Kelly Services Inc (NASDAQ:KELYB) Q1 2019 Earnings Conference Call - Final Transcript

May 06, 2019 • 09:00 am ET


Kelly Services Inc (NASDAQ:KELYB) Q1 2019 Earnings Conference Call - Final Transcript


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George S. Corona

performed in the first quarter starting with Americas Staffing. Americas Staffing revenue increased 4% in the first quarter compared to the same period last year. This growth rate was favorably impacted by the strategic acquisition of NextGen. Excluding NextGen, revenue was flat in the first quarter consistent with fourth quarter results. Commercial staffing revenue was down 1% from the prior year. Kelly Educational Staffing revenue was up 7% in the first quarter. Revenue in our professional and technical specialties grew 26% in the first quarter compared to last year favorably impacted by the acquisition of NextGen. Excluding NextGen, professional technical revenue declined 2% for the quarter. On a combined basis, permanent placement fees increased 7% year-over-year. The first quarter gross profit rate in Americas Staffing was 18.7%, up 80 basis points from last year.

The gross profit rate for the quarter was positively impacted by the addition of NextGen and lower employee related cost. Expenses for the quarter were up 10% in Americas Staffing. The increase includes the addition of NextGen and a $6.3 million restructuring charge related to the repositioning of our service delivery model for growth, which we discussed last quarter. Excluding NextGen and the restructuring charge, expenses were down 2% compared to the prior year reflecting effective cost management. All told, the Americas Staffing segment achieved an operating profit of $16 million in the quarter compared to $16.1 million last year. Excluding the restructuring charge and NextGen, operating profit was $21.1 million, up 32% over the prior year. Now turning to our International Staffing operations outside of the Americas. Revenue in International Staffing decreased 9% in nominal currency, down 1.5% on a constant currency basis as the strengthening US dollar significantly impacted growth.

Our results in constant currency were consistent with our results in Q4 and gains in the Eastern European region partially offset 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 first quarter was down 7% year-over-year. The segment's reported GP rate for the quarter is 13.3%. This is 40 basis points below the same period a year earlier, driven mainly by customer mix. Expenses were 1% lower versus the prior year. In summary, International's reported operating profit was down $1.3 million compared to the same quarter last year excluding the $400,000 negative exchange rate impact. Now turning to results of our Global Talent Solutions reporting segment. This segment includes GTA, one of our new strategic acquisitions. Let's first look at how GTS performed as a whole in the first quarter.

GTS revenue increased 3% year-over-year in Q1. Excluding the impact of our GTA acquisition, revenue growth was consistent with the fourth quarter of last year. Gross profit increased 9% year-over-year in Q1. Excluding the impact of the GTA acquisition, GP increased 6% year-over-year. 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