Kelly Services, Inc. (KELYA) Q4 2022 Earnings Call Transcript

Kelly Services, Inc. (NASDAQ:KELYA) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Peter Quigley - President, CEO & Director

Olivier Thirot - EVP & CFO

Conference Call Participants

Joseph Gomes - NOBLE Capital Markets

Kevin Steinke - Barrington Research Associates

Jack Boyle - Northcoast Research

Mitra Ramgopal - Sidoti & Company

Operator

Good morning, and invited to nan Kelly Services' Fourth Quarter Full Year 2022 Earnings Conference Call. [Operator Instructions]. Today's telephone is being recorded astatine nan petition of Kelly Services. If anyone has immoderate objections, you whitethorn disconnect astatine this time. A 4th fourth webcast position is besides disposable connected Kelly's website this morning.

I would now for illustration to move nan gathering complete to your host, Mr. Peter Quigley, President and CEO. Please spell ahead.

Peter Quigley

Thank you, Keely. Hello, everyone, and invited to Kelly's 4th fourth convention call. With maine coming is Olivier Thirot, our Chief Financial Officer, who will locomotion you done our safe harbor language, which tin beryllium recovered successful our position materials.

Olivier Thirot

Thank you, Peter, and bully morning, everyone. Let maine punctual you that immoderate comments made during this call, including nan Q&A, whitethorn see forward-looking statements astir our expectations for early performance. Actual results could disagree materially from those suggested by our comments, and we person nary responsibility to update nan statements made connected this call. Please mention to our SEC filings for a explanation of nan consequence factors that could power nan company's existent early performance.

In addition, during nan call, definite information will beryllium discussed connected a reported and connected an adjusted basis. Discussion of items connected an adjusted ground are non-GAAP financial measures designed to springiness penetration into definite trends successful our operations. References to integrated maturation successful our chat coming exclude nan results of our 2022 acquisitions, RocketPower and PTS, arsenic good arsenic nan effect of nan waste of our Russian operations. We person besides provided nan descent platform that we are utilizing connected today's telephone connected our website.

And now backmost to you, Peter.

Peter Quigley

Thanks, Olivier. I'll commencement by sharing my position connected nan existent economical and labour marketplace dynamics to supply immoderate discourse for Kelly's afloat twelvemonth and 4th fourth results. The mixed shape of deceleration we saw successful nan 3rd 4th persisted done nan equilibrium of nan twelvemonth amid heightened economical uncertainty. In nan high-tech sector, layoffs continued arsenic much firms move to bring costs successful statement pinch slowing maturation pursuing a agelong play of description and fierce hiring.

Workforce reductions dispersed to nan financial services assemblage amid marketplace volatility and decreased user spending, driven by rising liking rates. Manufacturers besides trim jobs arsenic economical activity successful this assemblage began to statement aft 29 consecutive months of growth. In different sectors not broadly impacted by layoffs, a increasing number of employers, standard backmost aliases slowed hiring successful anticipation of greater headwinds successful 2023.

Notwithstanding these dynamics, nan labour marketplace remains tight. The system continued to adhd jobs successful nan 4th quarter, albeit astatine a somewhat slower gait to extremity nan year. Services industries, wellness attraction and unit accounted for nan bulk of nan gains arsenic employers successful these sectors proceed to retrieve from nan pandemic.

Unemployment remains astatine historically debased levels. vacancies are steady, and nan labour unit information complaint is comparatively unchanged contempt elevated costs growth. The nett result, occupation openings proceed to beryllium difficult to capable successful those sectors.

Even arsenic economical headwinds emerged successful nan 2nd half of nan year, Kelly remained laser-focused connected executing our specialty strategy, achieving coagulated maturation successful 2022. We accrued gross year-over-year, driven by apical statement gains successful our SET, Education and OCG businesses and accelerated maturation successful our outcome-based solutions. Every business portion expanded its gross profit margin, lifting Kelly's gross profit separator supra 20% for nan first clip successful much than 25 years, a important milestone successful our pursuit of higher margin, higher worth business. And we improved adjusted net from operations by 30% year-over-year, demonstrating our expertise to efficaciously construe gross separator description to net growth.

Together, these achievements awesome that our specialty strategy is paying off. 2022 besides marked a twelvemonth of bold action arsenic we accelerated our strategical transformation, streamlined our portfolio and created further worth for each our stakeholders. We ended nan transverse ownership statement betwixt Kelly and Persol and reduced our ownership liking successful our Persol and Kelly associated venture, unlocking $235 cardinal of liquidity while repurchasing our communal shares held by Persol for $27 cardinal successful nan process.

We redeployed a information of nan nett proceeds from those transactions to beforehand our inorganic maturation strategy while preserving nan remaining superior to prosecute further high-margin, high-growth acquisitions successful nan future. We monetized noncore existent property holdings, unlocking much superior to put successful maturation initiatives. And we acted decisively to transportation ownership of our Russian operations to a Russian company. And finally, we accrued our dividend to its pre-pandemic level and authorized a $50 cardinal repurchase of outstanding Class A communal shares.

These moves are suggestive of a caller Kelly, a Kelly that acts pinch urgency successful pursuit of profitable growth. Yet nan twelvemonth wasn't without its challenges. The effect of heightened economical uncertainty, I mentioned earlier, became much visible successful parts of Kelly's portfolio, particularly successful nan 4th quarter. The operation of mixed deceleration and labour marketplace tightness contributed to little gross successful nan 4th from our staffing products successful P&I and SET. This contrasts pinch maturation successful our higher-margin outcome-based solutions successful these segments, which demonstrated greater resilience and performed well.

Among different areas of resilience is our Education segment, which continued to turn astatine a accelerated gait crossed each specialties connected a year-over-year basis. We stay pleased pinch nan capacity of Greenwood/Asher and PTS, our caller acquisition successful nan pediatric therapeutic space. These higher-margin businesses some achieved gross maturation this 4th connected accrued demand.

In OCG, ongoing headwinds successful nan high-tech assemblage continued to effect request for nan services of RocketPower, our caller acquisition successful nan RPO space. This resulted successful a goodwill impairment complaint successful nan 4th quarter, astir which Olivier will supply much details. Notwithstanding these challenges, we made measurable advancement toward realizing much expected worth from this acquisition. We're accelerating integration efforts to leverage nan mixed spot of Kelly's customer relationships and RocketPower's transportation model. We're diversifying RocketPower's customer base, winning caller business extracurricular nan high-tech sector. And to thief mitigate apical statement declines successful nan adjacent term, we're taking steps to set SG&A.

Beyond RocketPower, we're stepping up our attraction connected SG&A guidance crossed Kelly. In consequence to a alteration successful leverage that we knowledgeable successful nan 4th quarter, we took swift action to negociate costs successful nan adjacent term, temporarily pausing hiring and reducing travel. As nan macroeconomic business evolves successful 2023, we're committed to ensuring our costs guidelines reflects our operating environment, our strategical priorities and our performance.

Longer term, we're reviewing our maturation and ratio objectives arsenic we attack nan 3-year day of our operating model. This includes continuing our activity to delegate expenses arsenic precisely arsenic imaginable to each of our 5 business segments, providing america pinch nan visibility basal to person much gross profit into earnings.

For much specifications connected Kelly's Q4 capacity and our afloat twelvemonth results, I'll move nan telephone complete to Olivier.

Olivier Thirot

Thank you, Peter. Before I excavation deeper into our Q4 results, which arsenic Peter mentioned, person been impacted by economical headwinds, immoderate comments connected our afloat twelvemonth capacity first.

Full twelvemonth gross was up 1.1% connected a reported ground and 3.2% connected a changeless rate basis. This reflects fantabulous gross maturation successful our Education business portion arsenic we captured further maturation opportunities and efficaciously managed talent proviso challenges. SET, OCG and International, excluding Russia, besides delivered coagulated changeless rate gross growth. Consistent pinch actions taken successful alignment pinch our specialty strategy, GP complaint improved 170 ground points connected a year-over-year basis. The higher GP rate, mixed pinch expanding revenue, resulted successful a 12.1% summation successful gross separator dollars successful changeless currency, and our GP complaint improved successful each BUs.

Finally, excluding nan impairment charges, we are capable to person nan higher gross profit dollars to amended earnings. As Peter mentioned, adjusted net from operations were up 30%, and adjusted EBITDA separator was 2.1%, up 40 ground points from a twelvemonth ago.

Now looking astatine nan 4th fourth of 2022 successful much details. Revenue totaled $1.2 billion, down 1.3% from nan anterior year, including 200 ground points of unfavorable rate impact. Revenues were up 0.7% connected a changeless rate basis. Included successful that summation are a 150 ground points favorable effect from our acquisitions of RocketPower and PTS, arsenic good arsenic a 270 ground points unfavorable effect resulting from nan waste of our Russian operations. So our gross was up 1.9% connected a non -- integrated changeless rate basis.

As we look astatine gross successful nan first 4th by segments, successful nan SET conception gross was up 1.7%. Demand has continued to beryllium beardown for our telecommunication specialty and galore of our outcome-based solutions. Growth successful different specialties was negatively impacted successful nan 4th by nan existent economical headwinds.

In our Education segment, year-over-year gross maturation continues to beryllium strong, up 53% arsenic reported and 43% connected an integrated basis, aliases excluding nan effect of our May acquisition of PTS. Our gross maturation successful nan Education business reflects robust request from existing customers and caller wins successful 2022. This level of maturation is accordant pinch Q1 to Q3 trends and demonstrates nan resiliency of nan Education business moreover arsenic nan broader economical trends soften. Placement fees, chiefly higher acquisition and executive hunt pinch Greenwood/Asher were up 67%.

Our OCG conception delivered different 4th of year-over-year gross growth, pinch gross up 3.5% complete past year. OCG results see nan effect of our March acquisition of RocketPower. Organic changeless rate revenues were flat. Declines successful PPO offset nan continued maturation successful our high-margin MSP and RPO products. I will supply much discourse connected nan business pinch RocketPower later successful my comments.

Revenue successful our Professional & Industrial conception declined 11.8% successful nan quarter. Revenue from our staffing merchandise declined 17% successful nan quarter, a deceleration from Q3 arsenic economical headwinds has historically much effect connected this conception early successful nan cycle. The segment's outcome-based business delivered coagulated gross maturation of 9%. And moreover pinch continued contraction successful nan year-over-year request from our telephone halfway specialty, maturation successful different outcome-based specialties was strong.

Revenue successful our International conception declined 16% connected a reported ground and was down 8% connected a changeless rate basis. Excluding nan effect of nan waste of our Russian operations, gross improved by 5% connected an integrated changeless rate basis. Permanent placement fees were besides resilient and were up 32% connected an integrated basis.

Overall gross profit was up 1.7% arsenic reported, aliases up 3.7% connected a changeless rate basis. Our gross profit complaint was 20.3%, compared to 19.7% successful nan 4th fourth of nan anterior twelvemonth for a year-over-year betterment of 60 ground points. The superior driver continued to beryllium favorable integrated business mix, which contributed astir 100 ground points for nan quarter.

Our 2022 acquisitions besides positively impacted our full GP complaint by astir 20 ground points arsenic some PTS and RocketPower make higher margins than Kelly's average. These improvements were partially offset by higher employee-related costs and besides little perm fees. Our SET, OCG and International businesses delivered nan astir important year-over-year betterment successful business operation and improved year-over-year GP rates.

SG&A expenses were up 2.4% year-over-year connected a reported ground and up 4% connected a changeless rate basis. Included successful our 2021 results are astir $4 cardinal successful restructuring charges, and our 2022 results are impacted by nan intangible amortization and different expenses of our caller acquisitions, arsenic good arsenic nan favorable effect of nan waste of our Russian operations.

So connected an integrated changeless rate basis, 4th fourth 2022 expenses grew by 4.3% year-over-year. This simplification successful nan SG&A maturation trends from earlier this year, and it does bespeak nan continued attraction connected costs management. We'll proceed to return steps to guarantee that we are prepared for uncertain economical conditions while continuing to money finance successful exertion improvements that will position america for semipermanent success.

During nan 4th quarter, we did study an further $10.3 cardinal goodwill impairment complaint related to RocketPower. As we person discussed previously, RocketPower provides RPO services chiefly to customers successful nan high-tech vertical. Beginning earlier this twelvemonth and accelerating successful Q4, location has been a simplification successful hiring activity successful this manufacture vertical, which we now judge will beryllium deeper and will past done March of 2023. The impairment complaint is simply a noncash point and does not effect our plans for RocketPower, including arsenic Peter mentioned, a attraction connected customer diversification and opportunities for synergies, which will let america to maximize nan worth of our finance successful nan future.

Our reported net from operations successful nan 4th fourth were $4.6 cardinal compared to $15.3 cardinal successful Q4 of 2021. Included successful Q4 of 2022 is simply a goodwill impairment complaint and successful Q4 2021 is astir $4 cardinal of restructuring charges. So connected an adjusted basis, Q4 2022 net from cognition of $14 cardinal declined 28% year-over-year. As Peter mentioned, we monetized our finance successful Persol Holdings and astir of nan PersolKelly associated task successful nan first 4th of 2022. So location will beryllium nary further P&L effect from some investments, but nan comparable play twelvemonth will see gains and losses related to those investments until we day nan transactions.

In nan 4th fourth of 2021, we recognized a $50 cardinal pretax summation connected our Persol Holdings communal stock. Also reported beneath net from operations successful nan 4th fourth of 2021, we realized a $19 cardinal onetime summation related to rate proceeds received from a colony of a declare connected nan practice and warranties security argumentation purchased successful relationship pinch nan acquisition of Softworld.

Income taxation disbursal for nan 4th fourth was $5.2 cardinal compared pinch our 2021 income taxation disbursal of $16.1 million. Our effective taxation complaint for nan 4th was much than 100% and was impacted by nondeductible losses connected nan rate surrender worth of company-owned life insurance.

And finally, reported nonaccomplishment per stock for nan 4th fourth of 2022 was $0.02 per stock compared to net per stock of $1.80 successful 2021. Loss per stock successful 2022 included nan effect of a goodwill impairment charge, nett of tax, partially offset by a summation connected waste of existent property property, nett of tax. Earnings per stock successful 2021 were favorably impacted by gains connected Persol shares and a summation connected security settlement, and partially offset by a restructuring charge, each nett of tax. So each in, connected an adjusted basis, Q4 2022 EPS was $0.18 compared to $0.65 per stock successful Q4 of 2021.

Now moving to nan equilibrium expanse arsenic of year-end. Cash totaled $154 cardinal compared to $113 cardinal a twelvemonth ago. Debt was astir 0, accordant pinch year-end 2021. And erstwhile combining our beardown equilibrium expanse pinch our existing borrowing capacity, we still person and proceed to person ample superior disposable to money our integrated and inorganic strategy, arsenic good arsenic navigating an uncertain macroeconomic environment.

At year-end, accounts receivable was $1.5 cardinal and accrued 5% year-over-year, reflecting our year-over-year summation successful gross arsenic good arsenic billings to MSP customers reported connected a nett basis. Global DSO was 61 days, an summation of 1 time complete year-end of 2021. For nan year, we utilized $88 cardinal of free rate flow. Free rate flows successful 2022 see nan last repayment of astir $87 cardinal of national payroll taxation balances, which were deferred successful 2020 nether nan CARES Act arsenic good arsenic $48 cardinal of income taxes owed successful Japan pursuing nan income of our finance successful Persol communal stock.

And during nan 4th quarter, we person started executing against nan $50 cardinal stock repurchase scheme that we announced successful November, buying astir 475,000 shares for a worth of $7.8 million.

As Peter mentioned, nan world system has grown progressively uncertain. As a result, we are not going to supply a general outlook for 2023 astatine this stage. However, I will stock nan pursuing observations. Through nan execution of our specialty strategy, Kelly has continued to toggle shape since nan past important economical disruption caused by nan COVID-19 pandemic successful 2020. We person remixed our portfolio towards higher-margin products and specialty, and we person demonstrated nan expertise to enactment pinch urgency to proactively negociate costs, to protect nan bottommost statement and sphere superior erstwhile necessary.

Our existent position for nan first half of 2023 bespeak that nan economical uncertainty will constrain apical statement maturation successful respective of our business units. We expect that our structural GP complaint betterment will continue, but apt astatine a slower gait than successful 2022. And finally, that will incorporate our SG&A to levels akin to Q4 of 2022 moreover while continuing to put successful our exertion initiatives and successful our people. If apical statement trends don't align pinch our existent expectations, we are prepared to return action -- further actions to align our costs building arsenic we move forward.

And pinch now each that, backmost to you, Peter.

Peter Quigley

Thanks for those insights, Olivier. It's difficult to cognize really nan macroeconomic business will unfold arsenic we move guardant successful 2023. What is definite is that we will attraction connected what we tin power and enactment nan people successful our fierce pursuit of profitable growth. In each of our chosen specialties, we'll proceed to displacement toward a business operation characterized not only by higher margins and worth but greater resiliency amid marketplace pressures. We'll thrust inorganic maturation utilizing nan ample superior disposable to america connected our equilibrium expanse to prosecute further high-quality acquisitions successful Education, SET and OCG. And we'll proceed to put successful exertion and caller products that will amended nan talent and customer experience, alteration integrated maturation and summation efficiency.

I person awesome assurance successful our team's expertise to meet nan infinitesimal and present connected these priorities. This has been a defining characteristic of Kelly group since our founding much than 75 years agone and has contributed successful nary mini measurement to nan longevity of our company.

With our squad laser-focused connected executing our specialty strategy and guided by our noble purpose, I look guardant to building connected nan affirmative momentum we generated successful 2022. Together, we'll create semipermanent worth for each our stakeholders, helping our talent and customers thrive and rewarding our shareholders for their patience since we embarked connected this transformation. We're grateful to each of them and to our Board of Directors for their unwavering support arsenic we move guardant connected our travel to unleash nan afloat imaginable of this awesome company.

Keely, you tin now unfastened nan telephone to questions.

Question-and-Answer Session

Operator

[Operator Instructions]. We'll spell to nan statement of Joe Gomes pinch Noble Capital.

Joseph Gomes

So conscionable benignant of wanted to commencement disconnected here. If we -- connected nan P&I business, if we look astatine that, it looked for illustration revenues benignant of accelerated connected a antagonistic extremity successful nan quarter. It was higher successful nan 4th quarter. The gross declined successful nan different quarters of nan year. Maybe you could conscionable springiness america a small much colour arsenic to what is going connected successful nan P&I segment.

Peter Quigley

Yes, Joe, I deliberation it's a reflection of what's going connected successful nan parts of nan system that we person vulnerability to. The P&I business has sizeable vulnerability to manufacturing, for illustration business distribution. And those businesses, successful particular, were impacted by nan headwinds that we saw, to immoderate grade successful Q3, but really accelerating successful Q4. And that's nan communicative down nan P&I. I besides mentioned that we still person yet to day nan nonaccomplishment of nan awesome customer we had that will day successful April of 2023.

Olivier Thirot

On nan flip side, I would say, and we did mention -- I did mention, our BPO business is still growing, contempt of nan truth that our telephone halfway business is still a small spot connected a benignant of challenging comparables. But overall, we grew this business by astir 9% successful Q4, which I deliberation is an betterment versus what we person seen moreover successful Q3 wherever it was astir 3.5%. So that I wouldn't opportunity that it's offsetting nan staffing, but it is thing we assumed to beryllium resilient for nan adjacent future.

Joseph Gomes

Okay. And switching complete to Europe, you telephone retired a number of different countries there, break that retired successful your tables. And I'm looking astatine it, evidently we cognize what happened successful Russia pinch nan sale.

But each nan different countries that you place extracurricular of Portugal were down connected a gross basis. Maybe you could talk a small spot arsenic to what you're seeing successful immoderate of those countries that would show nan sequential diminution -- nan quarterly diminution successful revenue.

Olivier Thirot

Yes. I would say, of course, you request to put connected nan broadside 2 things, right? One is, of course, speech rate, which is, of course, arsenic we did mention, again, impacting our P&L successful International. And of course, Russia until we day fundamentally nan transaction that did hap early July of 2022. So if you put these 2 things connected nan side, we are still increasing astatine astir 5%.

We are -- it's a small spot little than what we person seen successful Q3. Q3, we were awkward of 7%. So we spot a decline, but not, I would say, a beautiful pronounced decline. We still spot a batch of maturation successful Portugal, and you tin spot it connected our 8-K, 30% plus. We person seen that successful Q1, Q2, Q3 arsenic good arsenic Q4 of 2022.

We person seen immoderate slowdown successful Switzerland, successful France and successful Italy because of marketplace conditions, but I would opportunity it is much challenging than before, but I wouldn't telephone it arsenic a complete alteration successful trend. We still person agleam spots successful Germany that is mentioned successful other. And this is 1 of nan main reasons why different is still up by 14%.

In Germany, though nan gross is not big. It's a business wherever nan separator aliases nan gross separator is beautiful absorbing because of nan business mix. And we proceed to make immense advancement complete there. So we person besides a mates of different countries wherever we proceed to spot very bully traction. And of course, we don't disclose them because they are beautiful small, particularly connected revenue. But immoderate of them, for illustration including Germany, are creating very absorbing traction, astir apt much visible successful GP and bottommost line.

Joseph Gomes

Okay. And pardon me, you mentioned connected nan past telephone talking astir nan tech layoffs, astir really that mightiness supply a amended pipeline of candidates for immoderate of nan different verticals. Maybe you could talk -- are you seeing that? And what other are you needing to do? I cognize this is benignant of an ongoing and unfolding business to pull workers to capable positions that are open.

Peter Quigley

Yes. The request for nan talent that are progressive successful a batch of nan publicized layoffs successful nan tech assemblage are skills and capabilities that are successful request extracurricular of nan high-tech sector. The lag clip betwixt moving those group to different industries is measured by geography, by pressures that successful each industries customers are making hiring decisions slower, taking a small spot much time.

But clearly, nan request for those accomplishment sets is evident, and we're seeing it. It's conscionable that nan macroeconomic conditions doesn't construe instantly into moving group from -- up from Friday to Monday to a caller position. It takes a small spot longer. And we expect to spot nan benefits of that summation successful technology, talent and accomplishment sets passim 2023.

Joseph Gomes

Okay. And 1 more, if I may, connected RocketPower. Again, your past telephone erstwhile you were talking astir it, nan firm, you mentioned astir identifying synergies pinch nan remainder of Kelly, accelerating nan integration, diversifying nan portfolio. Maybe could you supply a small much item connected wherever you spot yourself progressing connected those goals for RocketPower?

Peter Quigley

Yes. We're very encouraged by wherever we are connected those 2 issues. But also, Joe, portion of nan finance thesis for RocketPower was being capable to return advantage of their Latin American transportation model. And we're encouraged by nan expertise not only to proceed to usage that for RocketPower customers, but besides to return advantage of that for either bequest Kelly RPO customers and besides usage it arsenic portion of our income efforts for caller RPO customers.

And we are seeing signs that, that portion of nan finance thesis is paying off, pinch customers we're talking to successful position of wherever they're looking to spot a little costs transportation and we're capable to supply that done that Latin American transportation exemplary that was portion of RocketPower.

Operator

We'll spell adjacent to nan statement of Kevin Steinke of Barrington Research.

Kevin Steinke

I wanted to first inquire astir nan Science, Engineering & Technology segment. You noted immoderate continued bully request successful nan telecom area, though that you mentioned besides that nan different areas wrong nan conception are being impacted by nan economy. So tin you possibly conscionable grow connected nan areas being impacted by nan economy, and possibly really worldly nan slowdown has been there?

Peter Quigley

Yes. Thanks, Kevin. So arsenic Olivier mentioned, conscionable to telephone retired nan BPO aliases outcome-based business and SET continues to spot bully growth. And I deliberation it speaks to nan strategy that we person of moving business to that transportation model. So that's wherever I would start.

Telecom is enjoying very important growth, some successful position of accepted unit arsenic good arsenic connection of activity business. And we spot that continuing arsenic companies activity to deploy next-generation networks. The areas that are a small much challenged are astir apt Science and Engineering. Because successful Science, location are a batch of companies that are catching their activity aft coming retired of COVID and trying to reestablish what their going-forward strategy is.

So we've seen immoderate slowdown successful hiring, taking -- customers taking longer. And Engineering has continued to spot immoderate headwinds from a macroeconomic standpoint. Technology is reflective of, I think, nan high-tech assemblage overall. But we don't spot that arsenic a permanent. It's astir apt a impermanent lull successful position of demand. Companies still request app developers and web architects and cybersecurity experts and information analysts. And we spot erstwhile they -- economical conditions go much certain, we expect that to travel backmost rather quickly.

Kevin Steinke

Okay. That's adjuvant color. You were talking earlier astir really immoderate of nan layoffs successful nan high-tech sector. You could usage immoderate of those group and their skills to capable request successful different areas. I guess, conscionable much broadly, has immoderate of nan softening successful nan labour marketplace improved your expertise to capable orders much mostly crossed nan company?

I cognize you referenced, there's still a bully number of occupation openings and nan labour marketplace is still reasonably tight. So conscionable benignant of wondering if that's possibly enabled you to capable immoderate different orders amended than possibly we're sitting unfastened owed to greater labour marketplace tightness.

Peter Quigley

Yes. Well, nan request has slowed successful definite sectors. I would constituent retired that our capable rates person improved successful Education, which is apt a motion of group coming disconnected nan sidelines, could beryllium retirees that are concerned astir inflation. But we've seen crossed nan regions betterment successful capable rates, which is very encouraging because nan request continues to beryllium very beardown successful Education.

In SET, our capable rates person beautiful overmuch maintained. Demand has slackened a small bit. But we proceed to find talent and put them to activity astatine our customers. And our capable rates person improved successful P&I, though nan request has softened considerably, arsenic I mentioned to -- successful consequence to Joe's question.

Olivier Thirot

Another measurement to look astatine it is astir our ain costs inflation. We spot arsenic [indiscernible] SET is still elevated astatine astir 8% to 9%, which is what we person seen for a agelong clip now. It is moving down a small spot successful P&I, which mightiness beryllium a motion that nan proviso of talent broadside is easing a small bit.

Our costs ostentation for P&I successful Q4 was astir 2.5% versus thing for illustration 7% successful Q3. Education is somewhat down, but still very elevated astatine astir 9% versus 14%, aliases 13% to 14% before.

Kevin Steinke

Okay. Yes. That's good. Helpful color. So conscionable possibly conscionable drilling down a small spot much into Education and -- does nan business pipeline location proceed to beryllium strong? And specifically, what are you seeing pinch request and your expertise to leverage nan Pediatric Therapeutic Services acquisition.

Peter Quigley

Yes, very encouraged by nan early signs of synergy betwixt our accepted pre-K to 12 acquisition business and PTS some ways, frankly. So PTS introducing our accepted K-12 business to schoolhouse districts they support and our K-12 schoolhouse districts being introduced to PTS. So we deliberation there's important synergistic opportunity there.

We're seeing maturation successful nan accepted business, some successful position of existing customers arsenic good arsenic our existing schoolhouse districts, arsenic good arsenic nan pipeline continues to beryllium very beardown and schoolhouse territory struggle pinch frankly, a chronic coach shortage. And arsenic they attraction connected their full-time hiring and curriculum, much and much schoolhouse districts are apt to beryllium outsourcing nan guidance of their substitute coach population.

And we're going to beryllium nan beneficiary of that because we triumph much than our adjacent stock erstwhile we're competing for business. We've had an fantabulous retention complaint among our existing customers and fantabulous triumph ratio erstwhile we compete for business.

I would besides adhd that nan higher ed information of nan acquisition strategy is very dynamic, which leads to a batch of turnover. Which intends our Greenwood/Asher executive hunt believe is seeing very important measurement of searches for universities and organization colleges and moreover immoderate superintendents successful our K-12 space. So we're very encouraged by that because it's a very -- not a immense business, but a very, very profitable business.

Kevin Steinke

Great. I conscionable besides wanted to inquire astir nan outlook for nan first half of 2023. As you noted, you expect gross will proceed to beryllium constrained by economical uncertainty. And besides acknowledging that, arsenic you mentioned, it's difficult to ascertain precisely really nan macroeconomic business will evolve.

But arsenic it presently stands, would you expect economical headwinds to prime up successful nan first half, aliases benignant of enactment arsenic is? Kind of what's nan pipeline look like? And your anticipation for really terrible aliases really overmuch of a alteration you could spot successful position of economical headwinds successful nan first half?

Olivier Thirot

Yes. Probably what I'm going to do is to bespeak a small spot connected what we person seen truthful far, particularly successful position of revenue, early successful 2023 arsenic we speak. So backmost to what Peter was talking astir Education, we proceed to inclination very good successful each practices, including PTS.

This is simply a confirmation of what we person seen again for nan full of 2022. We proceed to make advancement successful improving our capable rates. And we expect, I mean, coagulated maturation and a continuation of nan coagulated growth. Just for you to cognize that -- of course, we are going to woody pinch higher comparables because we are already increasing astatine 40% to 50% successful 2022, but a very coagulated commencement of nan year.

When I look astatine OCG, not seen immoderate important changes successful trends truthful acold versus what we person seen Q4 2022. I judge astatine immoderate stage, we would expect immoderate unit connected RPO because of nan market, though we person not seen that yet.

For SET, P&I and International, what I would opportunity is staffing continued to slow down, particularly successful P&I. Fees, very, very volatile. We person 1 bully week, 1 much challenging week. Difficult to cognize really it's going to inclination successful nan future, I would say, precocious volatility. Outcome-based, truthful far, what we person seen is simply a confirmation of resilience, whether it's successful P&I aliases successful SET.

Operator

We'll spell adjacent to nan statement of Kartik Mehta of Northcoast Research.

Jack Boyle

This is Jack Boyle, speaking connected behalf of Kartik Mehta. Just a mates of questions to get america started here. So you conscionable said a small spot astir what we tin expect early I admit that.

So tin you speak a small spot much astir possibly nan competitory environment, what you're seeing? I understand request has travel down. But what benignant of competitory situation are you guys seeing now? And is location a definite constituent that you guys are competing on, whether it beryllium value aliases capability?

Peter Quigley

I deliberation nan competitory scenery hasn't changed importantly successful position of nan vendors and suppliers that we compete against. We've been very disciplined astir maintaining our pricing and our margin. And to immoderate extent, successful immoderate cases, trading disconnected and not chasing gross for purposes of apical line.

I deliberation we haven't seen a batch of, I would say, wholesale separator unit coming from our main competitors. And location companies will, astatine times, pursuit business. But arsenic I said, we're being disciplined astir it. We're focusing connected uncovering higher-margin jobs and occupation categories that we cognize we tin capable and compete and win.

We're pleased pinch nan number of customer acquisitions that we've had successful nan past mates of quarters. Those return a while to show up because you person to modulation from different companies. But I would opportunity connected nan whole, there's not a important alteration successful nan competitory landscape.

Jack Boyle

All right. And conscionable 1 more. In position of a small much colour astir immoderate of nan SG&A savings strategy you discussed. The region successful hiring, is that crossed each of your businesses? And really agelong do you foresee that lasting?

Peter Quigley

Well, we -- it's crossed each businesses taxable to -- if we person a customer-facing gross GP generating position, we're filling those roles. But we're doing it aft a reappraisal to make judge that it's necessary. But each of nan -- nan other, I would telephone them, noncustomer-facing, non-revenue GP generating roles are -- we've put a hiring frost on.

And we'll proceed that until we spot immoderate signs of certainty successful nan macroeconomic conditions and don't spot immoderate deterioration successful request successful our businesses.

The 1 exception, Jack, mightiness beryllium Education, wherever nan request is truthful important that we've sewage to adhd group because nan opportunity is truthful significant. And we're not going to miss nan awesome activity that nan Education squad has done to get caller schoolhouse districts and make further gross and GP done improving our capable rates.

Operator

We'll spell adjacent to nan statement of Mitra Ramgopal pinch Sidoti.

Mitra Ramgopal

Just pursuing up a small connected nan past mobility connected nan SG&A, successful position of really comfortable do you consciousness you'll beryllium capable to support SG&A arsenic good arsenic you would like, particularly successful ray of nan gross uncertainty? And really acold on are you successful position of nan investments successful exertion initiatives? And should we proceed to spot elevated investments?

Peter Quigley

So connected nan SG&A question, we've done a batch of activity starting successful nan 3rd 4th of past twelvemonth to place definite metrics that we're pursuing very intimately that will trigger further costs moves, if necessary. And I deliberation we're amended prepared to respond to macroeconomic conditions than we person been before.

So I'm very comfortable that we're -- person nan levers that you request to propulsion identified and disposable to america should that beryllium necessary. The exertion is simply a very captious area of finance for us. We're investing not only successful nan ways to amended nan productivity of our frontline teams, but we're besides investing successful nan talent experience.

We precocious launched a caller myKelly portal, which provides nan talent that we woody pinch each time pinch a amended personification experience. And we deliberation that's going to create immoderate opportunities to support relationships pinch nan awesome group that we put to activity each day, and usage that arsenic a differentiator successful position of trading to our customers.

So nan exertion investments, we will proceed judiciously. But we request to make investments for nan agelong term. And that will beryllium and proceed to beryllium a privilege successful position of our integrated investments.

Mitra Ramgopal

Okay. That's great. And past connected nan inorganic side, I cognize it's thing you ever support an oculus connected fixed nan equilibrium expanse you have, you tin surely beryllium fierce there. But successful ray of nan economical uncertainty you said to, if possibly you tin springiness america immoderate colour successful position of really you're reasoning astir inorganic opportunities, if you consciousness assured you'll beryllium capable to get thing done possibly this twelvemonth and nan pipeline and valuations you're seeing?

Peter Quigley

Well, candidly, Mitra, nan value and nan amount of properties successful nan marketplace correct now is little than it was a twelvemonth ago. And that's, I think, conscionable a reflection of not only nan macroeconomic conditions, but besides nan liking complaint environment. And that's apt to proceed for nan first 4th and astir apt into nan first half.

My anticipation is that erstwhile nan liking complaint situation becomes a small spot clearer successful position of nan ceiling, and companies person statement of show to much certainty successful nan economy, we're going to spot a batch of companies that were connected nan sidelines being portion of conversations.

And we're not waiting for that. We're actively -- proactively pursuing and identifying high-quality, high-margin, high-growth assets that we would for illustration to adhd to nan portfolio. But it's a reasonably constrained situation correct now.

But we will beryllium ready. And arsenic I said, we're not sitting connected our heels during this play of time. We're continuing to proactively look for those kinds of properties.

Olivier Thirot

And pinch our level of liquidity, which is now complete $450 million, I mean, we tin really spell accelerated and aggressive, particularly successful nan 2nd half of nan year, not needfully waiting for a overmuch amended economical environment. Because, again, I mean pinch our equilibrium sheet, we tin do it astatine an early shape of immoderate imaginable betterment versus nan existent environment.

Operator

We person a follow-up from nan statement of Kevin Steinke pinch Barrington Research.

Kevin Steinke

Just a really speedy follow-up successful position of what we should expect for an effective taxation complaint arsenic we move into 2023.

Olivier Thirot

Yes, that's a difficult question. I would opportunity I'm still connected nan mid-teens plus, that would beryllium wherever I would position it. Although you mightiness person seen that location is simply a batch of volatility because of respective items. I deliberation today, erstwhile I was talking astir tax, it was a bully illustration of that. But precocious mid-teens would beryllium astir apt nan measurement I would position it for nan moment.

Operator

[Operator Instructions]. There are nary further questions successful queue.

Peter Quigley

Okay. Keely, I deliberation we tin wrap it up then. Thank you very overmuch for your help.

Olivier Thirot

Thank you.

Operator

Thank you. And ladies and gentlemen, today's convention will beryllium disposable for replay opening astatine 11:30 a.m. Eastern Time today, moving done March 16 astatine midnight. You whitethorn entree nan AT&T replay strategy astatine immoderate clip by dialing 866-207-1041 and entering nan entree codification of 1472042. International dialers whitethorn telephone 402-970-0847. That does reason our convention for today. Thank you for your information and for utilizing AT&T Event Conferencing. You whitethorn now disconnect.