Kelly Services Inc (KELYA) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to Kelly Services' first 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 Carl Camden, President and CEO. Please go ahead.

Thank you, John. Good morning everyone. And welcome to Kelly Services' 2010 first quarter conference call. With me on today's call is Patricia Little, 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 please refer to our 10-K for a description of the risk factors that could influence the Company's actual future performance.

The global economy and the labor markets are showing very encouraging signs of life. We believe that we are in the early stages of a credible, classic recovery and although the long-term pace is uncertain, the progress is steady and we're headed in an upward direction. In the United States, while the unemployment rate increased to 9.9% in April, it actually signals that the employment picture is getting brighter with a greater number of people actively seeking employment. March showed a net gain of 230,000 jobs, the first convincing gain since the recession began at the end of 2007. And this trend continued in April, as we saw an expansion of nearly 300,000 jobs. And across the board, temporary employment has risen by nearly 14%, since its lowest point last June, with April marking the tenth consecutive month of improvement in year-over-year comparison. The penetration rate for temporary staffing has turned the corner in recent quarters, increasing to 1.58% in April, the seventh month in a row to show a rate increase. The US economy appears to have reached and inflection point with favorable economic and labor market trends slowly gaining traction. However, there is still plenty of capacity in the marketplace and that will likely remain true for the foreseeable future.

Within Kelly, we're seeing other trends that are characteristic of the early stage of a classic recovery. In April, we observed the eleventh consecutive month of increased demand for light industrial staffing. And although clerical, Professional and Technical and other staffing sectors lag last year's levels, they are showing improvement from their low points. We do note there is continued weakness in fees related in direct hire and temp to perm, as well as the fee based businesses within our OCG segment, but these typically begin to improve later in our recovery cycle. While the first quarter is always challenging for the staffing industry, we were pleased to see our revenue growth trend higher than the seasonal levels typically experienced. As a result of this growth, and Kelly's ability to maintain tight control over expenses, we were very pleased to report solid improving results.

Our first quarter revenue was up more than 8% year-over-year, and expenses were down. Our cost control efforts continued to yield tangible results. For the first quarter, expenses decreased by nearly 12%, following a year in which we had significantly reduced expenses. Our GP rate is down year-over-year, primarily due to the shift in service line mix, characteristic of the early stages of recovery. However, the gross profit rate has held relatively stable for the past three consecutive quarters. Most notably, excluding restructuring cost, Kelly earned $0.05 per share in the quarter, a significant improvement over a loss of $0.26 per share last year, again, excluding restructuring and litigation charges. And ahead of street expectations.

After I review our operating results by business segment, and Patricia takes you through the financials, I will make a few closing comments and address our recent announcement, a strategic alliance with Temp Holdings. Then we'll hold the call open for your questions. Let's now turn to the Americas performance beginning with Commercial.

Revenue in Americas Commercial in the first quarter increased 14% year-over-year, an improvement from the 6% decrease in the fourth quarter. Within the Commercial segment, light industrial staffing and now electronic assembly are experiencing large sustained sequential and year-over-year growth. Office clerical staffing continues to trend flat for the last three quarters. Our combined temp to perm and direct placement fees were up 19% year-over-year for the quarter, compared with the 58% decline in the fourth quarter. On a sequential basis, placement fees were up 61% for the first quarter compared with the fourth. We expect that placement fee performance will be volatile over the next several quarters, and lag that of our temporary activity.

Kelly's gross profit rate in this segment was negatively impacted by the shift in business mix due to the cyclical growth in light industrial staffing. For the quarter, the gross profit rate was 14.3%, or 90 basis points lower than the same period last year. However, sequentially, the gross profit rate has remained stable compared to the last two quarters. We remain highly focused on tight expense control in our Americas Commercial segment, reducing spending this quarter by about 10% compared to last year, excluding restructuring cost. Sequentially, spending was 4% lower than the fourth quarter, again, excluding restructuring charges. Commercial earnings were $13 million in the first quarter, compared to an essentially breakeven quarter last year. We're very pleased with the improvement in earnings we've achieved in the Americas Commercial segment.

Now on to the Americas Professional and Technical segment. PT revenue improved in the first quarter, increasing 4% compared to the 5% decline in the fourth quarter year-over-year. Taking a closer look at our PT segment, for the first quarter we saw year-over-year and sequential growth across most business lines. The standout performers were our legal business with a 43% year-over-year revenue increase, followed by IT with a 14% increase. Combined temp to perm and direct placement fees for Professional and Technical were down 18% year-over-year for the quarter. This is better than the 43% year-over-year decline we saw in the fourth quarter. Lower year-over-year performances found across the majority of our PT businesses. Sequentially, total PT fees were about flat compared to the fourth quarter.

For the entire segment, our gross profit rate was 15.3%, down 60 basis points from the same period last year, and about flat with the fourth quarter. The year-over-year decline was attributable to lower placement fees. For the quarter, expenses decreased by 12% or $3.2 million year-over-year, and sequentially spending was 7% lower than the fourth quarter, excluding restructuring. PT earnings were $8.5 million, up $3.2 million compared to the prior year, primarily due to our success in controlling expenses.

Now I'll turn to our EMEA region, which is also seeing signs of improving trends. On a constant currency basis, revenue was down 12% year-over-year or down only 4% excluding the impact of branch closings and suspending staffing operations in several markets last year. For the remainder of my EMEA discussion, all revenue results will be discussed in constant currency. The greatest improvement during the quarter was seen in eastern Europe, increasing 41% year-over-year, primarily due to the performance in Russia. Western Europe was down 5% year-over-year, which was primarily attributable to our operations in the Netherlands and to a lesser extent our Italian operations.

Turning to fees, revenue for the quarter was down 8% year-over-year. This was an improvement compared to the 46% decline seen in the fourth quarter. Sequentially, fees grew nearly 13% during the quarter, compared to the fourth. The quarterly GP rate was 16%, flat compared to last year. Expenses were down 21%, excluding restructuring year-over-year. Our major restructuring efforts are now complete in this region and we have a sufficient infrastructure to sustain future market growth. Excluding restructuring cost, EMEA Commercial achieved an operating profit of roughly $400,000 in the first quarter, a significant improvement over a loss of $6.3 million for the same period last year.

Revenue in EMEA Professional and Technical was down 1% year-over-year. Double-digit growth is being seen in France, Switzerland and Germany, with outsized growth in Belgium. However, we're still experiencing year-over-year declines in the UK and Norway. Fees in the quarter were down compared to last year by 22%. That's an improvement over the 37% decline experienced in the fourth quarter. The gross profit rate in the segment was 27.1% for the quarter, compared to 28.6% last year. This decrease is due to lower perm fees. PT expenses declined by more than 4% compared to a year ago. EMEA PT operated at a small loss for the quarter, but an improvement of $500,000 compared to the same period last year.

Our APAC region is also seeing signs of economic growth and labor market stabilization in both our Commercial and Professional and Technical segments. Combined revenue for the region grew by 25% year-over-year, or 7% on a constant currency basis. And that's an improvement from the 4% constant currency decline in the fourth quarter. Fees are coming back and were up 47% for the region. 30% on a constant currency basis. This is a significant improvement over the 9% constant currency decline in the fourth quarter. Our GP rate for the segment was largely unchanged, as improvements in fee base income were offset by lower temp GP rates. Excluding $500,000 of restructuring charges, we earned $600,000 for the quarter, a nice improvement from the $1.6 million loss in the prior year. As a result of the improvements that were seen in the APAC region, we are increasing our investments in selected markets across Asia to better leverage our staffing and PT operations there.

Our final segment is our Outsourcing and Consulting Group, OCG. OCG revenue was up roughly 13.5% in the first quarter, compared to last year. Both the Americas and Asia had positive revenue growth for the quarter, reflecting economic improvements across both regions. European revenue was lower than last year, reflecting the slower pace of recovery in that region. By business unit within OCG our results reflect the pace of the recovery I spoke about earlier. Our PPO and BPO practices, which mirror the temp staffing market, showed improvement over last year. At Ayers, our outplacement group, revenue fell as companies slowed their restructuring activities. In our recruiting process Outsourcing group, revenue was down compared to last year as customer hiring continues to be weak but we are encouraged to see sequential revenue growth as we bring on several new account wins.

The OCG profit rate, gross profit rate declined by 740 basis points during the quarter, primarily due to the shift in revenue mix among the OCG business units that I've just talked about. Expenses were up by roughly $1.4 million year-over-year in OCG, as we continue to expand this strategically critical business. On a combined basis, OCG had a loss of $4.4 million in the quarter, excluding restructuring. This compares to the $1.1 million we lost a year ago. Overall, higher expenses and the impact of our Ayers Group were the largest components of the decline. While we don't like the losses in OCG, we are confident that the investments we're making will enable us to leverage our infrastructure as customer volumes increase in tandem with economic and labor market growth. Now I'll turn the call over to Patricia who will cover our quarterly results for the entire Company.

Thank you, Carl. Before I get into our first quarter operating results, I would like to provide what I expect is a final update on our restructuring activities. During the first quarter, we spent approximately $4.4 million or $0.10 per share on restructuring activities, primarily related to employee and lease termination costs. While these costs were spread around the globe, the largest portion came from EMEA, as we completed restructuring activities that we started last year. In 2009, the first quarter included restructuring and litigation charges of $8.1 million, or $0.21 per share.

Moving on to our operating results for the quarter, revenue totaled $1.1 billion, an increase of 8% compared to the first quarter last year, up 4% in constant currency. This is a significant improvement over last year's fourth quarter when constant currency revenue decreased 10% compared to the prior year. During the quarter, we saw increases in all of our business segments, with the exception of EMEA, where we exited certain markets. Our gross profit rate was 15.9%, a decrease of 90 basis points compared to last year. The decrease was caused primarily by a reduction of our temporary margin. The rate is about the same as in the third and fourth quarter of 2009. Worldwide, our fees were about the same as the prior year, which compares to a 30% year-over-year decline in the fourth quarter. Our average temporary margin has been impacted by shifts in our business and customers, as light industrial's proportion of our business increased compared to office.

Moving on to selling, general and administrative expenses. For the first quarter, our expenses were down 12% or $25 million on a year-over-year basis. Excluding the restructuring and litigation items I noted earlier, we were successful in reducing our SG&A costs by $21 million. As we talk about total earnings, you may find it helpful to turn to page eight in our press release, since it summarizes the walk from GAAP numbers to pretax and EPS operating results excluding restructuring. Also, in the segment results in the press release, you can find the segment operating results that Carl referenced in his remarks.

In the first quarter, our GAAP loss from operations was $1.6 million, compared with a loss of $30.6 million in 2009. Excluding charges, we had an operating profit of $2.8 million in 2010, compared to an operating loss of $22.5 million in 2009. Although we did see revenue growth, it was our continued focus on expenses that allowed us to earn this small profit. In the first quarter of 2010, we had 8% higher revenue and $5 million of additional gross profit compared to 2009. However, we realized the $21 million of expense savings as we continue to lower our breakeven point. This lower breakeven point will help us to leverage future sales growth and improve our profitability as the economy continues to recover. Income tax benefit in the first quarter was $700,000 on a pretax loss of $2.7 million. That gives us a first quarter tax rate of 26%. Diluted loss per share from continuing operations for the first quarter of 2010 totaled $0.06 per share, compared to $0.46 in 2009. Again, excluding restructuring and litigation charges from both periods, we earned $0.05 in 2010, compared to a loss of $0.26 in 2009.

Before I turn to the balance sheet, let me look forward to the remainder of 2010. First, although the economy should continue to improve, until fees from permanent hiring come back I don't expect our GP rate to improve significantly from its current level. With regard to expenses, we substantially completed our restructuring activities in the first quarter. As a result, we have seen most of the benefit from restructuring. At this point, I expect we will begin to see increases in our sequential SG&A as we make targeted investments, particularly in PT and OCG, and as our earnings begin to generate field and management variable compensation. Also, since our pretax earnings are close to breakeven, our tax rate will be volatile, heavily influenced by discrete items and swings in country earnings. And we will have a small dilution on our EPS from the temp holdings transaction. Our outstanding shares were 35 million at the end of the quarter, and they will rise to about 36.5 million after the transaction.

Turning to the balance sheet, I'll make a few comments. Cash totaled $56 million, down $33 million compared to the $89 million we held at 2009 year-end. A little lower than usual due to the timing of the Easter holiday over our quarter end. Accounts receivable totaled $727 million, and increased $9 million compared to 2009. For the quarter, our global DSO was 51 days, unchanged compared to the prior year. Accounts payable and accrued payroll and related taxes totaled $384 million, and decreased $7 million compared to year-end 2009. Debt of $124 million is down $13 million compared to the 2009 year end. At the end of the first quarter, debt to total capital was 18%.

Turning to our cash flow, net cash from operating activities was a use of $19 million, compared to cash provided of $25 million last year. The change primarily reflects increased working capital needs in the first quarter, as our business picked up. Also during the quarter, we repaid $11 million of debt, compared to $24 million in the prior year. By the way, the temp holdings transaction was made using treasury stock and we received about $24 million from it this week. I'll turn it back over to Carl for his concluding thoughts.

Thank you, Patricia. As we've noted, Kelly turned in a solidly improving first quarter in spite of the typical seasonal impact and continued pressure on gross margins as a result of the slowness in permanent hiring rebound. And we've discussed the typical scenario before. Job creation usually lags other positive indicators following a recession and so it is today. Given the duration and severity of the latest economic downturn, it will take a while to get back to where we were. However, let me be clear. We are on the road to a sustainable recovery and we remain confident that we're on the right strategic course. We've cut expenses to reflect the new reality and in large part the improvement in our operating results this quarter was due to our ability to maintain a leaner cost structure. Our cash flow liquidity, balance sheet and access to credit are intact, allowing us to capitalize on opportunities.

Restructuring is now basically behind us and we've emerged as a reshaped and renewed Company. We have streamlined our operations from the top down, realigned our geographic footprint to match current and projected needs, exited unprofitable and unpromising locales and positioned our PT services and OCG for growth. And just as important, Kelly has reimagined its vision. The global labor market has changed. After months of difficult layoffs and contraction, employers are wary of gearing up too quickly, expanding beyond capabilities and prematurely ramping up their workforce. Our customers are seeking more flexibility in hiring, more autonomy to make staffing adjustments and a greater ability to strategically manage their fluctuating employee needs. In short, they need comprehensive workforce management options and that's what we offer.

We've turned our attention to becoming the single source for seamless integrated employee solutions. With renewed emphasis on professional and technical staffing and OCG, we are becoming less commodity-driven and more focused on comprehensive and all-inclusive workplace solutions. Services that are customized to meet our customer needs, broad enough to deal with anticipated workforce fluctuations, less dependent on any particular geography, and more agile and adaptive than ever before.

In keeping with that strategic focus, yesterday we announced that we were strengthening our relationship with Temp Holdings in order to position both companies to provide a greater range and depth of workforce solutions to our customers. Over the next few months we'll be forming a joint strategy council comprised of senior executives from each Company. We'll work toward completing a joint sales and marketing agreement and in the long run and in the medium run we believe this alliance will allow for each Company to foster a long-term relationship that will support each Company's goal of global growth.

We see a world in which elements converge to create an unprecedented opportunity for Kelly. A world where free agent workers can find rewarding positions, where highly skilled talent discovers ample employment choices and employers gain the tools that they need to maneuver in an increasingly complex global business environment. Our vision embraces all of the time honored aspects of Kelly Services and acknowledges that our best path to growth is to deliver solutions that extend beyond traditional temporary staffing. As 2010 progresses, look for us to focus on improving profitability and to make continued investments that will enable us to maintain a stronghold in our Commercial staffing markets, accelerate the growth of higher margin services such as our Professional and Technical disciplines, and our Outsourcing and Consulting Services, increase our focus on customer acquisition, and build consultative relationships that create success for our customers and drive profit for Kelly.

That concludes our formal comments this morning. Patricia and I will now be happy to answer your questions. John, the call can now be opened. For those of you on hold, wait while we resolve the technical difficulty.

We have our first question from the line of Tobey Sommer with SunTrust Robinson. Your line is open.

Great. Hi, Tobey.

Mr Sommer, your line is open, please go ahead.

Hello. Thank you very much. I wanted to--

Hi, Tobey. Sorry for the --

Ask you a question about gross profit which was kind of stable sequentially. Usually there's some sort of seasonal decline from 4Q to 1Q. How should we think about that, not talking about in terms of guidance, but in terms of seasonality. Typically you get a little bit of a rebound throughout the year, but I know we've got some mix issue shifts as well. So it may depend on what your expectation is there. Thanks.

Tobey, I am obviously comfortable with the fact that we've been sequentially flat and obviously Q1 is usually the gross profit quarter under most duress. It is hard to look forward and say what's going to happen to the GP rate. The mix shift at the first quarters of a recovery are unusual. The influence of the lack of fees is strong. And while we've been doing well in pseudo recoveries, just depending on state and timing and so on, there can be effects in any one particular quarter. So it's variable at the moment is the best way. But I think you are very correct in noting that usually Q1s are the quarters where the gross profit rate is under the most pressure.

(Operator Instructions) And we'll go to Ty Govatos with CL King. Please go ahead.

Hi, Ty.

How are you guys doing? You must feel good. SG&A, the growth in SG&A throughout the year, targeted investments, variable, commissions, et cetera. Are you using any rule of thumb on where you want to keep the SG&A in terms of growth relative to, let's say, gross profits, hold it down to 50% of the increase or anything like that?

Ty, we've not given that guidance. On a macro basis, it's difficult to do because it depends which business lines are growing. There are those that will have a much lower use of expense as a percentage of GP and those that would have higher. On a more macro basis, you've heard us talk about that we're committed -- that we viewed half of our SG&A expense reduction as structural, as having changed the breakeven points for the Company, and the other half will slowly come back based on the pace of recovery, things like compensation, variable comp stuff will come back quickly or more slowly, depending on the pace of --

Of whatever. Tax rate for the year, any guess? I realize it's volatile.

It will be in the upper 30s, but I think each quarter will be quite volatile. Because our earnings, especially in this first period, are so close to breakeven, the effective work opportunity credits makes it a little bit hard to predict.

Thanks an awful lot.

Thank you, Ty.

We'll go back to Tobey Sommer with SunTrust Robinson Humphrey.

Thank you. I just wanted to ask a question about operating margins and the breakeven point being lower. What kind of margin could the Company achieve at the operating line on prior peak revenue levels, given the structural expense cuts that you've made over the last, gosh, 18 months or more? Thanks.

Ty, it's too early to kind of even make that type of projection. You know from our conferences that we've stated an aspirational goal of beating our peak earnings in terms of both the sheer amount of them as well as the percentage return on sales. That is obviously what management is driving towards in both regards. The quality of the earnings as well as the quantity of the earnings. There are just too many unknown variables. At what point do the OCG services kick in as permanent hiring kicks in and then starts driving volume on that side. What will be the pace of the professional technical recovery. I don't -- even though we probably wouldn't answer your question anyway, in this particular point there's too many moving variables to get to to get to an answer.

Is it a fair assumption, based on your comments, that you'll be adding probably sequentially to SG&A, at least on a targeted and selective basis, that you are expecting sequential revenue growth to continue?

I think that Patricia was clearly indicating we will see some sequential expense growth, that there are targeted markets. Let me again be very specific. We're not looking at across the board investments in markets, but there are some targeted markets where we have great opportunity. But that more across the board, variable comp as we return to profitability does turn back on and you'll see growth across most of the business units as they return to profitability.

To answer the second half of your question, yes, we look for increased revenue during the course of the year.

Thank you.

(Operator Instructions) And we'll go to Phil Stiller with Citigroup. Please go ahead.

Thanks for taking my question. Just wanted to ask about the impact of the NIH contract that you announced, can you just talk about it strategically and then from a financial impact perspective?

To the first strategically, as we've moved into supply chain management and the employment market, we've announced two large contracts, BP and the NIH, both of them view as very important to the type of services that we're offering and in the NIH case we're delivering with very highly trained and compensated individuals across the country. So I think strategically both of those accounts are very critical, give us a lot of credibility in the talent supply chain management area and in particular with the NIH, gives us a lot of credibility in one of the fastest growing segments of employment in this country which is the government, the Federal Government.

In terms of at what point do we see it making an impact in terms of a profit, implementation on these accounts, we're used to in the temporary employment market of implementation being measured in weeks, occasionally months. And these type of contracts you often don't achieve full run rates for a year. And so you're bearing costs for the first few quarters and begin to approach break even as you lay out over the course of a year's time.

Will the full value of the contract run through your revenue line or is it subcontracted as well?

When we talk about -- when we do more in-depth phone calls and presentations, we differentiate between what we call spend under management and revenue. When you're a supply chain management firm, you are -- you're only showing on the revenue lines your fees for managing the supply chain. Now, in some of these contracts we obviously are also one of the talent providers and in that case, that part of the revenue would show through the revenue line.

Then could you just quantify the year-over-year impact of the pseudo increases on the gross margin in the first quarter?

No, we haven't broken that out and we're in the -- what we've talked about is that we've been in a -- and you've heard this from other staffing firms too. We've been in a sustained campaign to recover the pseudo fees. All of us are reporting pretty good success at doing so. There's lag effects in that recovery effort. But overall, we're pleased with the amount of recovery that we've had and I think that while it will be -- there will be an impact over the course of the year, it will be nothing like the impact that we've seen in prior downturns.

Analytically when we looked at it for the first quarter, it was well under 50 basis points. So we're pleased with the recovery. It's not having a big impact on our overall GP.

Okay. Thank you.

Thank you.

(Operator Instructions) And we do a follow-up from Tobey Sommer. Please go ahead.

Thanks. Just wanted to ask a question about your balance sheet and available liquidity, if you could update us and given some of the pretty big increases in revenue that we've seen, just wondering where that stood. Thanks.

Yes, we're still really pleased with where we are in liquidity. We have our revolver in place. We've been using it on and off during the first quarter. We've fully used our securitized line through the course of the first quarter. The Temp Holdings transaction as well as some federal tax refunds are going to give us more liquidity this quarter than we had in the first. So I'm very comfortable that as we see our business pick up, we have adequate capacity, we model that regularly and there's nothing that gives me any sense that we'll be constrained by borrowing capacity.

Thanks. And Carl, should we be reading anything kind of more into the relationship that you're developing in Japan? You both own modest stakes in each other now. How should we think about that in terms of impacting particularly Kelly's Asia-Pacific growth? Thanks.

Good question, Tobey. As we went through this recession, it became clear that we were not going to be a dominant temporary staffing provider in every country that exists in the US, not even necessarily all the large markets. There would be those that we had niches. There would be those that we were a significant player and there would be those we would be providing workforce solutions.

Over the course of the years we have worked with Temp Holdings in many different ways. I sit on their board, as you know. We find that we are very culturally aligned with them. They also look at the world and say they don't want to have to go through the global expansion and between the two of us as we look at cooperating in a way that leverages the strengths of both of our networks, provides distribution channels for each Company's unique products, we see tremendous opportunity for each of us to leverage our -- to leverage the expense base that we -- each of us already had built into place and to take advantage of the customer relationships that each of us have. I think it's exciting. I'm really looking forward to the unfolding of this relationship.

Mr Sommer, any additional questions?

So should Asia-Pac still be an area for growth for you or I'm just wondering if this impacts the expected rate of growth, last month versus this month? Thanks.

Tobey, we announced that we would be putting additional investments into Australia, so clearly we plan on growing services. There are many markets where we're a number one or two staffing player. Malaysia and Singapore. There are other markets where we're very strong niche players like Australia and New Zealand. Those will be good growth markets for us. We'll continue to make investments in some of those markets. It just means that we won't have to be utilizing resources to build out staffing operations in some parts of the APAC region.

Next question is from Angelo [Agnello], private investor, please go ahead.

Hello, Carl.

How are you doing?

A question concerning the recently enacted federal health bill. Have you determined at all the impact that's going to have on our costs? Are we going to have to provide insurance coverage, et cetera, for our temporaries? And then of course if we do, maybe it's too early at this point to determine the final impact, but I would assume we're going to have a problem or we would have -- it's going to be difficult to pass that on to our customers. Could you comment on that, please, Carl?

Sure. We have been an advocate for this style of healthcare reform. We've been involved in the crafting of the legislation. We'll be involved and have been involved in the crafting of the rules as they are deployed. One of the greatest constraints on the supply of temporary labor and on the use of temporary labor in the United States has been the difficulties of accessing healthcare for temporary employees. So excited about this from a perspective of growing the industry and growing the supply and better treatment of our temporary workers.

It will be a cost that will have to be dealt with. Exactly how, I don't know. There are rules that are floating around in terms of how many hours does one have to work over the course of a month before you're considered an employee. And we're going to work on shaping those rules. But to dimension it for you, I don't view the overall problem as any greater than the difficulty of dealing with pseudo increases in the state unemployment tax increases over the course of a recession. And in early talks with our customers, they understand that there will be charges coming. We've been talking about it and as you noted, we've got three years to get ready for this and I think in the long, medium run, it's going to be great for the industry and I think we'll be well-prepped to deal with the increase in costs that come from it.

Thank you.

Thank you.

And Mr Camden, no further questions in queue.

Great. Thank you. And thank you all and stay tuned for next quarter.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.