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

partially offset by decreases in our centrally delivered staffing. Now let's look at gross profit results in each of the two GTS businesses. Our talent fulfillment business is made up of our contingent workforce outsourcing, payroll process outsourcing, centrally delivered staffing, and recruitment process outsourcing solutions. Gross profit in the talent fulfillment business was down 2% year-over-year in Q1. The decrease was a result of lower volume in our centrally delivered staffing practice partially offset by lower employee related costs.

Our outcome-based business is comprised of our BPO, KellyConnect, and advisory service solutions, and as mentioned previously, the results of the newly acquired GTA organization. Gross profit in our outcome-based businesses increased 30% year-over-year, up 27% excluding the impact of our GTA acquisition. The like-for-like increase continues to be driven primarily by strong volume growth in both our BPO and KellyConnect products coupled with lower employee related costs. Overall, the GTS segment's gross profit rate was 20% for the quarter, up 110 basis points year-over-year. This improved rate is primarily a result of structural improvement in our product mix and lower employee related costs. Expenses in GTS were down 2% year-over-year. Excluding the impact of the GTA acquisition, expenses were down 4% year-over-year. The lower expenses were a result of lower performance-based compensation and continued effective cost management. All told, GTS first quarter operating profit was $25.7 million compared to $16 million a year ago, a 61% increase.

Now I'll turn the call over to Olivier, who will cover our quarterly results for the entire Company.

Olivier Thirot

Thank you, George. Revenue totaled $1.4 billion, up 0.9% compared to the first quarter last year. Our total Company reported results were unfavorably impacted by 200 basis points due to foreign exchange. So on a constant currency basis, our revenue growth for the first quarter was 2.9%. Our Q1 performance also includes the results of NextGen and GTA, which added 260 basis points to our total revenue growth rate. This was partially offset by the 60 basis point impact of the recent divestiture of our healthcare and legal specialty practices. Overall, the Q1 constant currency organic revenue growth was up slightly as modest growth in our Americas Staffing and GTS segments was partially offset by declines in International Staffing. Staffing placement fees were down 4% in nominal currency and flat with a year ago in constant currency. Continued positive momentum in Americas Staffing was offset by declines in fees in International Staffing.

Overall, gross profit was up 5.6% or 7.4% on a constant currency basis. Our gross profit rate was 18.2%, up 80 basis points when compared to the first quarter last year. Approximately 20 basis point of our GP rate improvement was due to the acquisition of NexGen and GTA, which are higher margin specialty businesses. On an organic basis, GP rate improved 60 basis points with 40 basis points coming from structural improvement in the GP rate and 20 basis points from adjustment for employee related cost. SG&A expenses were up 3.8%