Kelly Services Inc (NASDAQ:KELYA) Q3 2019 Earnings Conference Call Transcript

Nov 06, 2019 • 09:00 am ET

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Kelly Services Inc (NASDAQ:KELYA) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to Kelly Services Third 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.

I would now like to turn the meeting over to your host, Mr. Peter Quigley, President and CEO. Sir, you may begin.

Executive
Peter Quigley

Thank you, John, and good morning. Welcome to Kelly Services 2019 third quarter conference call. I'm Peter Quigley, Kelly's President and CEO. With me on today's call is Olivier Thirot, our CFO.

Let me remind you that 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.

Before I turn to our quarterly results, I want to take a moment to say how honored and excited I am to be serving as Kelly's fifth and newest President and CEO. Like my predecessor, George Corona, I have a profound respect for the people of Kelly and an unshakable belief in our mission of connecting people to work in ways that enrich their lives. This Company has a rich history and a bright future ahead. As George mentioned on our Q2 earnings call, he'll be staying with Kelly as an adviser until he retires in the first half of next year. I look forward to working with George and the other members of the Board in the months ahead as we continue to ensure a smooth transition.

Now let's turn to Kelly's third quarter results. As we do so, please note that year-over-year comparisons are represented in nominal currency with the exception of our International Staffing segment, which is in constant currency.

Looking at key measures of Kelly's Q3 performance, this was a challenging quarter. Revenue was $1.3 billion, down 5.6% compared to the third quarter of last year. Our gross profit rate was up 20 basis points, and earnings from operations was down 22%. These results reflect several factors, both internal and external.

From an internal standpoint, as mentioned on last quarter's call, Kelly undertook a significant and necessary restructuring of our US branch operations in Q1. The changes we made are designed to accelerate growth in our focused specialties and create a better balance in our business mix, which is currently overweighted toward economically-sensitive lower-margin light industrial business. At the same time, we exited several high-volume, low-value accounts.

While we remain confident in