committed 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. Kailey, you can now open the call to questions.

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.

Okay. Yes. I wanted 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?

Yes. Thanks, Kevin. I'll turn it over to Olivier to provide some details. But 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 pipeline looks strong. The fact is that, we've our business is growing 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.

Yes. We continue to see the top line growing despite of a growing base, till that 22% 23% growth in revenue in Q3. The -- on the leverage, I would say, yes, I mean, we -- we continue to leverage and one of the key KPI we use 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 continued to grow at a very fast pace.

Okay. Great. Thank you. I also wanted to ask about the OCG segment. That continues to generate strong gross margins about 36%. Although SG&A expenses as a percent of revenue kind of in the low 30s and that's always been meaningfully higher as a percent of revenue in 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 those -- that high gross margin those gross profit dollars than you currently are?

Yes, 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 in 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 in signals. You are 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 US, 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.

Okay. Great. That's good color. Just lastly just from a reporting perspective going forward once the sale of the European staffing businesses closed does the international segment just completely go away? I know you still have Mexico in there. Just wondering what happens there?

Well, 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 8-K. So what basically we are transferring to GI or selling to GI is about $810 million 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 4...

4 business units. So the big change is going to be P&I is going to include Mexico because that's where it is best fitted for the future in terms of synergies and continue to accelerate growth. Our Mexican business now is very successful. We grew at a very fast pace base and we expect that to continue.

Okay. Perfect. Thank you. I will turn it back over. Appreciate.

Thank you, Kevin.

Thank you, Kevin.

We'll go next to the line of Kartik Mehta with Northcoast Research.

Good morning, Kartik.

Good morning

Mr. Mehta your line is open.

Can you hear me?

Now….

Sorry.

Good morning.

Sorry, about that. 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?

Kartik, we -- 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 a 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 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.

And then as you look at the trends throughout the quarter and into October any changes? Are they getting better or worse the same?

I would say when you look at our September exit rate, we are in constant currency basically at minus 2.4%, which is basically the midpoint of our guidance. If you move it from nominal currency to a constant currency we expect about 140 basis points of favorable FX. So this is where we have ended the quarter. One of the points 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 would tell us that the trends are going to be significantly different in Q4. The main item is of course for Q4 high seasonality indications that of course with the same type of growth we have seen so far would contribute more dollar-wise to the total revenue simply because of the fact that Q4 is high seasonality for Education.

And then just one last question. Are you seeing any change in competitive behavior pricing or anything that the market continues to struggle a little bit?

Well, we always see certain competitors that respond to a challenging macroeconomic environment by adjusting their pricing. We continue to sell maintain our price discipline and sell the value of working with Kelly and we continue -- we will continue to do so. We haven't seen I would say wide scale changes among the largest players. It 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.

Okay. Thank you, very much. I really appreciate it.

Thank you.

Thank you.

Thank you. We’ll go next to the line of Joe Gomes with NOBLE Capital Markets.

Good morning, Joe.

Good morning.

This is actually Joshua [ph] filling in for Joe. So I just kind of want to get a quick start on thing just on looking at your segments here everything seems to be kind of neutral every -- sorry time to see it a little bit down. I just kind of [Indiscernible] a basis on like what was going on in the quarter that led to that.

Well yes the big outlier is obviously Education which we've discussed. The challenging macroeconomic conditions because of our being in a cyclical business, we're impacted by that as customers reduce their permanent hiring which shows up in a significant drop in 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 ships. 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.

Okay. Great. And if I obviously kind of shipping to the international staffing sale. I just kind of -- I know you guys touched on it a base a little bit briefly, but how does that sale really kind of impact Kelly in terms of revenue and EBITDA? Like what should we expect in 2024? Is any kind of additional color on that would be helpful?

So you mean just to clarify the impact on a pro forma basis of basically getting international with the exception of Mexico being monetized or...

Yes, that's right.

Yes. If you -- 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 topline. It's going to reduce our FX exposure because most of it is coming from this International business. It is going to improve our gross margin rate by about 100 basis points simply because the International business is doing a good job. But for market reasons there GP rate is lower than the average. So, it should lead us to get a 100 basis point gross margin improvement. And on the pure EBITDA margin as Peter and myself did share during our prepared 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 I would just add also an impact on DSO historically and it's not UK, it's 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.

Okay, great. And then just the last one for me I'm going to get back in the 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. You guys get in the additional interest since you last spoke about it. How has the pipeline kind of been looking for that program?

Yes. We're very encouraged by the I would call it the digital innovation and ability that we've demonstrated to bring technology and incorporated in solutions to our customers. I mentioned the we have technology we're deploying in our Professional and Industrial segment and the optimized local delivery. We -- Kelly Hilux 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.

Okay, great guys. Thanks for answering my questions.

Thanks Josh.

Thank you. We'll go next to the line of Marc Riddick with Sidoti.

Morning Marc.

Morning. So, it's certainly been a busy year for you. I wanted to 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 you -- 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 on that?

Yes. 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 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.

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 it was -- 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 ability issue or just availability of some attractive targets? Thank you.

I would say on 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 properties, unless they are high growth, high margin, quality and that it would be a good fit for Kelly. But about three years ago, when we set up our operating model, we recognize 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 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 the net margin improvement that we have on an organic basis.

I appreciate it. Thank you very much.

Okay. Thank you.

Thank you. [Operator Instructions]. And presenters there are no further questions in queue at this time.

Okay. Keelly thanks. I think we can call it a day then. Thank you.

Thank you.