Title

Presentation

Kelly Services, Inc. beats earnings expectations. Reported EPS is $0.82, expectations were $0.65.

Operator: Good morning, and welcome to Kelly Services Ford 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, Inc. 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 investor relations. Please go ahead.

Scott Thomas: Good morning. And welcome to Kelly Services, Inc.’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 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 will 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 10-K. All of which can be accessed through our investor relations website at ir.kellyservices.com. I will now turn the call over to Kelly’s President and Chief Executive Officer, Peter Quigley.

Peter Quigley: Thank you, Scott. Good morning, everyone. Before I share my reflections on our fourth quarter and full year performance, I would like to discuss the leadership succession plan that we announced in our earnings press release earlier today. After twenty-two years with Kelly Services, Inc., 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 Services, Inc.

is well positioned to realize the value creation opportunities that lie ahead. I am 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 Services, Inc. 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 Services, Inc. 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 StatementWorks solutions. Both OCG and PNI 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 Services, Inc.’s journey. By capturing a greater share of customer demand and by more effectively converting top line growth to bottom line profitability. Today, I am 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 3.3% 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 Services, Inc.’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 MS solutions. Finally, we redeployed capital in pursuit of inorganic investments in high 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 markets. We delivered on these commitments in 2024, notwithstanding that 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 Services, Inc. is well positioned to compete and win. I will share more later on how we will leverage our momentum to propel us forward on the next leg of our specialty journey. First, I will turn it over to Troy Anderson, who will lead the financial discussion today. Having completed a successful transition with Olivier Thirot 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 Services, Inc. team for such a warm welcome during my first quarter with the company. It has been a pleasure diving into the business and seeing this team’s dedication and commitment. I am 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 are pleased with our strong fourth quarter and full year results and encouraged by the momentum we are building across our segments. As a reminder, for comparison, our reported results for 2023 included the European staffing business that was sold on January 2, 2024, and for 2024 include Motion Recruitment Partners since the May 31 acquisition date.

To provide greater visibility into the underlying trends in our operating results, I will 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 3.3% 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 PNI and SET, an even greater portion of gross profit also trended up positively.

Drilling down into revenue results by segment, I will start with education, which was up 12% year-over-year in the quarter, continuing its trend of double-digit revenue growth. Growth in the quarter reflects ongoing fill rate improvement, 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. That organic revenue was down 4%, which was an improvement versus the prior quarter, and outperformed the market despite the continued challenging environment. SET 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 third 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 StatementWorks 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 PPO specialty. Year-over-year declines in RPO and MSP reflect reduced hiring and contingent labor demand with our customers. Adding lower margin PPO revenue, pressured gross and net 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 industrial segment improved 4% year-over-year in the quarter, which is a significant improvement relative to recent quarterly trends. Revenue from staffing improved 3.7% year-over-year, reflecting the success of our omnichannel strategy. Revenue in the outcome-based specialties was up 5.9%, driven by strong demand in semiconductors, logistics, manufacturing, and distribution. Consistent with SET, PNI 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 perm fees.

The business mix impact showed improvement relative to prior quarters, reflecting 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 PNI, 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 lower performance-related incentive compensation expenses. You will 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 Softworld acquisition that we completed in 2021. While Softworld 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 Softworld’s specialty IT staffing statement of work, 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 cap in 2025 as we further integrate MRP with SET’s portfolio of specialty businesses, including Softworld. Reported loss per share for the fourth quarter was $0.90 compared to earnings per share of $0.31 in Q4 2023. On an adjusted basis, earnings per share was $0.82 compared to $0.93 in the prior year quarter. The decline versus the prior year reflects increased net interest expense of $0.12 following the MRP acquisition, and a one-time deferred income tax valuation allowance release benefit in 2023 of $0.25. 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.

110 basis points of margin expansion includes a 50 basis point organic improvement. All four segments improved 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. As we look ahead, I will reflect briefly on our full year results. Revenue was $4.3 billion, down 10.4%. However, organic revenue grew 0.5% 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 perm fees.

We reported a loss from operations of $15.1 million for 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 $0.02 and earnings per share of $2.34 on an adjusted basis, an increase of $0.14. We ended the year with total available liquidity of $154 million 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 will 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 have 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 and 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 year-over-year quarterly growth rates will not 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 few points of decline. 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 efforts over the past two years and will continue to actively manage resources and align 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 at the beginning of the year. For depreciation and amortization, all in, we expect approximately $13.5 million each quarter. Given all 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 initiatives. In closing, I want to thank our teams 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 will turn the call back to Peter for his closing remarks.

Peter Quigley: 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 will deliver top line growth by continuing to increase scale in our chosen specialties. To this end, we will continue to execute our organic growth initiatives, including our omnichannel delivery strategy in PNI, and our large enterprise account strategy, both of which we expect will continue to deliver gains in market share. In addition to these initiatives, our primary focus is the integration of MRP. Since completing the acquisition, we have 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 are integrating each of its respective offerings within our SET and OCG segments. We will combine Motion Recruitment’s 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 Services, Inc. into the top ten providers in the category. TG Federal will come together with SET’s government specialty, building upon the life sciences and engineering workforce solutions we currently bring to our public sector partners and adding 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 will combine MRP’s Seven Step business with Kelly OCG’s global RPO specialty. Differentiated by innovative technology, they will 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 earn-out period included as part of the MRP transaction. Among the leaders we have designated for each of the combined businesses are members of the deep experience management bench at MRP. By leveraging the unique strengths of each business, we are 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 will 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 are bringing together Kelly OCG and PNI under common operational management. This decision reflects shifting buying preferences among large enterprise customers as demand grows for integrated end-to-end workforce solutions that bundle traditional staffing services with advanced outsourcing and consulting capabilities. Unifying OCG and PNI positions Kelly Services, Inc. to address these preferences more effectively by simplifying our go-to-market approach and unlocking new value-creating opportunities.

The combined OCG and PNI business, along with our SET and Education businesses, will underpin a more streamlined operating model designed to accelerate profitable growth. Finally, we are 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 will 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 are positioned to deliver top and bottom line results that outperform the market on a consistent basis. Reinforcing that this is a different Kelly Services, Inc.

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 will 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 are grateful for their support as we move forward on our journey to unleash Kelly Services, Inc.’s full potential. Lib, you can now open the call for questions.

Operator: Our first question will go to Joe Gomes with Noble Capital. Your line is now open.

Joe Gomes: Good morning. Nice to meet you. Thanks for taking my questions. I wanted to start off on the education segment. Again, you know, really strong revenues were up by over 12%. But that was down, you know, if you look at the full year, I think they were up 15.5%. Anything unusual, whether you are expecting more in your education segment? Was it in line with your expectations for the quarter?

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

Joe Gomes: Okay. Are you with those at Skill Group? Twelve over twelve percent. So that’s fantastic there. And then in the release, you talked about some, you know, new customer wins and the sales pipeline momentum. And, Peter, just wanted to give us a little more color on that. You know, the kind of the number of wins or, you know, growth in the pipeline. You know, what more could you add to that statement that you had in the press release?

Peter Quigley: Well, in terms of education specifically, Joe, we have based on staffing industry analysts, Mark, we continue to take share, and we are taking share not just because we are competing on price, but we are competing on value. We are the market leader for a reason. We deliver higher fill rates and better performance for school districts across the country, and they recognize that value. And so we are 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 therapy business in combination with 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.

Joe Gomes: Okay. And on the M&A front, you know, anything there? How’s the market, I guess, our pricing, you know, is it kind of trending in your favor? There are more opportunities coming across the sale there. Maybe give us a little more color on that also.

Peter Quigley: 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 are actively monitoring the deal flow and actively engaged in conversations with companies that we think could be attractive additions to the Kelly Services, Inc. portfolio.

Joe Gomes: Great. I’ll get back in queue. You know, Peter, it’s been great working with you, and you’re going to be here hopefully to the end of the year, but I just want to congratulate you on the career.

Peter Quigley: Thank you. Thank you, Joe. Appreciate it. Likewise. Been a pleasure to work with you.

Operator: Thank you. And our next question coming from the line of Will Brinman with Northcoast Research. Your line is now open.

Will Brinman: Hey, guys. How’s it going?

Peter Quigley: Good. Well, how are you? Good morning.

Will Brinman: I’m good. So, you know, 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.

Troy Anderson: Yeah. Sure. This is Troy. Good to talk to you, Will. Thanks for the question. The staffing, so PNI was where we saw the strong demand on staffing in the quarter. Yeah. 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 PNI throughout the year with their omnichannel strategy and along with their large account strategy and the outcome-based solutions. So they had a good quarter of, you know, up 3.7% 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 know, you start to get some anomalies with holidays and weather and things like that.

But overall, it was consistent form. So we’ve seen consistent performance, improving performance throughout the year on the PNI 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.

Will Brinman: Okay. Great. That’s all. Thank you.

Peter Quigley: Thanks, Will.

Operator: Thank you. And our next question coming from the line of Kevin Steinke with Barrington Research. Your line is now open.

Kevin Steinke: Hey. Good morning.

Peter Quigley: Morning.

Kevin Steinke: 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, I think you just expect the environment to be similar to what it has been. So are we just kind of still seeing general cautiousness? You know, how are customers in your view thinking about the overall macroeconomic environment and how that might be impacting their, you know, their plans and, you know, overall demand? Thanks.

Peter Quigley: 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 that, you know, around budget and tax policy, etcetera. So that’s why we’ve landed on the first half of the year being a continuation of what we’ve seen in the prior few quarters. And, again, we’re pleased with the fact that we’re continuing to take share across our specialties and, you know, we will execute with that end in mind.

Kevin Steinke: Okay. That makes sense. Yeah. And just with regard to the organic growth outlook for the first half of 2025. You talked about education continuing to grow nicely, although, alright. Yeah. 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, and 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.

Troy Anderson: Yeah. Sure, Kevin. This is Troy. Appreciate the question. Our first half, you know, up ten, approximately ten with MRP and then, you know, roughly flat or modest growth on organic. It’s not significantly different than our 2H performance from 2024. We were up about two, if you look at the second half. So when you think about the market conditions as we were just discussing in the customer sentiment, you know, again, it’s not entirely different. And then you do 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 capture more share and expand into greenfield areas on the education side.

So I would expect, you know, not double digits in the first half, but maybe some uptick in the back half. On PNI, a little bit of a pullback maybe relative, you know, 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 PNI 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 in 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 Q4 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 and are 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.

Kevin Steinke: Alright. Thank you. That’s helpful color. 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?

Troy Anderson: 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 to any changes in 2025.

Kevin Steinke: Okay. Sounds good. Thanks for taking your questions. I’ll turn it over.

Peter Quigley: Thanks, Kevin.

Operator: Thank you. Our next question coming from the line of Marc Riddick with Sidoti. Your line is now open.

Marc Riddick: Hey. Good morning.

Peter Quigley: Good morning, Marc.

Marc Riddick: So first of all, Peter, I just want to say it’s 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. Okay. So I did want to touch a little bit on the actually, no. I wanted to go back for a moment. You did have a smaller acquisition that was announced back in November in the education space. Maybe because maybe you spent so little time talking about that, and I’m sure that how that opportunity came about with Children’s Therapy Center.

Peter Quigley: Yeah. Thanks, Marc. Small acquisition, 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 district customers. And because they’re clinics, they’re not bound only to school hours or even the 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.

Marc Riddick: Excellent. And then shifting gears, as far as the sort of cash usage and the like. But we did sort of notice and prepared remarks around the share repurchase activity during the fourth quarter. I wanted to sort of touch a little bit on that appetite going forward as well as it seems as though there seems to be some comfort at least in, 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 and prioritization you may have now and if that’s shifted at all over the last year or so. Thank you.

Troy Anderson: Sure. Thanks, Marc. This is Troy. Yes. Completed the $10 million share repurchase in Q4. It’s a two-year authorization. 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 very strongly in the Kelly Services, Inc. strategy and our ability to execute against that in 2025 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, organically and inorganically, 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 repay 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.

Marc Riddick: Great. Thank you very much.

Peter Quigley: Thanks, Marc.

Operator: Thank you. Now that I have 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.

Peter Quigley: Yeah. Thanks. Well, I think we can conclude the call. Thank you, everybody, for your time this morning and appreciate your participation. Thank you, Liz.

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