Kelly Services Inc Q1 FY2023 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. Our 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.

Thank you, Rich. Hello, everyone, and welcome to Kelly's 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 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 2022 acquisitions of PTS and RocketPower, as well as the 2022 sale of our Russian operations. Finally, the slide deck that we are using on today's call is available on our website. Now, back to you, Peter.

Thank you, Olivier. I'll begin by sharing some brief thoughts on the broader context for Kelly's first quarter results. For the most part, the macroeconomic and labor market headwinds that existed in the fourth quarter continued in the first quarter, and those headwinds are widely reported and well understood. Overall, employers are being more deliberate about their talent strategy decisions. And as in all challenging times, some industries are showing more resiliency than others. Likewise, Kelly specialty solutions, where we have intentionally focused our growth strategy proved more resilient than the others. In our Education segment, our investments enabled us to meet rising demand and increase our first quarter fill rates. Our focus on more profitable outcome-based businesses in both P&I and SET, also yielded growth in the quarter as customers continued to demand our value-added solutions. As expected, in the current environment, our staffing businesses faced lower demand and we took action early in the first quarter to align expenses and to focus P&I on our local U.S. markets, improving our quarterly fill rates. On the whole, we delivered solid results in the first quarter. Throughout, the entire Kelly team maintained its focus on serving our clients and talent, capitalizing on growth opportunities, while managing costs and staying true to our strategic priorities. Their ongoing commitment to excellence is reflected in Kelly being named number one on Forbes 2023 list of America's Top Temporary Staffing Companies. I'll now turn the call over to Olivier, who will provide details about our quarterly results.

Thank you, Peter. For the first quarter of 2023, revenue totaled $1.3 billion, down 2.2% from the prior year, including 80 basis points of unfavorable currency impact. So revenues for the quarter were down 1.4% in constant currency. Included in that decrease are 140 basis points of favorable impact from our 2022 acquisitions of RocketPower and PTS, as well as a 230 basis points unfavorable impact resulting from the 2022 sale of our operations in Russia. So, our revenue was nearly flat at down 0.5% year-over-year on an organic constant currency basis. As you look at first quarter revenue by segment, our Education segment continues to report significant year-over-year growth, up 44% due to our improved fill rate and new customer wins as well as the acquisition of PTS. Education's organic revenue growth was 35% and continues to demonstrate that our Education business is resilient, even as broader economic trends softened. Placement fees in Education, primary education executive search with Greenwood Asher, were up 21%. Our OCG segment continued to deliver year-over-year revenue growth with revenue up 5% over last year in the first quarter, including the results of RocketPower. Organic constant currency revenue growth was up 4%. OCG delivered strong growth in our high margin RPO and MSP products, partially offset by declines in PPO. In the SET segment, revenue was down by 3%. During the quarter, we saw a continuation of the deceleration of demand that started in Q4 across our staffing specialties. Permanent placement fees were also impacted by a pullback in market demand and declined 32%. Despite these economic headwinds, demand has continued to be strong for our telecommunications specialty and many of our outcome-based solutions. Revenue in our Professional & Industrial segment declined 12% year-over-year in the quarter. Revenue from our staffing products declined by 19%, reflecting the impact of economic headwinds, which are more noticeable in this segment. The segment's outcome-based business delivered solid revenue growth of 15%, and the market continues to be strong for these value-added solutions. Permanent placement fees declined 58% and were impacted by lower demand for full-time hiring, as well as the impact of the prior year comparable, which included about $2 million in conversion fees from a single customer. Revenue in our International segment declined 16% on a nominal currency basis and was down 14% on a constant currency basis. Excluding the impact of the sale of our Russian operations, revenue declined 2% on an organic constant currency basis. Performance varies depending on geography and product. For the quarter, we had good revenue growth in Mexico, Germany, and Portugal, but had challenging trends in France and Switzerland. In total, placement fees were down 1% on an organic constant currency basis. Overall gross profit was down 1.7% on a reported basis, or 0.8% in constant currency. Our gross profit rate was 20% compared to 19.9% in the first quarter of last year. Our overall GP rate improved by 10 basis points. Our organic business mix continues to be a strong driver of our GP rate, generating 60 basis points of year-over-year improvement with an addition of 10 basis points coming from our recent acquisitions, which are higher margin businesses. These were offset by the 60 basis point unfavorable impact of our lower perm fees. SG&A expenses were up 3.1% year-over-year on a reported basis, or 3.8% on a constant currency basis. Expenses for the first quarter of 2023 include a $5.7 million restructuring charge. We took actions to manage costs in response to the current demand levels and to reposition our P&L staffing business to better capitalize on opportunities in local markets. Q1 2023 expenses also include an additional $5.1 million of intangible amortization and other operating expenses of RocketPower and PTS. So adjusted organic expenses were flat year-over-year in constant currency. This reflects a balance of proactive cost management efforts to align expenses with demand for our services, while still continuing to invest additional resources in businesses that are delivering strong revenue growth. Our earnings from operations for the quarter were $10.7 million compared to $23.4 million in Q1 of 2022. As noted, our 2023 Q1 results include the $5.7 million of restructuring charge. So adjusted earnings from operations in Q1 of 2023 were $16.4 million and adjusted EBITDA margin was 2%. As a reminder, Kelly's Q1 2022 earnings before taxes also include the impact of the 2022 sale of our non-core investments in APAC. Notwithstanding the prior year non-cash charges, the APAC transactions unlock $235 million of capital. Income tax expense for the first quarter was $1.8 million, compared with our 2022 income tax benefit of $13 million. Our effective tax rate for the quarter was 13.9%. And finally, reported earnings per share for the first quarter of 2023 were $0.29 per share, compared to a loss of $1.23 per share in 2022. Adjusted EPS for the first quarter of 2023, excluding the restructuring charge, the net of tax was $0.40. After adjusting for the Persol transactions and related impacts in the prior year, as well as a gain on sale of assets net of tax, Q1 2022 EPS was $0.44. So, on a like-for-like basis, EPS declined by 9%. Now, moving to the balance sheet as of the end of the quarter. As of the end of Q1, cash totaled $112 million compared to $154 million at the end of 2022. And we ended the first 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, we continue to have ample capital available to deploy. As of the end of Q1, accounts receivable was $1.5 billion and decreased 6% year-over-year, reflecting a year-over-year decrease in DSO, as well as a decrease in revenue. Global DSO was 59 days, a decrease of two days from year-end 2022, and three days lower than the first quarter of 2022. For the first quarter of 2023, we used $18 million of free cash flow. Our Q1 free cash flow trend reflects the historical pattern, resulting from the payment of prior year annual performance-based incentive compensation in the first quarter. Our accounts receivable balances declined since year-end 2022 primarily as a result of favorable DSO trends. But the majority of those receivables are related to our MSP programs and are funded with supplier payables. So the change had a little net impact on free cash flow generation this quarter. We have also continued to execute against the $50 million share repurchase program that we announced in November, buying approximately 1.1 million shares for $18.3 million in the quarter and bringing the total repurchase to $26.1 million program to date. As for looking ahead, as we noted in our call in February, we are navigating the market environment created by the current economic uncertainty with the continued commitment to the execution of our specialty strategy. So, reflecting on our Q1 results and given continuing economic headwinds, we expect Q2 organic constant currency revenue trends to be consistent with Q1, roughly flat versus prior year. We expect Q2 reported revenue to be down 2% to 3%, including the favorable impact of the 2022 sale of our Russian operations of 220 basis points. We expect our Q2 GP rate to be about 20.5%, down 20 basis points versus last year. This reflects the continued shift in mix to higher-margin specialties, offset by the impact of lower permanent placement fees. We expect SG&A expenses to be down 1% to 2%. This includes the savings from our Q1 restructuring actions, which are partially offset by investments in our Education business as revenues grow and continued investment in our technology initiatives. Based on our outlook for Q2, we expect adjusted EBITDA margin of 2%, similar to Q1. And finally, we expect a Q2 effective income tax rate in the mid-teens, which includes the impact of the Work Opportunity Tax Credit, which has been enacted through 2025. And I'll now turn it back over to Peter to discuss his observations on the execution of our specialty strategy and upcoming actions.

Thanks for those details, Olivier. In February, I shared that as we are approaching the three-year anniversary of our operating model, we would be reviewing our growth and efficiency objectives to determine how to accelerate Kelly's progress towards becoming a specialty talent solutions provider. We have made progress on our growth journey; growing gross profit and improving our gross margin percentage by shifting to a higher-margin, higher-growth business mix, unlocking value by monetizing non-core assets and reinvesting that capital in future growth through our inorganic and organic investments. That said, our progress has not yielded the necessary meaningful improvement to the bottom line. Accordingly, we intend to continue sharpening our focus on reducing organizational complexity and inefficiencies and finding new avenues of growth. This will mean creating structural improvements in our business, converting more of our revenue and gross margin gains to a significantly improved net margin, and achieving the profitable results I know we can deliver. That's why we have initiated a comprehensive and intensive transformation initiative to optimize our business and functional operations in a sustainable manner, unlock additional value-creating opportunities, and accelerate profitable growth. Our goal is to build on the progress we've made in the last three years to create long-term structural improvements that will benefit our employees, the talent we place, our customers, and shareholders. The success of an effort with this ambition depends on having the right people at the table with a clear line of accountability, undivided focus, and a mandate to act swiftly and decisively. To that end, I have appointed an internal leader to the role of Chief Transformation Officer reporting directly to me. This individual brings extensive experience leading complex transformations at several large enterprises before joining Kelly. He oversees a Transformation Management Office that we have formed to identify value-creating opportunities across the enterprise, drive the necessary changes to realize these opportunities, and ultimately accelerate profitable growth. Furthermore, we've engaged an outside consulting firm that brings deep business transformation expertise, world-class data and analytics capabilities, and a tested model to inform our efforts. Let me be clear. As a result of our work, we expect to see meaningful improvement in our EBITDA margin rate starting in the second half of this year, with full benefits realized in 2024. Achieving our aggressive goals is our highest priority, and we have the full support of the Board and management team. Coupled with our newly-created Transformation Management Office and external consultants, I am confident that we have the right pieces in place to realize our collective ambitions. We remain committed to transparency and accountability and, beginning in August, we intend to provide regular updates by which you can measure our progress. As we embark on this next phase of our growth journey, I am filled with optimism that Kelly will emerge positioned for long-term growth. The path that lies ahead won't be without challenges, but I have no doubt that our team will persevere and deliver on our commitments. I look forward to sharing more in the quarters to come. Rich, you can now open the call to questions.

Certainly. We'll now take questions from Joe Gomes with Noble Capital. Please go ahead.

Good morning. Congrats on the quarter, and thanks for taking my questions.

Good morning, Joe. Thank you.

Good morning, Joe.

Since you ended up on the business transformation program, let's start right there. Just trying to get a better handle and understanding of all this. You've done something similar in the past, as you just described, what's kind of different this time? What's the cost to this program? And when you talked about meaningful EBITDA margin improvement, can you quantify those types of numbers for us?

Yes, Joe, thanks for the question. The transformation is something we're very excited about. I think it's going to prove to be a positive in the long term for Kelly. I'll let Olivier maybe comment on the investment or cost question. But it's different this time, Joe, for a couple of reasons. One, we're focusing on both growth and efficiency. We've done a good job of growing our gross profit and our gross profit percentage. And we continue to look for ways to add to those through our higher margin and higher growth solutions. At the same time, we have undertaken a comprehensive review of the whole company in terms of the ways that we work, our business processes, technology to try to find additional efficiencies that we can apply that are going to convert more of our gross margin to net margin. And that's really what this transformation is all about. And we have retained an outside expert to help us with that. That's not something we've done before. And this is an exhaustive review, driven by data, and we have expectations that in the coming quarters, we'll be able to share more details about the financial performance that we expect as a result.

Yes. It's about structural improvement, not only on the cost base, but also in our capabilities to allocate our resources differently to accelerate our growth. Part of the transformation is going to be investing, for instance, in technologies, new products, and so on. On your question about the cost to execute, yes, there are going to be a cost to execute. As Peter was sharing during his prepared remarks, we plan, of course, to talk about our expectations for the second half of this year and beyond 2023 in August, and we are going to talk about the cost to execute as well at this time.

Okay. Thank you for that. Let's switch to hopefully a little more happier or brighter topic, so to speak. So, you recently released the Digital Workers program. I was wondering, Peter, can you give us a little more color on that, the potential, the reception so far? Although I know it's been relatively early. I mean it sounds something that is really interesting you could drive results at Kelly there for an area where it might be difficult to get people to take our jobs these days.

Yes. Joe, we're very excited about it. The Digital Worker is, we think, a solution that the time is ripe for that. We have received very positive reception from our customers, both existing customers and new customers. It is still very early. But the idea is that, in today's environment, the cooperation of companies to apply technology and people in a more thoughtful way creates really exciting opportunities for efficiency, productivity, and new products. And that's the sort of promise of the Digital Worker. It's not intended as a necessarily a replacement for workers as much as it is an augmentation of workers to make them more efficient to allow them to focus on meaningful work and use technology to eliminate or compensate for more redundant ministerial work that often gets in the way of employee satisfaction, employee productivity. And again, we've received very positive feedback from our customers and potential customers.

Thank you. I have one more question before I return to the queue. Clearly, RocketPower has experienced a few challenging quarters. Could you provide an update on that business? I'm curious about your efforts to leverage their capabilities outside of the high-tech sector and how that is progressing. Thank you.

Yes. So the integration with the legacy Kelly RPO business is going well. As you mentioned, the tech sector has been hit pretty hard. And as a result, RocketPower has faced some considerable headwinds. But we're managing the expenses within RocketPower accordingly, and we're integrating its delivery model into our other RPO operations. It's still early, but we're seeing positive results and are pleased with the integration results so far.

We have an integration of our middle and back office infrastructure support in progress, which we aim to complete by early July. This will effectively complement what Peter was discussing in terms of costs.

Okay. Thank you.

Thanks, Joe.

Thank you, Joe.

And our next question will come from the line of Kartik Mehta with Northcoast Research. Please go ahead.

Good morning.

Good morning.

Good morning. As you consider potential structural changes and the evolution of the company to enhance profitability, do you foresee the need for acquisitions, or is this more about optimizing your existing portfolio for greater efficiency?

Good morning, Kartik. We will continue to focus on investing organically in our high-growth, high-margin businesses while also pursuing inorganic investments when we identify high-quality properties that can enhance our portfolio with high-margin, high-growth solutions. This strategy will remain unchanged as part of our initiative. The initiative involves examining our business processes, technology, and how our individual business units market themselves, as we see significant potential in leveraging the blue-chip client base that Kelly has. We will dedicate considerable time to this effort. We are also evaluating the markets we serve and our delivery methods. Overall, it is a comprehensive review aimed at improving both growth and efficiency.

And then if you look at the trends that you're seeing in April, how would they compare to kind of what you saw in the first quarter or maybe how you exited the first quarter?

Yes. If you think about the outlook we have for Q2, we have said and we anticipate, and this is what we see now when I look at the April and early May, basically, we anticipate revenue-wise, a very similar quarter in Q2 as compared to Q1 with the same kind of dynamics. So something where you can say organic constant currency growth is going to be nearly flat. We are going to continue to see Education having very, very good traction, and we have seen that for several quarters. We continue to see that in April. And so far, we have not seen any significant changes in early Q2 versus Q1. Our exit rate in Q1 is pretty similar to the average of the quarter. So, we anticipate really something very similar on the top line. And as I said, our cost base is going to continue to go down post our Q1 restructuring. So, the main purpose of this restructuring was really to align our resources on the type of demand we see now.

Perfect. Thank you so much. I appreciate it.

Thank you, Kartik.

Thank you.

We'll now go to the line of Kevin Steinke with Barrington Research. Please go ahead.

Good morning, Peter and Olivier.

Good morning, Kevin.

Good morning.

I wanted to inquire more about the growth aspect of the transformation initiative. You mentioned exploring new avenues for growth and possibly reallocating resources to enhance it. Can you provide any additional insights on that? What types of opportunities do you think might be discovered? Additionally, I assume that the growth aspect will take longer to materialize compared to the cost side, and that the EBITDA margin improvement you mentioned for the second half will largely stem from cost reductions. Is that the correct way to understand it?

You're correct that growth may take a bit longer, Kevin. When we established the operating model three years ago, we aimed for the business units to concentrate on their areas of expertise and markets, and they've excelled in that. This success is reflected not only in the gross profit amount but also in the gross profit margin, which is currently at its highest in 25 years. Our focus now is on enhancing growth by converting more of that gross margin into net margin. We believe there are opportunities to reallocate resources towards high-margin, high-growth businesses. Even in Q1, these businesses have demonstrated resilience against downturns or macroeconomic challenges. We see a significant chance to allocate our resources more effectively through this assessment. It also presents us with the opportunity to seek collaborative growth avenues between our business units, not due to any reluctance to collaborate, but because they have been concentrating on their specialties. Ultimately, we have a robust customer base, and we believe there is substantial potential to enhance our share within our existing customers moving forward.

Okay. Great. So yes, it sounds like, maybe, a lot more opportunity for cross-selling between the segments. How much of that is going on now? And I guess, what's the opportunity there?

Yes, there is a lot of opportunity. There's a lot of upside. We have part of the work that's underway is evaluating both the structure and the processes and the go-to-market strategies that we apply. And we believe that there are some quick wins that are available to us. But longer term, we think creating customer relationships that are sustainable and stickier, and we have more of our solutions delivered into each of our customers is something that we're spending a lot of time on and expect to come from this effort.

Okay. Great. I’d like to make an overall comment on the labor market. You've mentioned some softening demand in certain areas and customers delaying decisions. Is there still a general imbalance between demand and supply, considering the low unemployment numbers and job openings compared to hiring metrics? What is your current perspective on the labor market?

Yes, the imbalances in the labor market still exist, Kevin, but they are not as severe as they were a year ago. We are noticing an increase in talent supply, particularly in the Education sector. Our fill rates have improved across the board in Education as individuals view roles in teaching, substitute teaching, and tutoring as opportunities to supplement or become their main source of income. This indicates some loosening of the previously tight labor market, although it remains tight, especially in the professional and technical fields. Demand continues, but it varies by industry and sector, making it difficult to generalize across all areas.

When we examine wage inflation within P&I, we are observing a continuing slowdown. The average wage inflation in P&I staffing was 1.8% in Q1, down from 14.2% a year ago. Our fill rate in P&I staffing has increased by about 9%. In SET, wage inflation remains high at around 9%, and the existing shortage seems to be a structural issue. In education, wage inflation has also started to slow down, reducing to about 4.5% from 9%. Additionally, as Peter noted, the fill rate has improved by about 10%, indicating some progress, although it is not a significant change. Overall, when considering wage inflation and fill rates, we are largely at the same levels as we were three to six months ago.

Okay. Thank you. That's very helpful color. Maybe just a couple more here. The Education organic growth rate continues to be very strong. In 2022, organic growth was running 40% to 45%. Now you reported 35% organic for the first quarter here. I mean, just trying to get a sense as to how sustainable these strong organic rates of growth are? Obviously, I would expect the rate to come down just as the business grows larger. But just trying to get a sense for the legs here and what sort of growth rates we can expect going forward?

The comparison is becoming more difficult because since the start of the second half of 2022, we have already been above the pre-COVID 2019 levels on an organic basis. Of course, we won't maintain 30% to 35% organic growth indefinitely. In the short term, we are still seeing significant momentum. There hasn't been any notable change at the start of Q2. One reason for this is that we are experiencing growth from various sources, including new wins, increased demand, improved fill rates, better bill rates, and good leverage. I do anticipate a slight deceleration in percentage growth, though not in absolute dollar growth, towards the end of this year. However, I don't predict this change will occur soon. I remain confident that in Q2, we will see a similar level of traction to what we have experienced in the previous quarters, and I don't expect any rapid changes in the near term.

Okay. Lastly, regarding the restructuring actions you took, I know you discussed the year-over-year SG&A trend in the second quarter. Can you quantify the savings from the restructuring? I understand that this will likely be offset by investments, but can you provide any numbers on that?

Out of the $5.7 million, about $3 million, so more than half, was really on P&I, because this is where we have seen in staffing. As you know, the demand continuing to be challenging. And we have done a few adjustments elsewhere, but I would say the main focus was on P&I due to the level of demand we see. When I look at Q2 guidance, minus 1% to minus 2% versus where we have been in Q1, I mean that should give you an idea of how we expect to trend in the near future until we have a better visibility on the demand, especially in some areas like P&I. So basically, moving from 3.8% growth in SG&A in Q1 to turning negative, minus 1%, minus 2% in Q2. And as you were mentioning, it is not that we do not continue to invest in Education where we need to continue to add more people, although we leverage, but when you grow at 30%-plus, you need to add more people, right? So you need to think about the balance between the two. But clearly, we are going to move from a 3%-plus growth in SG&A to minus 1%, minus 2% as soon as basically Q2. And when you look at our exit rate in Q1, we are starting to turn into a negative, meaning starting to overall reducing our SG&A, despite our necessary investment in Education. And as I mentioned in my prepared remarks, also related to our investment in technology, especially around our digital transformation.

Okay. Thank you for taking the questions. I'll turn it over.

Thank you.

Thanks, Kevin.

We'll now go to the line of Mitra Ramgopal with Sidoti. Please go ahead.

Yes, hi. Good morning, and thanks...

Good morning, Mitra.

Good morning.

Hi. Good morning. Thanks for taking the question. Just wanted to follow up again on the SG&A and the cost management actions you've taken. I know it's obviously meant to align with current growth opportunities. But trying to get a sense of how much of that is going to be on a permanent basis, or should we expect some of those costs to come back as market conditions improve?

Yes. On Q1, I would say the triggering event was really adjusting our resources to the level of demand we see now, right? Of course, if the demand is coming back, we may need to add some resources. But in a way, what we are thinking now is to make sure that we look at the current situation, not only on the pure tactical basis, but also linked to the transformation Peter was referring to and take advantage of this transformation initiative to really rethink the way we need to add resources when demand is going to pick up again. So, it is likely that some of the savings that we have initiated in Q1 are going to become structural when they are going to be combined with this broader, more structural improvement initiatives that Peter was referring to.

Okay. No, that's great. I know you're always going to be investing in the business, and you've highlighted the education and technology initiatives. Just curious, how far along are you on that front in terms of your targets?

Are you speaking of the Education segment?

And technology investments you're making, yes.

Yes. So as you noted, it's a continuous investment because we have to maintain our competitive edge, our market-leading position in Education, and we'll continue to look for ways to make our front lines more productive, whether it's through the introduction of technologies, AI and other resources like that or just the systems in which they operate. And that's something that we're focused on, because Education has such considerable upside that the amount of attention and investment that Education is going to get is more than other parts of our business that aren't growing as quickly and have less of an upside.

Okay. Thanks. And could you talk about the pricing environment right now and your ability to not only sustain, but even expand margins with pricing?

Yes. So the market continues to be competitive and we're evaluating our customers against the ideal price thresholds that we use. There is some slackening in demand, which makes the ability to raise prices a little bit more challenging, but we're continuously focused on that as well as other commercial terms, including the payment terms, which, as Olivier mentioned, we're very focused on DSO, making sure that we're making that a priority and it will be going forward.

One statistic I like to focus on is our spread in the temp staffing business. In P&I, it's increased by about 1.2% in Q1, and in SET, it's around 3.2%. We've noticed that this has been a consistent structural improvement, ranging from 3% to 4% each quarter. Education is about flat, indicating some pricing pressures; however, we're managing to pass wage inflation onto our bill rate in that sector. In SET, we continue to see structural improvements in our value profile, which is reflected in the spread. Additionally, we see some progress in P&I as well. A 1.2% increase in the current environment is something I would consider quite positive.

Okay. No, that's very helpful. And then finally, obviously, the expectation is in the U.S., the second half, we should see improved market conditions. Just curious what you think on the International front for the second half and beyond.

Yes. I mean we have clearly seen some slowdown in International. And again, usually, I would like to put on the side FX and Russia because it's creating a lot of disruption and misunderstanding. Things are slowing down. I mean the adjusted organic revenue growth in Q4 was about 5%. We are at minus 2%. But we continue to see very nice bright spots. I mean, Germany is still growing double-digit. We see the same thing in Portugal, Mexico as well, and a few other countries. But there are some countries like France and Switzerland, where there are clear headwinds, difficult to know how things are going to move. What I can tell you is when you look at our perm placement, we are only at minus 2% in Europe like-for-like, which is the best we have even if you compare with P&I and SET with the exception of Education that is plus 21%. So it's still a market where there is supply or talent shortage. There is the fact that the fee business is pretty resilient. On the temp side, difficult to know. I think it seems to be stabilizing at the level I was referring to. Difficult to know how H2 is going to look like. But I think some bright spots like Germany, Mexico, and others look pretty much resilient to the current economic environment.

Okay. No, that's great, and that's it from me. Thanks for taking the questions.

All right. Thank you, Mitra.

Thank you.

And with that, we have exhausted all questions in the queue. Please continue.

John, I think there's no other questions, we're good to conclude the call.

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