Kelly Services Inc Q1 FY2022 Earnings Call

Good morning, and welcome to Kelly Services' First 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 first quarter 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, sir.

Thank you, Steve. Hello, everyone, and welcome to Kelly Services' first quarter conference call. With me today is Olivier Thirot, our Chief Financial Officer, who will walk you through our safe harbor language, which can be found in our presentation materials.

Thank you, Peter, and good morning, everyone. 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 those 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. References to organic growth in our discussion today exclude the results of our Q2 2021 acquisition of Softworld. While we did complete our acquisition of RocketPower in the first quarter, which Peter will talk more about shortly, we'll be consolidating their operating results on a one-month lag. So while our balance sheet and cash flows include the initial impact of the acquisition, we'll start seeing the positive P&L impact of RocketPower in Q2. Finally, the slide deck that we are using on today's call is available on our website. And now back to you, Peter.

Thanks, Olivier. It's been an exceptionally productive start to the year, and Kelly's first quarter performance provided substantial evidence that our strategy is paying off. We achieved significant year-over-year improvement in revenue. We grew GP in every one of our five segments. Our GP rate reached its highest level in more than 25 years and we more than doubled our earnings from operations, all of which point to broad-based structural improvements in our business. We also restored our dividend to its pre-pandemic level of $0.075 per share, a sign of our Board's confidence in Kelly's performance and strategic progress. Our education SET and OCG segment each delivered double-digit constant currency year-over-year top-line growth. While the impact of Mexico's legislation led to an overall decline in International, we saw solid revenue growth in our European operations. And notwithstanding a modest decline in revenue, P&I substantially grew its GP and saw a significant growth in fees. In fact, fees were higher across all segments as companies continue to ramp up their hiring of full-time talent. As we approach just the second anniversary of our new operating model, we are pleased with Kelly's first quarter financial results. And early in 2022, we're excited about the progress we're making in executing our strategy. We entered the year committed to advancing our bolder, more acquisitive specialty growth strategy. In February, we announced noncore investments in APAC that provided approximately $235 million of capital and said then that we would redeploy that capital toward higher-margin growth. We haven't wasted any time. As of last week, we have completed 2 acquisitions this year. In March, we acquired RocketPower, a Silicon Valley start-up that diversifies and strengthens Kelly's fast-growing RPO business by targeting clients in the high-tech market. And last week, we acquired Pediatric Therapeutic Services, or PTS, a specialty firm that extends our leadership position in K-12 workforce solutions with the provision of in-school services, including occupational therapy, physical therapy, speech language pathology, and mental and behavioral health services. Though the 2 acquisitions are in separate businesses, one in OCG, the other in Education, both acquisitions clearly align with our inorganic growth strategy. Both meet our goal of expanding Kelly's presence in high-growth, high-margin specialties. Both offer significant opportunities for top-line synergies and both provide clients value by connecting them quickly to the right specialized talent. We were able to act decisively to acquire these highly attractive assets because of our strategic decision to monetize noncore assets in APAC. That move equipped us with an unprecedented amount of capital to invest in our specialty growth strategy. As a reminder, upon completion of the APAC transactions, and considering our borrowing capacity, we had more than $0.5 billion of capital available to pursue high-margin, high-growth acquisitions and drive structural improvements in our business that will deliver quantitative and qualitative results. Even after the RocketPower and PTS transactions, which totaled $140 million, we have ample capital to deploy and continue to carry no debt. As we execute our growth strategy, we are also making thoughtful long-term decisions about our portfolio of businesses. In the first quarter, we shared that we were considering options for Kelly's Russian operations, first and foremost, taking steps to ensure the safety and well-being of our employees in the region. After careful consideration, we have decided to transition our Russian operations. We are committed to an orderly transition of our Russian operations in full compliance with international and local laws. Now for a closer look at the details of Kelly's Q1 results, I'll turn it over to Olivier.

Thank you, Peter. In the first quarter of 2022, our revenue reached $1.3 billion, representing a 7.5% increase from the previous year, despite a negative currency impact of 150 basis points. When adjusted for currency, our revenues increased by 9% for the quarter. This growth included a positive contribution of 310 basis points from our acquisition of Softworld, which was partially offset by a 230 basis points decline due to regulatory changes in the Mexican staffing market enacted in Q3 2021. Although the ongoing situation in Ukraine has created economic uncertainties in Europe, our first-quarter revenues were not significantly affected. Analyzing revenue by segment, our Education segment saw substantial growth of 55% year-over-year, as the comparable period in 2021 was still dealing with COVID-related disruptions. We’ve maintained strong demand and gained new customers despite facing challenges in securing talent. Our Education business has successfully increased the talent supply and we've noticed improvements in our fill rate. Our OCG segment also showed year-over-year revenue growth, with a 10% increase over the previous year in the first quarter. This growth in OCG was driven by custom demand for RPO services and solid performance in MSP offerings, which were somewhat reduced by decreases in PPO due to some customer withdrawals. However, revenue from our Professional & Industrial segment dropped 5% year-over-year in the quarter, still reflecting supply chain disruptions and difficulties in meeting customer demand in the current talent landscape. Our outcome-based business reported a 9.9% decline in revenue year-over-year, primarily due to decreased demand from our call center specialty, which outweighed growth in other areas. Revenue generated from our staffing product fell by 3.5% due to lower work hours, although higher billing rates helped to mitigate some of this decline. In our International segment, revenue decreased by 7% on a nominal basis and was down 1% on a constant currency basis, negatively influenced by results in Mexico due to previous legislative changes. Conversely, revenue growth in the EMEA region remained positive, with a 9% increase in constant currency. In the SET segment, where we report results from Softworld, revenue rose by 25% on a reported basis and 10% organically. The organic revenue trends in SET have continued to differ across specialties but follow customer demands closely. We saw persistent recovery in telecommunications, strong demand for outcome-based solutions, and double-digit growth in our technology specialty. As we mark the first anniversary of the Softworld acquisition, we have sustained double-digit growth in their top line. Overall, we have consistently met the evolving talent needs of our clients, including placing talent directly into permanent positions. Permanent placement fees surged by 69% year-over-year in constant currency and increased by 26% sequentially. We have also observed significant growth in placement activity across SET, International, and Education, which includes contributions from Greenwood and Asia, with P&I also showing strong growth in fees of over 100% year-over-year. The increase incorporates around $2 million from conversion fees from a customer that adjusted its labor acquisition strategy. Our overall gross profit rose by 21.2% on a reported basis or 22.6% in constant currency. Excluding Softworld, gross profit increased by 16.2% in organic constant currency terms. Our gross profit margin improved to 19.9% compared to 17.7% in the same quarter last year, marked by a 220 basis point improvement. This improvement is attributed to several factors, including a 70 basis points contribution from higher operating fees and an additional 40 basis points from the Softworld acquisition, alongside reductions in employee-related costs and favorable business mix adjustments. SG&A expenses increased by 16% year-over-year in reported terms and by 17.2% on a constant currency basis. This increase includes expenses from the intangible amortization and operational costs associated with Softworld, which contributed 500 basis points to year-over-year expense growth. On an organic basis, expenses grew by 12.1% year-over-year in constant currency. The rise in SG&A is primarily linked to heightened compensation-related expenses for our full-time employees. We increased headcount in line with revenue growth and made noteworthy increases in performance-based incentives for our client-facing teams, alongside minor adjustments to base pay reflecting the need to attract and retain talent in the current market environment. Notably, earnings from operations for the first quarter reached $23.4 million, more than double the $10.6 million recorded in Q1 of 2021, which includes Softworld's operating earnings of $3.5 million. Excluding these, Kelly's earnings before taxes also reflect gains and losses related to our investment in and subsequent sale of Persol Holdings' common shares, which experienced a $52 million pretax loss due to market value changes upon sale, in addition to a $15 million related transaction cost. Additionally, we reported a $20 million noncash foreign exchange loss from liquidating our Kelly Japan subsidiary post-sale of the Persol shares, although the sale of our interests in the PersolKelly joint venture did not have a significant impact. We recognized a foreign exchange gain of $5.5 million tied to cash held in Japan following the sale of the Persol shares, until the funds were transferred to the U.S. Despite these noncash charges, the APAC transactions positively affected our cash flow, generating $235 million in additional liquidity. In terms of income tax, we recorded a benefit of $13 million in the first quarter compared to an expense of $10.5 million in 2021, with an effective tax rate of 21.2%. For the first quarter of 2022, we faced a reported loss per share of $1.23, down from earnings of $0.64 per share in 2021, mainly due to the impacts of the Persol share transaction and the liquidation of Kelly Japan. Adjusted for these transactions, Q1 2022 EPS was $0.46, compared to adjusted EPS of $0.12 in Q1 of 2021, nearly a 300% increase. Looking at our balance sheet at quarter-end, the sale from much of our investment in the PersolKelly joint venture provided cash proceeds of $114 million after taxes. The sale of our Persol Holdings common share investment generated approximately $145 million after transaction costs and expected taxes. We anticipate paying most of the taxes related to this transaction in Q2 of 2022. To finalize our shareholding arrangement with Persol, we repurchased Class A and B common shares, costing $27 million in Q1, which will result in about $235 million of cash after tax payments in Q2. This repurchase also enabled us to lower our shares outstanding by 4% without affecting share liquidity. We have begun using this capital to accelerate our strategic transformation, having completed the acquisition of RocketPower, which is reflected in our Q1 balance sheet and cash flows, along with the acquisition of PTS that concluded in early Q2. At the close of Q1, our cash balance stood at $230 million, slightly down from $239 million a year prior. We maintained no debt, which is consistent with nearly zero debt at the end of the first quarter of 2021. With $300 million in available capacity on our credit lines and our cash reserves following the Q2 payment of APAC transaction taxes and the acquisition of PTS, we have ample capital for future deployment. Our accounts receivable reached $1.5 billion, up by 19% year-over-year, reflecting the revenue increase and a rise in days sales outstanding, which was 60 days, up by 2 days from both year-end 2021 and Q1 2021. For Q1 2022, we utilized $108 million of free cash flow, indicative of increasing investment in working capital. This figure also includes approximately $29 million in cash outflows to repay deferred federal payroll tax amounts from 2022 under the CARES Act. We anticipate covering the remaining balance of $58 million on January 1, 2023. Now, back to you, Peter.

Thanks for those details, Olivier. We're encouraged by our momentum leaving the first quarter and the increased demand, healthy sales pipelines, and new customer wins we're seeing. We expect each of our specialty business units to deliver strategic contributions to this year's performance. In P&I, the well-publicized dynamics of the current labor environment require Kelly and our clients to adjust the ways in which we connect with high-quality talent, and we are responding with speed and agility. As Olivier mentioned, we are changing how we work with one of our large P&I staffing clients shifting to a direct hire model to better meet their needs. We are also making P&I's local teams more agile. In January, we made adjustments to the P&I organization to align with our local markets, enabling us to deliver service through the channel that works best for local talent and clients whether that be through technology, our branch network or an on-site arrangement. Notwithstanding ongoing talent shortages and supply chain disruptions, we expect P&I's new local alignment, coupled with the deployment of technology investments we've described on previous calls, will drive improved productivity throughout the second half of the year. In our SET segment, we said we wanted to see meaningful returns on our inorganic and organic investments. Our double-digit growth with and without Softworld in the first quarter, delivered on that expectation, and we expect meaningful contributions from SET for the remainder of 2022 and beyond. In Education, we committed to capture K-12 growth this year, improve our fill rates and further expand our adjacencies. And we achieved that growth in Q1 and started Q2 with our acquisition of PTS which creates yet another high-margin, high-demand specialty within the Education segment that can quickly drive synergies across our market-leading client portfolio. We also expect to see improving fill rates in our K-12 staffing business throughout 2022. In OCG, we said we would invest in our fast-growing RPO business, and that's precisely what we did in the first quarter with the acquisition of RocketPower, an innovative RPO leader in the high-margin, high-tech specialty. In addition, many of the sizable MSP wins from 2021 will begin to produce GP throughout 2022. And in our International segment, we said we expected continued growth in regional and local specialties. Our EMEA operations delivered solid top-line growth in the first quarter. Notwithstanding Mexico and our transition from Russia, we expect our International segment to continue delivering nice revenue growth for the remainder of the year. These growth strategies in our 5 business segments, together with our aggressive and focused use of capital, are designed to drive value for Kelly's stakeholders in 2022 and beyond. To share more about what we expect from the year ahead, I'll now welcome back Olivier.

Thank you, Peter. As we review our first-quarter results and look forward, we anticipate the continuation of several macro trends we are currently experiencing. There is a steady rise in the demand for talent alongside a persistent talent supply mismatch that affects our capacity to meet that demand. We also expect that recent inflation trends and wage increases across all skill levels will carry on into the second half of 2022. Additionally, anticipated interest rate hikes may exert pressure on certain industries as consumers and businesses adjust. Regarding Kelly, there are two unusual events that influence our outlook. First, we plan to transition our operations in the Russian market, which will decrease our 2022 revenues in the International segment and for all of Kelly by around 200 basis points. Second, one of our major customers has altered its labor strategy, transitioning from relying heavily on contingent labor to focusing on hiring talent directly as full-time employees. Although P&I has secured several large on-site transitions from competitors during the quarter, there won’t be enough to completely counterbalance the impact of this change in this particular customer's business during Q2. Nevertheless, we still anticipate an organic revenue increase of 4.5% to 5.5% for the full year in nominal currency, excluding the effects of our acquisition of RocketPower and PTS. In other words, we are raising our outlook for our non-Russian business by approximately 200 basis points. We also expect an additional 150 basis points of inorganic revenue growth from our recent acquisitions of RocketPower in the OCG segment and PTS in the Education segment, bringing our expected overall revenue growth to 6% to 7% for the full year. Our outlook assumes no significant changes in the impact of COVID-19 or major deterioration in macroeconomic conditions. As mentioned in prior calls, International's revenue growth rate will continue to face negative effects from the Mexico legislation change until we anniversary its impact in the second half of 2022. While we are not providing quarterly guidance, we believe that the Q2 organic revenue growth rate may be below our full-year expectations, influenced by the factors mentioned. However, we expect to see an increasing revenue growth rate as we enter the second half of the year. We project our gross profit rate to be around 20%, reflecting a 130 basis point improvement from the 18.7% gross profit rate reported for 2021 on a full-year basis, including 20 basis points attributable to our recent acquisitions in 2022. Our ongoing structural improvement in gross profit rate expectations is indicative of sustained growth in our fee-based business, a shift towards higher-margin specialties, and a more gradual growth pace in our lower-margin specialties. We anticipate SG&A expenses to increase by 6% to 7% on an adjusted organic basis. We are actively working on various initiatives to realize cost savings and adjust our expenses, including additional measures taken in Q1. Nonetheless, we continue to face pressures related to talent attraction and retention in the current market. We are concentrating on a range of initiatives in this area, including offering higher incentive compensation for our full-time employees. Furthermore, we will keep focusing on technology initiatives aimed at improving the experience of talent placed on assignment. We remain dedicated to enhancing productivity across all our business units and ensuring that our investments in talent yield the necessary workforce for future objectives. We also expect our two recent acquisitions to contribute approximately 200 basis points of SG&A expense growth, factoring in intangible amortization expenses. As we implement our organic and inorganic strategy, we are using adjusted EBITDA and adjusted EBITDA margin as additional indicators of our progress in achieving profitable growth. Based on our 2022 outlook, we expect adjusted organic EBITDA margin improvements of 70 to 90 basis points from the 1.7% adjusted EBITDA margin reported in 2021. Lastly, we anticipate an effective income tax rate in the high teens, which includes considerations regarding the work opportunity tax credit, enacted through 2025. Now, back to you, Peter.

Thank you, Olivier. We entered 2022 with energy and optimism, and signaled that 2022 would be a year of bold progress for Kelly. Kelly is leaning into market opportunities with a well-defined and well-capitalized specialization strategy ready to use the resources at our disposal to accelerate our progress and increase value to our shareholders. We made a commitment to bold inorganic growth, and we started 2022 by providing unprecedented capital to enable that growth. The effectiveness with which we started putting our capital to work signals a newly confident Kelly, one that has chosen our specialties wisely, pursues high-margin growth where we know we can win and acts decisively to drive value for shareholders. We're thrilled to welcome RocketPower and PTS to the Kelly team, and we look forward to our shared success. At the same time, we're delivering on our promise to accelerate high-quality organic growth, driving significant improvement in GP while simultaneously investing in the talent and technology needed to bring innovative Kelly products to market with speed and impact. As we continue to execute against our specialty strategy in 2022, Kelly will create value for all of our stakeholders, talent, clients, suppliers, and shareholders alike. Steve, you can now open the call to questions.

Our first question will come from the line of Kevin Steinke of Barrington Research.

Hey. Good morning. Congratulations on the solid start to the year.

Thank you, Kevin. Good morning.

I wanted to start off by asking about RocketPower. Seems like a really nice acquisition, but can you just give us a sense as to what they bring to Kelly that is additive to what you were doing before in recruitment process outsourcing?

Yes. Thanks, Kevin. We're really excited about the RocketPower acquisition. It's another high-quality, high-margin, high-growth property that we think will add considerably to our existing Kelly RPO practice, which is also experiencing significant growth and demand. RocketPower participates in a high-tech industry that Kelly has not participated significantly in. So it broadens the customer base. There was literally no overlap in our customers between Kelly and RocketPower, and they have a delivery model that includes leveraging resources in Latin America that we think can be deployed in our legacy Kelly RPO practice to the advantage of our customers and also produce some meaningful financial returns.

Maybe, Kevin, I can add a few numbers. If you want to tell you a little bit more about what we call pro forma full-year expectations. So you know that the revenue of RocketPower in 2021 was about $28 million. If you think about our expectations and again, full year, not basically the pro rata temporaries that we are going to recognize based on the acquisition date. We expect revenue in the region of close to $60 million for the year. So if you compare that with $28 million in 2021, I would say, very high growth, and we have already seen that in 2021 versus 2020. The GP rate in the region of 44%, so gross margin, very, very high, and EBITDA margin in the region of 20%. So really a high-growth, high-value engine, as Peter, I think, was describing during his prepared remarks.

Great. That's very helpful. And can you give us just a sense as to how quickly you can capitalize on revenue synergies, both from RocketPower as well as your latest acquisition Pediatric Therapeutic Services in the education space?

Yes, it's a priority, Kevin, that top-line synergies is one of the parts of the investment thesis for both the RocketPower and PTS. And we think that there's opportunity, as I said, in the case of RocketPower to leverage their exposure in the high-tech market, which we don't have a lot of exposure to, to bring their delivery with our other customers. In the case of PTS, it's an adjacency that we've been looking for, a high-quality property to add to the K-12 portfolio. We believe we found it in PTS. We have school districts that are in need of the therapies that PTS provides, and it's just a natural complement to our leading K-12 core business to be able to support our school districts with the therapies that PTS provides, and we believe it's a platform that we can scale.

Great. I just want to ask you about the Education segment, really strong results, at least relative to my expectations, and we have been talking last quarter about labor shortages in that market. And you noted a meaningful improvement in fill rates and that your efforts to attract talent are gaining traction. So can you just talk a little bit about the Education segment, the momentum there, and your ability to attract more talent?

Yes. We are truly pleased with the results from Q1, particularly regarding the improvement in fill rates that we discussed last quarter. In several regions where Kelly Education operates, we are at or even surpassing pre-pandemic fill rates. While some areas are still lagging behind, all are showing improvement as more people return, health concerns decrease, and schools are open without vaccine and masking requirements. We are also optimistic about the pipeline of new achievements, having added several large school districts to our portfolio this year. As we look ahead to the 2022-2023 school year, we feel positive about the combination of better fill rates and rising demand.

I would add that we are seeing wage inflation continue. In Q1 for our Education sector, wage inflation was around 14%, which impacted the bill rate as well. This is beneficial for Kelly and also helps in attracting talent.

And as Olivier said, pay rates are high, and we're seeing an inflow of talent from the health care sector as the COVID-induced stress individuals are migrating to the education space, which adds to the labor pool for school districts, which is very positive for Kelly Education.

All right. Yes, that's an interesting dynamic that you called out there. Okay, great. So you talked about the shift to a direct hire model with your large P&I customer. It sounds like that's happening in other places across the market. I mean, when you talk to your customers, do you think this reflects a fairly permanent shift in their approach to hiring or attracting talent? Or do you think they might eventually revert back to the old model? Just what's your sense on just that market trend and the sustainability of it?

I don't think it's a trend. There are a few isolated cases where customers have shifted from using contingent workers to permanent hiring as a response to the talent shortage. However, the demand for contingent worker support is currently at a record high according to the American Staffing Association's penetration rate. Customers have recognized the flexibility that contingent labor offers, particularly in light of the COVID situation. It's difficult to say if these one or two customers will return to employing contingent workers, but we don't view this as a shift that will significantly affect our business in the long term.

Okay. Good. That's helpful. Just a couple more here. You noted the higher SG&A expenses related to higher compensation to attract and retain your own workforce. Do you feel like that you're in a good position now with those compensation increases to attract and retain the talent you need to fulfill all the customer demand you're seeing?

Well, it's a competitive labor market, as you know, Kevin, and we're addressing some of that through increased compensation, which is important to recognize our employees' contributions to the success of our business. But it's not the only answer. We need to provide a compelling value proposition to our employees and provide a workplace that is flexible, that is inclusive and welcoming, and we have efforts underway to ensure that that's the case at Kelly. But it's a competitive environment. And we're doing everything we can to ensure that we have the talent and the capabilities we need to deliver on our strategy.

Okay. Lastly, as we consider the gross margin throughout the year, should we expect it to remain fairly consistent from quarter to quarter? You're at 19.9 in the first quarter and 20 for the full year. Is that relatively stable, or is there anything we should consider specifically for the second quarter and the quarters that follow?

No, I would say we are confident on the 20-plus percent for the year, including our two recent acquisitions. I think we have a solid set of dynamics that we see, with the fee business still up 68%. The mix that has been beneficial for years, along with spread improvement, especially in SET, where we're beginning to see our bill rate increasing at a faster rate than our pay rate. We expect all of these dynamics to continue as we have observed for quite some time now. Recently, I was reviewing our gross margin total; in 2018, it was at 17.6. We have managed to improve our gross margin every year since 2015, including in 2020, when market conditions were extremely challenging. Therefore, I would say it's a long-term structural improvement that we expect to continue this year and beyond.

Great. Thank you for taking the questions.

Thanks, Kevin.

Our next question will come from Joe Gomes of NOBLE Capital.

Good morning. Thank you for taking the questions. The first one is regarding your remarks; if you look at the P&I business and the International business, both experienced lower revenues but increased gross profit dollars and rates. I would like to know more about what is happening that allows you to raise the gross profit rate even with the decline in revenues in those two segments.

The headwind in the International segment is primarily due to Mexico. In EMEA, we experienced a 9% increase in revenue, indicating solid growth. However, in both cases, our staffing business is focused on enhancing the quality of the business we're acquiring, which allows us to concentrate on higher-margin opportunities in these segments. Additionally, in the case of P&I, we are providing higher-margin outcome-based solutions through our new operating model. This model enables us to offer outcome-based business process outsourcing and our SPS solution to all P&I customers, which command higher margins and are growing rapidly. This growth contributes to the improved gross profit performance in P&I.

Thank you for that insight. There has been significant movement; you mentioned an improvement in the GP rate over the years, and hopefully, this year, we'll reach a 20% rate. How much more potential do you think exists? Are we primarily looking at acquisitions similar to Softworld, or are there other strategies we can employ to continue increasing the GP rate?

Well, Joe, our strategy is both organic and inorganic. And we believe in both cases, we can improve our GP rate. And I think that's what you're seeing. It's a combination of the addition of high-quality, high-growth properties like Softworld, like PTS, like RocketPower, but also improving the solutions that we provide in our legacy Kelly businesses that command higher margins. Our outcome-based solutions command a higher margin, and we believe that there is upside in really all of our business segments to improve our GP rate. If you take education as an example, it's been relatively stable in Kelly Education, but the addition of PTS, which commands much higher margins, we think can have a meaningful impact on the GP rate in Kelly Education as well as Kelly overall.

Yes. So far, when you look back a little bit, when you look...

Right. Go ahead.

When you look back from, let's say, 2018, our average GP rate improvement, Joe, was about 40 to 50 basis points with about 2/3 that is basically purely organic. And we still have a lot of opportunities even organically, as Peter was describing.

And you talked a little bit on your full-time talent in some of the things that you're doing there. In your presentation, you talked about addressing the talent supply to meet customer demand. Just wondering outside obviously, increased pay. What other types of things are you being able to offer to help try and attract more talent for you so that you can meet your customers' supply-demand?

Well, as mentioned, Joe, it's about the value proposition. Today's workers want a flexible environment where they can adjust their work requirements around their other aspects of their life. We have a program that we started before the pandemic, 5 years ago, called Kelly Anywhere, which provides a level of flexibility that we think is very attractive to today's workers. So combined with that as well as improving our wellness and benefits plans, creating affinity groups, so individuals of all demographics feel welcome in the workplace. That's a potent combination to attract people as well as telling the story of our noble purpose of connecting people to work in ways that enrich their lives. Today's workers want to feel a sense of purpose, and we believe that Kelly offers that combination that they can be excited about coming to work every day in support of the great companies that we work with and the great talent that we work with.

Okay. I have one last question. I know you bought back the shares held by Persol and recently increased the dividend. However, given the current market conditions and how the stock has been performing, would you or the Board be interested in repurchasing more shares in this situation, or would you prefer to conserve that capital for possible acquisitions?

Well, we're reviewing all of the options with respect to capital allocation, Joe. We do that regularly with the Board, whether it's dividends or the possibility of share repurchase. We do believe that the best use of the majority of our capital is going to be to acquire high-quality properties like we've demonstrated with Softworld and RocketPower and PTS. But nothing is off the table, and we're regularly considering how to create value for our shareholders.

There are no further questions in queue at this time. Please continue, Mr. Quigley.

Steve, if there are no further questions, I think we can call it a day.

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