Kelly Services, Inc. Price & Performance (KELYA)

And welcome to Kelly's fourth quarter and full year conference call. Me today are Kelly's President and Chief Executive Officer Peter Quigley and our Chief Financial Officer, Troy Anderson. Before we begin, remind you that the comments made during today's call including the Q and A session, may include forward looking statements about our expectations for future performance. Actual results could differ materially from those adjusted by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings a description of the risk factors that could influence the company's actual future performance. In addition, we'll discuss certain data 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. For more information regarding non GAAP measures and other required disclosures, please refer to our earnings press release presentation and once filed Form 10 ks all of which can be accessed through our Investor Relations website at ir.kellyservices.com Kelly. I will now turn the call over to Kelly's President and Chief Executive Officer, Peter Quigley, Thank you, Scott. Good morning, everyone.

Before I share my reflections, on our fourth quarter and full year performance, I'd like to discuss the leadership succession plan that we announced in our earnings press release earlier today After twenty two years with Kelly, I intend to retire as President and CEO by the end of this year. The Board has initiated a process to identify my successor, engaging a nationally recognized firm to conduct a comprehensive search of both internal and external candidates. I plan to continue serving in my current role until the Board of Directors appoints Kelly's next CEO Kelly we can facilitate a smooth transition. Over the past few years, we have made meaningful strides on our specialty growth journey and Kelly is well positioned to realize the value creation opportunities I'm proud of the progress we have made and I look forward to concluding my tenure with a strong 2025 defined by continued growth and strategic evolution. With new leadership, and as market conditions improve, the Board and I are confident that Kelly will reach new heights and create even more value for our clients, talent, employees and shareholders. With that, let's review the highlights from our performance in the fourth quarter and full year.

In the fourth quarter, Kelly delivered both top and bottom line growth on a year over year basis, increasing organic revenue by more than 4% and adjusted EBITDA by 34%. This reflects strong profitability for expansion through targeted organic and inorganic initiatives, Total company performance exceeded the outlook we provided in November and continued to outpace the market. At the segment level, Education delivered another quarter of double digit revenue growth and accelerated the expansion of our higher margin therapy business through the acquisition of Children's Therapy Center. In SET, the revenue deceleration we experienced early in Q3 subsided in Q4 and we captured growing demand for our light Sciences specialty and our higher margin StatementWorks solutions. Both OCG and P and I delivered solid revenue and profit growth as our differentiated offerings in these businesses enabled us to further expand market share. Our positive performance in the fourth quarter book ended a year of significant strategic progress. Last February, I said that 2024 Kelly by capturing a greater share of customer demand and by more effectively converting top line growth to bottom line profitability. Today, I'm pleased to say that we delivered on our commitments and are poised to continue doing so in 2025.

We continued to accelerate profitable growth delivering positive organic revenue growth on a year over year basis and outperforming the market. Across our specialties. We remained laser focused on improving delivering 50 basis points of organic adjusted EBITDA margin expansion in the quarter and bringing our full year EBITDA margin to 3.3 on an adjusted basis. This represents a significant increase over our recent historical average of approximately 2%. We unlocked additional value creating opportunities and further streamlined Kelly's operating model completing the same of our European Staffing business for more than $100,000,000 We also completed the sale of Ares Group in June, enabling OCG to sharpen its focus on global RPO and MMS solutions. Finally, we redeployed capital in pursuit of inorganic investments in higher margin higher growth specialties with the transformational acquisition of Motion Recruitment Partners. The addition of MRP, has strengthened the scale and capabilities of our staffing, consulting and RPO solutions in attractive customer end markets. We delivered on these commitments in 2024, notwithstanding a challenging operating environment in which total staffing industry revenues declined in most segments by double digits. Our continued progress against this backdrop further reinforces our strategic decision to sharpen our focus on in demand specialties in which Kelly is well positioned to compete and win.

I'll share more later on how we'll leverage our momentum to propel us forward on the next leg of our Specialty journey. First, I'll turn it over to Troy Anderson, who will lead the financial Having completed a successful transition with Olivier T. Rowe in December, over to you for more details on our results in the fourth quarter and full year. Thank you, Peter, and good morning, everybody. Before I get into the results, want to thank the Kelly team for such a warm welcome during my first quarter with the company.

It's been a pleasure diving into the business and seeing this team's dedication and commitment. I'm incredibly excited to execute on the opportunities in front of us to drive more value for our shareholders, customers talent and employees in 2025. As Peter said, we're pleased with our strong fourth quarter and full year results and encouraged by the momentum we're building across our segments.

As a reminder, for comparison, our reported results for 2023 included the European Staffing business that was sold on 01/02/2024, and for 2024 include motion recruitment partners since the May 31, acquisition date. Provide greater visibility into the underlying trends in our operating results, I'll discuss year over year changes on a reported and on an organic basis, with the organic information excluding these items. Revenue for the fourth quarter of twenty twenty four totaled $1,190,000,000 a decrease of 3.3% versus Q4 last year. On an organic basis, year over year revenue was up 4.4%. This is an acceleration from our trends over the prior quarters in the year and better than what we had built into our Q4 outlook. In the quarter, staffing revenue trended up positively and we saw moderating declines in perm fees, which have a higher gross margin rate. Our outcome based offerings, which on an organic basis is just over a third of our revenue in P and I and SET, an even greater portion of gross profit also trended up positively. Drilling down into revenue results by segment, I'll start with Education. Which was up 12% year over year in the quarter continuing its trend of double digit revenue growth.

Growth in the quarter reflects ongoing fill rate improvement higher bill rates in our existing business as well as net new customer wins. In the SET segment, revenue was up 38% on a reported basis driven by the acquisition of MRP, Debt organic revenue was down 4% outperformed the market despite the continued challenging environment. Seth's organic revenue decline for the quarter reflects lower staffing market with revenue down 5% across the staffing specialties, and down 2% in the outcome based solutions. Which improved relative to the third quarter and was down overall primarily due to lower demand in certain industry verticals such as telecom. We continue to see the outcome based business including our StatementWorks suite of solutions, a growing portion of the market, we were driving our focus and continuing to innovate. In the OCG segment, revenue grew by 9% driven by continued strong performance in the PPO specialty. Year over year declines in RPO and MSP reflect reduced hiring and contingent labor demand with our customers. Adding lower margin PPO revenue pressured gross in net margin for the OCG segment as a whole again this quarter. Going forward, OCG is well positioned to drive revenue growth in both the MSP and RPO offerings.

Which have measurably higher gross margins, As recent wins are implemented during the year, and momentum in the sales pipeline is realized later in the year, Revenue in the Professional Industrial segment improved 4% year over year in the quarter, which is a significant improvement relative to recent quarterly trends. Revenue from staffing improved 3.7% year over year reflects the success of our omni channel strategy. Revenue in the outcome based specialties was up 5.9% driven by strong demand in semiconductors, logistics, manufacturing and distribution Consistent with Seth, P and I is seeing stronger demand for its innovative portfolio of outcome based solutions that meet clients' talent needs across a variety of skill sets.

Reported gross profit was $241,500,000 reflecting a gross profit rate of 20.3%. Improvement of 100 basis points compared to the prior year quarter. On an organic basis, the GP rate declined 80 basis points in the quarter with 70 basis points from business mix and 10 basis points from lower perm fees. The business mix impact showed improvement relative to prior quarters and reflects continued growth in specialties with lower GP rates. During the quarter, we saw GP rate improvement in SET as a result of the MRP acquisition. Modest declines in education and P and I, a more significant decrease in OCG reflecting the growth in PPL in the quarter. We continued improving our SG and A expense profile in the quarter with reported SG and A expenses of $217,400,000 down 6% year over year. On an adjusted organic basis, SG and A expense declined 4%. This decrease reflects our focused efforts to improve productivity, better align resource levels with volumes. As well as the impact of lower performance related incentive compensation expenses. You'll note in our financials that we had some impairment activity during the quarter.

As a result of positive subleasing activity for unused floors, we recognized an $8,000,000 non cash impairment charge for certain right of use assets related to the facility. Additionally, we recognized a $72,800,000 non cash goodwill in charge related to the Softworld acquisition that we completed in 2021. While Softworld delivered revenue growth in 2024, measurably outperforming the market, its growth and overall financial performance were lower than our original projections due to the challenging market conditions experienced during the year. [indiscernible] firmly believe that Softwareworld's specialty IT staffing statement of work its outcome based clinical science offerings are well positioned to generate additional value as demand improves. Peter will provide more insight shortly into how we plan to accelerate that value cap in 2025 as we further integrate MRP with Seth's portfolio of specialty businesses including software. Reported loss per share for the fourth quarter was $0.9 compared to earnings per share of $0.31 in Q4 twenty twenty three. On an adjusted basis, earnings per share was $0.82 compared to $0.93 in the prior year quarter.

The decline versus the prior year reflects increased net interest expense of $0.12 following the MRP acquisition in a one time deferred income tax valuation allowance release benefit in 2023, of $0.25 Adjusted EBITDA was $43,500,000 an increase of 34% versus the prior year period While adjusted EBITDA margin improved 110 basis points to 3.7%, beating our expectations for both measures. The 110 basis points of margin expansion includes a 50 basis point organic improvement. All four segments improved their organic adjusted EBITDA margin in the quarter versus last year. Overall, we finished the year with strong profitability and are confident in our ability to achieve further margin expansion in 2025 and subsequent years. Before we look ahead, I'll reflect briefly on our full year results. Revenue was $4,300,000,000 down 10.4% However, organic revenue grew 0.5% for the year reflecting solid execution and market share gains amid persistent market headwinds and overall double digit market declines according to major industry analysts. Our 2024 GP rate improved 50 basis points. On an organic basis, our GP rate declined 110 basis points due to business mix and lower perm fees. We reported a loss from operations of $15,100,000 for the full year, primarily due to $86,300,000 of non cash impairment charges.

Adjusted EBITDA was 143,500,000.0 up 31% and our adjusted EBITDA margin improved 100 basis points to 3.3%. We had a reported loss per share of $0.02 and earnings per share of $2.34 on an adjusted basis. An increase of $0.14 We ended the year with total available liquidity of $154,000,000 comprising $39,000,000 in cash and $115,000,000 of available liquidity on our credit facilities. Total borrowing was $239,000,000 at the end of the year, reflecting an adjusted EBITDA leverage ratio of 1.7. We'll continue to be disciplined in our approach to capital allocation and opportunistically deploy capital to generate attractive returns.

Indicative of that in the fourth quarter, we we completed $10,000,000 of our $50,000,000 Class A share repurchase authorization leaving us with 31,600,000.0 Class A shares outstanding at the end of the quarter. Our operating cash flow and available liquidity give us ample financial flexibility fund our operations and capitalize on attractive organic and inorganic investment opportunities. For our 2025 expectations, we believe market conditions to start the year will remain relatively consistent with what we have experienced in the past few quarters. And expect to see modest improvements in market conditions as we progress through the year. Overall, we expect to capture additional market share in 2025 and deliver incremental organic revenue growth. We also expect to continue to expand our net margin ultimately cash flow by efficiently converting more of our top line growth to bottom line profitability. Our initial outlook will be for the first half of the year we expect to outperform the market and deliver total revenue growth of approximately 10% due to the MRP acquisition.

With modest organic revenue growth. The MRP benefit will be slightly higher in Q1 than in Q2 given the 05/31/2024 acquisition date. The first half growth will largely be driven by the Education segment, although their year over year quarterly growth rates won't be double digits like they were throughout 2024, as a result of their strong performance during the year. We expect the other segments to range from flat to showing a few points of declines. Moving on to gross profit, expect to see GP rate improvement of approximately 80 basis points in the first half of the year, reflecting the benefit of the MRP acquisition.

We expect the organic GP rate to be roughly flat with Q1 down slightly. This is measurably improved relative to the 110 basis point organic decline for all of 2024. The improved GP rate performance reflects our expectation of overall mix improvement with outcome based solutions and higher margin specialty offerings. Reflecting on SG and A, we expect to sustain and build upon the efficiency improvements that we gained from our transformation related actions over the past two years, will continue to actively manage resources in line with revenue trends in each segment. Total adjusted expenses will increase gradually in the first and second quarters relative to the fourth quarter of twenty twenty four, in conjunction with revenue and the normal payroll tax and performance incentive resets at the beginning of the year.

Depreciation and amortization, all in, we expect approximately $13,500,000 each Given all of the above, we expect to adjusted EBITDA margin to improve roughly 10 basis points for the first half of the year. To approximately 3.6%. With Q1 being slightly lower and Q2 higher. We expect our effective tax rate to be in the upper teens for the first half 2025.

And finally, we expect to increase our CapEx and soft development spending in 2025. As a result of the MRP integration, and our overall enterprise technology modernization plans. In closing, I want to thank our teams for the strong performance during the year and their dedication and commitment to the company overall. As well as our customers for giving us the opportunity to support them and for their continued partnership. With that, I'll turn the call back to Peter for his closing remarks. Thanks for those insights, Troy. We move forward into 2025 propelled by positive momentum from our recent achievements and well positioned to accelerate profitable growth as staffing demand rebounds. Our priorities for the year are clear. First, we'll deliver top line growth by continuing to increase scale in our chosen specialties.

To this end, we'll continue to execute our organic growth initiatives including our omni channel delivery strategy and P and I, and our large enterprise account strategy both of which we expect will continue to deliver gains and market share. In addition to these initiatives, our primary focus is the integration of MRP. Since completing the acquisition, we've been working closely with our colleagues at MRP on a thoughtful approach to integration that harnesses the unique strengths of each business. At the core of the value case for this deal is the highly complementary nature of MRP's portfolio of businesses and our SET and OCG businesses To maximize value creation, we're integrating each of its respective within our SET and OCG segments.

We'll combine motion recruitments, IT staffing and consulting business with Seth's technology specialty. Which includes Softworld, This significantly increases the scale of our IT staffing and consulting business propelling Kelly into the top 10 providers in the category. TG Federal will come together with Seth's government specialty, This builds upon the life sciences and engineering workforce solutions we currently bring to our public sector partners and adds a strong IT solutions capability.

Motion Recruitment's telecom staffing and SoW managed services business will integrate with SETT's telecom specialty enhancing our market leading staffing and solutions provider, in the telecom market. Finally, we'll combine MRP's seven step business with Kelly OCG's global RPO specialty.

Differentiated by innovative technology, they'll create a leading talent solutions offering that will rank among the top five globally. Each of the combined business lines will be ready to go to following the conclusion of the earn out period included as Among the leaders we have designated for each of the combined businesses are members of the deep experience management bench at MRP.

By leveraging the unique strengths of each business, we're creating a clear pathway toward achieving revenue and cost synergies. We expect synergies to ramp throughout 2025 and into 2026, culminating in an EBITDA benefit of approximately $10,000,000 Second, we'll continue to optimize the company's operating model to enable growth and further enhance organizational efficiency and effectiveness.

To this end, in the first quarter of twenty twenty five, we're bringing together Kelly OCG and P and I under common operational management. This decision reflects shifting buying preferences among low large enterprise customers as demand grows for integrated end to end workforce solutions that bundle traditional staffing services with advanced outsourcing and consulting capabilities. Unifying OCG and P and I positions Kelly to address these preferences more effectively by simplifying our go to market approach and unlocks new value creating opportunities. The combined OCG and P and I business along with our SET and Education businesses, we'll underpin the more streamlined operating model designed to accelerate profitable growth. Finally, we're laser focused on driving incremental EBITDA margin expansion. The integration of MRP and our ongoing focus on efficiency will meaningfully contribute to achieving this objective as we progress through the year and transition into 2026. In addition, we'll continue to shift our business mix towards higher margin, higher growth areas including growth and efficiency, we're positioned to deliver top and bottom line results on a consistent basis. Reinforcing that this is a different Kelly Kelly. I have great confidence in our team's capacity, to execute against these ambitious priorities and achieve our performance expectations for the full year.

With our team focused on our specialty growth strategy and guided by our noble purpose, I look forward to building on the positive momentum we created in 2024.

Together, we'll deliver long term value to all our stakeholders connecting our talent and customers to limitless opportunities and rewarding our shareholders for placing their trust in our company. We're grateful for their support as we move forward on our journey to unleash Kelly's full potential. Liv, you can now open the call to questions.

Our first question will go to Joe Gomes with Noble Capital. Your line is now open.

Good morning. Nice quarter. Thanks for taking my questions.

I wanted to start off on the Education segment. Again, really strong revenues were up over 12%. But that was down if you look at the full year, I think they were up 15.5%. Anything unusual, whether you're expecting more in the Education segment? Was that in line with your expectations? For the quarter? Yes. Thanks, Joe.

The Education segment in Q4 was impacted significantly by the two hurricanes in the September, early October timeframe. That was not anticipated a hurricane can be a common, the fact that there were two back to back created significant disruption in school districts in market in which we participate. So that was a significant contributing factor to the performance of education in Q4.

Okay. And you went though that still grew 12% over 12%. So that's fantastic there.

And then in the release you talked about some new customer wins in the sales pipe momentum. And Peter, just wanted to give us a little more color on that. The kind of the number of wins or growth in the pipeline? What more could you add to that statement that you had in the press release? Well, in terms of edge based on staffing industry analysts market share numbers, we continue to take share and we're taking share not just because we're competing on price, but we're competing on value. We're the market leader for a reason. We deliver higher fill rates and better performance for school districts across the country and and they recognize that value. And so we're very confident in the our ability to continue to win more than our fair share of of schools. We also are very encouraged by the performance of our therapy business in combination with our traditional K core education business And we expect in the quarters to come to see meaningful contributions from the combination of traditional K-twelve and therapy.

Okay. [indiscernible] on the M and A front, anything there, how's the market, I guess, our pricing? Is it kind of trending in your favor? There are more opportunities coming across [indiscernible] Give us a little more color on that also Yes, Joe, it hasn't changed meaningfully in terms of the deal flow. It's still in a bit of a trough, I would say, relative to prior periods. And the anticipated or hoped for realignment of sellers' expectations about valuations is not is not immediately evident. There's still appears to be some disconnect between valuation expectations and and performance. But we're we're actively monitoring the deal flow and actively engaged in conversations with companies that we think could be attractive additions to the Kelly portfolio.

Great. I'll get back in queue. Peter, it's been great work. We know it's early and you're going to be here hopefully to the end of the year, but I just want to to congratulate you on the career.

Thank you. Thank you, Joe.

Appreciate it. Likewise, it's been a pleasure to work with you.

Thank you. And our next question coming from the line of Will Brinman with Northcoast Research. Your line is now open.

Hey, guys. How's it going?

Good. Well, how are you?

Good morning.

I'm good. So you said staffing revenue trended higher and maybe you already gave a little bit color on this, but you said staffing revenue trended higher in the fourth quarter. Was that mostly demand or is that more so on the pricing side? And then if you could give me some insight on demand for perm and temp staffing and how that sort of progressed throughout the quarter? Yes, sure. This is Troy.

Good to talk if you will. Thanks for the question. The staffing, so P and I was where we saw the strong demand on Staffing in the quarter. They do tend to have a seasonal uptick in the fourth quarter, tend to progressively grow through the year and have a seasonal uptick. We're have been talking about the improvements in P and I throughout the year. With their omni channel strategy and along with their large account strategy and the outcome based solutions. So they had a good quarter, up 3%, 3.7% on staffing and up 5% on outcome based. And it was pretty consistent throughout the quarter. I mean, they finished strong in December, but you start to get some anomalies with the holidays and and weather and things like that. But overall, it was consistent performance. We've seen consistent performance, improving performance throughout the year on the P and I side. Seth, the staffing was pretty much consistent with Q3. Some ebbs and flows across the months but down 5% in Q3 and down 5% in Q4. We saw some good improvement on the outcome base side with which helped them pull back a little bit from their Q3 client Okay, great.

That's all. Thank you. Thanks, Will.

Thank you. And our next question coming from the line of Kevin Steinke with Barrington Research. Your line is now open.

Hey, good morning.

Good morning. Just wanted to start off by asking about overall customer sentiment and As you talked about your outlook for the first half of twenty twenty five, you mentioned that you I think you just expect the environment to be similar to what it has been. So are we just kind of still seeing general cautiousness how are customers in your view thinking about the overall macro economic environment and how that might be impacting their their plans and overall demand? Thanks.

Yes, Kevin. So post the election, there was clearly a a shift, I would say, towards more optimistic points of view from our customers in terms of future business environment, tax policy, tax changes, relaxing of certain regulatory restrictions.

But as the administration took over and with a flurry of executive orders, I would say companies are taking a little bit more cautious approach, a wait and see. To understand the downstream impact of some of the executive orders that have come out as well as the Pending legislation that around budget and tax policy, etcetera. So that's why We've landed on the first half of the year being a continuation of what we've seen in the prior few quarters And again, we're we're pleased to the fact that we're continuing to take share across our specialties and we will execute with that end in mind.

Okay, that makes sense.

Just with regard to the organic growth outlook for the first half of twenty twenty five You talked about education continue to grow nice continuing to grow nicely, although [indiscernible] Probably not at double digits. I assume that's just kind of a a comp issue. And then on the other segments, I think you said flat to down modestly. Maybe if you could touch on the other segments in terms of the assumptions there as Kelly. You've had some pretty nice momentum going here in professional and industrial and also outsourcing consulting. So maybe Just talk about by segment, what's your factoring in, in terms of that outlook for the first half of twenty twenty five? Yes. Sure, Kevin. This is Troy.

Our 10 approximately 10 with MRP and then rough [indiscernible] [indiscernible] significantly different than our 2H performance from '24 we were up about two, if you look at second half. So when you think about the discussing and the customer sentiment Again, it's not entirely different. And then you could do get some of dynamics. You mentioned education, yes, is predominantly on the compares Keep in mind, they operate more on a school year basis. So there are new wins come in in the spring and summer they're implementing going into September. So the benefit of any new wins we've entirely captured at this point in the revenue performance and that we'll see that uptick in the back half of the year as we as we capture more share and expand into Greenfield areas on the education side. So I would expect not double digits in first half, but maybe some uptick in the back half. On P and I, little bit of a pullback maybe relative, again, very strong Q4, outcome based again drove a good bit of that. There was a little bit of a favorable compare on outcome based versus Q4 of the prior year where we had a bit of a pullback.

In some seasonality. So P and I probably in the more roughly flat range. Set, again coming off minus three Q2, minus five Q3, minus four. Q4, good performance in outcome based, but still a lot of challenge in the IT market. And I think as you've seen probably in some of the peers and just of the industry data that's come out, probably a little bit of a pullback here earlier in January and looking for some better performance as the quarter progresses, so probably down not inconsistent with Q4, maybe a little bit better than that. And then OCG, a dynamic going on there, the growth in '24 was driven entirely by PPO and as we've talked about all year and you've seen in the in the GP rates that puts a lot of pressure on the GP side. And we're looking for more of a remix in 2025 talked about the pipeline and new wins there, which which takes a while for those to implement. So we see a lot of MSP and RPO opportunities that are have been won and are implementing And PPO is a bit of a countercyclical and softer markets people will go more to the payrolling route of contractors they've had before versus going out for net new.

And so Kelly you'll see a remix on OCG where we have lower PPO growth, but being replaced by MSP and RPO growth, which will net benefit us from a margin perspective. But you won't see the growth rates in OCG and 25 that that you've seen this year.

All right. Thank you. That's helpful color. And when you were talking about bringing together professional and industrial and outsourcing and consulting common operational management, Is that also going to be brought together from a segment reporting perspective or how will you approach that going forward?

Sure. We're going through the segment reporting for '25, the analysis associated with that. As we speak. So we haven't made any definitive conclusions yet. We have some other elements of customer accounts and some offerings and the like that we're looking at. Making some changes with as well. So we'll have a full readout in the Q1 and of course bridge you all very clearly from our reporting structure for 2024 to any changes in 2025.

Okay, sounds good. Thanks for taking the questions. I'll turn it over Thanks, Kevin. It's good. Thanks, Kevin.

Thank you. Our next question coming from the line of Mark Riddick with Sidoti. Your line is now open.

Hey, good morning. Good morning, Mark. Good morning. So first of all, Peter, I just want to say, it's a pleasure working with you and looking forward to working with you through the remainder of the year at least. And Troy, welcome. Looking forward to working with you moving forward as well. So I did want to touch a little bit on [indiscernible] actually, no, I wanted to go back for a moment. You did have a smaller acquisition that was announced back in November. [indiscernible] talking about that and ensure that how that opportunity came about with Yes. Thanks, Mark.

Yes, small acquisition, little over $3,000,000 Children's Therapy Center, Kelly interesting space for the therapy business part of Kelly Education because CTC operates brick and mortar clinics that complement the in school therapy that PTS provides to our SchoolDisc customers. And because their clinics, they're not bound only to school hours or even the calendar school calendar. So it provides us with an opportunity to provide services outside of school time and even during the summer months. That can be very attractive to therapists that want a more regular schedule. And so we're very excited to essentially pilot this complement to our PTS business. And so far, we're very pleased with how the integration is going. And as you know, the therapy business is [indiscernible] significantly higher gross margins than our traditional K-twelve business does. So we're [indiscernible] excited about the possibility to further expand our therapy practice through CTC. Excellent. And then shifting gears, as far as the sort of cash usage and and the like of it. We did sort of notice and in prepared remarks around the share repurchase activity during the fourth quarter. I wanted to sort of touch a little bit on sort of that appetite going forward as well as it seems as though there seems to be be some comfort at least with the prepared remarks that you already had regarding the the valuation goal, I suppose.

But maybe if you could talk a little bit about [indiscernible] acquisition prioritization you may have now and if that's shifted at all over the last year or so? Thank you. Sure. Thanks, Mark. This is Troy.

Yes, completed the $10,000,000 share repurchase, dollars 10,000,000 share repurchase in Q4. It's a two year authorization. Clearly, there was a pretty significant disconnect in the fourth quarter on the share price coming out of the Q3 report.

So we felt it was important to be in the market there. We continue to very strongly in the Kelly Kelly and our ability to execute against that in 2025 and over the coming years and still believe there's a disconnect. But we also want to make sure that we're focused on investing in the business to support that strategy drive growth both organically and inorganically maintain the dividend and of course look for opportunities for debt repayment. Our net debt went up about $4,000,000 in the quarter, but that included the $10,000,000 of share repurchase plus the $3,000,000 or so that Peter referenced with CTC. So I think our bias probably in the near term is a little bit more toward the [indiscernible] investing in growth to drive further shareholder value creation, but we have the authorization available there and we'll continue to look at return to shareholder as an option throughout that time horizon.

Great. Thank you very much. Thanks, Mark.

Thank you. I see there are no further questions in the queue at this time. Will now turn the call back over to Mr. Peter Quickley for any closing remarks.

Yes. Thanks, Bill. I think we can conclude the call. Thank you everybody for your time this morning and Appreciate your participation.

Thank you, Liv. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference call and you may now disconnect. [indiscernible]