Olivier Thirot: And we still have — you might remember, we’re disclosing and discussing the fact that in terms of valuation and so on, we have — we use, amongst other things, internal rate of return — we are still on the 25% I was referring to some time ago. So that’s still the approach we have in terms of valuation.
Operator: We’ll go next to the line of Kartik Mehta with Northcoast Research.
Kartik Mehta: I was hoping to maybe get your thoughts a little bit about what you’re seeing in January. I realize I’m sure the guidance reflects what you’ve seen. But any changes you’re seeing outside of seasonality in January or early parts of February compared to what you saw in the fourth quarter or December?
Olivier Thirot: So two things on that. It’s Olivier. One is when you look at revenue exit rate end of Q4 of 2023, overall, we were at minus 0.1%, so I call it flat on a constant currency basis. So that’s where we ended up at the far end of 2023. When I look at the first weeks of January, what we have seen so far, and I’ve heard that also from many sources, but we have seen it a very light start in manufacturing at least for the first couple of weeks of January. And then some ramp up, we have started to see a little bit later. For the rest of the business, Education, as Peter was saying, still in high-growth mode. And I would say for OCG and SET, stabilization versus a little bit similar to what we have seen at the far end of 2024 — 2023, sorry.
Kartik Mehta: And then as you look at — I think you said a deal flow, maybe the quality isn’t as good as you would like. Is it just quality? Or is it maybe a number of opportunities? Considering the environment we’re in, are you getting to see opportunities where you can make a good decision? Or do you think that will come a little bit later, maybe as people get a better feel for what the economy is going to eventually do this year?
Peter Quigley: Yes. I think the big damper right now continues to be interest rate environment and the participation of certain investor communities. But I think as that either stabilizes or we actually get into a rate reduction environment, that money is going to come off the sidelines and companies that might be in the part of their cycle that they want to enter into an exit transaction, we’ll see greater deal flow. Based on the folks we talk to, we’re not in a permanent state of low-quality M&A properties, it’s just that the current environment for the past year or so has been not conducive to a lot of companies coming on the market. .
Kartik Mehta: And just one last question on Olivier. When you report first quarter results, right now, you have the Americas and Europe and AP and obviously, the EMEA business was about $854 million for the year of 2023. Will you still keep that European region segment? Or will that — what’s the remainder left move somewhere else?
Olivier Thirot: As I mentioned during our prepared remarks, so the perimeter of what we have sold is Europe, so it is excluding Mexico from the perimeter, and basically, this Mexican business is going to be under the leadership of P&I. But just to make sure, was it your question? Or there was something else, sorry. I may have missed something.
Kartik Mehta: No. I was just making sure I think Europe reported $854 million, you talked about $810 million kind of as a comparison.
Olivier Thirot: Yes. So the $810 million was to make sure externally, you can capture the perimeter, right? It’s lower than the total revenue of the segment International. The main difference is because basically our Mexican business is not part of the deal that we are referring to.
Peter Quigley: And our OCG business is going to continue to operate globally.
Olivier Thirot: Right.
Kartik Mehta: Right. So that OCG business will then be just reflected in your international segment, right?
Olivier Thirot: In OCG, so we keep a footprint in Europe a little bit similar than the one we have in Asia, in Asia-Pacific through our OCG business, namely MSP, and to some extent, FSP or BPO when relevant.
Operator: And we’ll go next to the line of Marc Riddick with Sidoti.
Marc Riddick: So a lot of my questions have been answered, and I want to thank you for providing greater clarification on that breakdown. That’s super helpful. I wanted to circle back around to your thoughts around the acquisition pipeline and potential targets and the like. Are you getting the sense that while it may not be quite where you’d like it to be? Are you getting the sense that there are any particular pockets that may sort of emerge or be relatively actionable sooner rather than later, whether it be regionally or by industry vertical?
Peter Quigley: Well, we’re focusing, as I’ve said previously, in science, engineering, technology, and telecom, and our education practice, others would be opportunistic. And we think that because of the size of the technology staffing market in the U.S. and North America that that’s a very fertile area to continue to pursue. We think it would be an excellent complement to the acquisition we made in soft world. So that we will continue to focus on science engineering technology and telecom and think that there’s historically been enough deal flow that when things ease up a little bit that we will begin to see the kinds of high-quality assets that we’d be looking for.
Marc Riddick: And then shifting gears, I was wondering with everything that’s going on with the client demand environment and what we’re sort of navigating through. I was wondering if you could share any thoughts as to if you see any potential changes for any particular go-to-market strategies or approaches and/or sort of how you feel about the general pricing environment? If there are any sort of tweaks or adjustments that you’re looking at engaging in as we begin the year?
Peter Quigley: I don’t think anything of consequence that I would point to, Marc. I think there are pockets where there are pricing challenges due to the competitive landscape and the decline in demand in certain areas. But I think, historically have demonstrated that we’re able to navigate through that. And also get price where the environment calls for it and the labor market continues to be tight. So while demand hasn’t necessarily — we haven’t seen it show up in demand yet, as the macroeconomic conditions improve, large and small enterprises are going to continue to struggle finding people in that is something that they’ll often turn to Kelly to help them with.
Olivier Thirot: Yes. I mean when you get the spread and it is something we look at to make sure that we understand where our margin are, our spread in P&I and SET are pretty much stable and even up a little bit. So we have not seen anything in terms of pricing pressure that would translate into basically some erosion in our spreads.
Marc Riddick: And then I would be remiss if I didn’t bring the topic up, but I was wondering if you could talk a little bit about if you heard any, relatively speaking, any changes or updates of client thoughts around AI-driven revenue opportunities and demand opportunities? Or if there’s any update you could provide there, that would be great.
Peter Quigley: Yes. So we’re spending a lot of time talking with customers about AI. I would say there is activity, but it’s still very early innings in that game. But we’re not waiting. So we’re using AI in a lot of our operations particularly to improve the productivity of our recruiters and salespeople, and we have used AI and other parts of our operations as well as in technology that we have that customers face off with and use like our Helix analytics portal and Helix UX in our OCG practice. But it’s still Kelly operated. It’s not a customer-driven activity right now. But there are a lot of conversations, a lot of interest. We have launched a program to connect customers who have demand for experts in the AI space, Kelly Arc program or platform.
And we’ve got customers who are on that platform because they’re looking for talent that can help them with their internal AI. But all of this is still relatively small and early relative to other technologies and solutions.
Operator: [Operator Instructions] And presenters, there are no further questions in queue from the phones at this time.
Peter Quigley: Okay. Kailey, thank you very much.
Olivier Thirot: Thank you.
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