Kelly Services Inc (NASDAQ:KELYA) Q4 2018 Earnings Conference Call - Final Transcript

Feb 13, 2019 • 09:00 am ET

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Kelly Services Inc (NASDAQ:KELYA) Q4 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
George S. Corona

in the fourth quarter, and revenue in our Professional and Technical specialties decreased 2% in the fourth quarter compared to last year. On a combined basis, permanent placement fees were flat year-over-year, as we anniversary several large prior year projects.

The fourth quarter gross profit rate in Americas Staffing was 18.3%, down 60 basis points from last year. The gross profit rate for the quarter was impacted by higher employee-related costs and unfavorable customer mix. Expenses for the quarter were down 3% in Americas Staffing. Expenses were lower, primarily due to performance-based compensation and effective cost management. All told, the Americas Staffing segment achieved an operating profit of $28.4 million in the quarter compared to $27.8 million last year. For the full year 2018, the Americas delivered $77.1 million in operating profit compared to $82.7 million last year.

Let's now turn to our International Staffing operations outside of the Americas. Revenue in international Staffing decreased 5% compared to the prior year in nominal US dollars. On a constant currency basis, revenue decreased 1% due to declines in Western Europe. For ease of reference, the remainder of my comments on International Staffing will be on a constant currency basis.

Fee-based income for the fourth quarter was up 11% year-over-year. The segment's reported GP rate for the quarter is 13.8%, a drop of 70 basis points from the same period a year earlier, driven by customer mix impact, partially offset by the fee growth mentioned earlier. Expenses were 3% lower versus the prior year, mainly due to our continued effective cost management. All told, International Staffing reported operating profit was $3.8 million compared to $5.6 million, a year ago. And for the full year, International Staffing delivered earnings from operations of $20 million compared to $22.1 million in the prior year.

Now, let's turn to the results of our Global Talent Solutions reporting segment. The GTS reporting segment reflects the two primary ways that large clients in this segment are buying from us, talent fulfillment, and outcome based services. I'll discuss each businesses results separately, but first , let's look at how GTS performed as a whole in the fourth quarter.

GTS revenue was flat year-over-year in Q4, while gross profit for the quarter decreased 2%. We continue to see structural improvement in our product mix this quarter with year-over-year volume increases in our BPO, KellyConnect and CWO practices offset by decreases in our centrally delivered staffing practice. Despite the improved product mix, our gross profit decreased during the quarter due to higher employee-related costs versus a year ago.

Now, let's look at gross profit results in each of the two GTS business segments. Our talent fulfillment business is made up of our contingent workforce outsourcing, CWO; payroll process outsourcing, PPO, essentially delivered staffing and recruitment process outsourcing, RPO solutions. Gross profit in the talent fulfillment business was down 9% year-over-year for the quarter. This was a result of the decreased volume in our centrally delivered staffing practice coupled with increases in