Q1 2020 Earnings Call
Thank you for standing by and welcome to Manpowergroup first quarter earnings results Conference call. At this time, all participants are in listen only mode until the Q any session of today's conference.
This call will be recorded.
Any objections. Please disconnect at this time and now I will turn call over to Manpowergroup, Chairman and CEO.
Sir you may begin.
Good morning, welcome to the first quarter conference calls for 2020.
With me today is our Chief Financial Officer, Jack and I guess.
I'll start by going for some of the highlights for the first quarter, but Jack will go through the operating results on the segments, our balance sheet and cash flow.
I will comment on some considerations for the second quarter 2020.
Sure some concluding thoughts before we start or Kunaev section.
As we proceed jacking locally the safe Harbor language.
Good morning, everyone. This conference call includes forward looking statements, including statements regarding the impact to the cold at 19, pandemic, which are subject to known and unknown risks and uncertainties.
Statements are based on management's current expectations or beliefs actual results may differ materially will materially from those projected in the forward looking statements. We so no obligation to update or revise any forward looking statements slide two of our earnings release presentation includes additional forward looking statement considerations and important information regarding previous SEC filings.
A reconciliation of non-GAAP measures.
Thanks Jack.
The first quarters 2020 was an unprecedented one for a company the magnitude of speed or the change in market conditions that occurred over the last couple of weeks of March was unlike anything we've seen over 70 year history.
We've had in mind.
To begin by thanking the member routine around the world for their incredible responds to what does the house price was first and then economic crisis next with the significant impacts on our people and business.
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The health and wellbeing of our people our employees, our clients and or assumptions.
And continues to be our top priority with our talented teams and their expertise. We have responded with speed into this global emergency, enabling us to support or assumptions and clients around the world.
Okay footprint, just allowed us to leverage the learnings from one or a buemi business as we experienced a first wave the co lead 19 pandemic move from Asia to Europe, North America and to Latin America.
We have a robust enterprise risk management framework, and our business continuity plans were executed with speed and efficiency and.
Regional and country level.
The technology investments, we've been making for some years as part of a transformational journey have been critical in allowing us to respond immediately in response to the global pandemic in a matter of chain days in March we were able to shift more than 80% of our people to remote working and I've also extended our cyber and information security came.
The ability to accelerate the ability for some of our associates and consultants to work at home for clients, where this was previously not possible.
I was hoping well reported by the end of March significant locked on measures had already been implemented in our main markets in Europe, and North America as well as in other countries.
When governments unable to provide further information dates on when and how restrictions will be lifted predicting where business will be in the short term is very difficult in this highly uncertain environment.
Instead, we will be providing a more detailed update unusual within our country performance commentary, including revenue trend currently being experienced in April to provide more insight and what into what we're seeing and how we're managing through this in the shorter.
In the first quarter revenue came in at $4.6 billion down 6% year over year in constant currency.
Same day basis, our underlying constant currency revenue decreased 7%, reflecting the sudden drop of activity during March as our largest markets experienced over 19 related work restrictions.
On a reported basis.
Operating profit for the first quarter was $13 million, 63% in constant currency.
Excluding restructuring charges from both years operating profit was $86 million for the quarter decreased 39% in constant currency.
Reported operating profit margin came in at 0.8%.
130 basis points in constant currency from the prior year end after excluding restructuring charges.
Operating profit margin was 1.9% don't hundred basis points from the prior year.
Reported earnings per share of three cents reflected the impact of restructuring charges and noncash pension settlement charge and an increased effective tax rate, excluding the special charges or earnings per share was 82 cents for the quarter, representing a decrease of 39%.
In constant currency.
I'm proud to say than we have a strong leadership team that moved very quickly during the start of the pandemic to support our clients and our associates. We did this while protecting the bottom line as much as possible in the first quarter, while creating plans for very challenging second quarter.
Our diversity across geographies industries and offerings has benefited us some businesses have not been impacted materially by the crisis at this stage.
Despite a very tough global economic environment, we did see revenue growth from Japan, Canada, Spain and in yet in the first quarter.
Bridging opportunities or industries are growing such as logistics and foodservices to partially offset the material declines in manufacturing in many markets.
Across our countries, we have implemented initiatives to reduce our as June eight and are prepared and ready to take further cost actions to optimize our business structure through this economic downturn, while preserving our ability to rebound when market conditions improved.
I'd now like to turn it over to Jack to take you through the financials and country performance deals.
Thanks, Jonas as result of the covet 19 related impacts on March 18th we disclose we're with growing our previous guidance for the first quarter.
Revenue in the quarter represented the reported decline of 8% year over year in on a constant currency basis represented a decrease of 6%.
Acquisitions, offset the impact of dispositions in the quarter and did not have a significant impact on the revenue trend in the quarter and more billing days. This year contributed to about 1% of additional revenue.
This resulted in organic constant currency days adjusted revenue declined 7% in the first quarter and compares the fourth quarter decline of 1.5% on a similar basis.
Our revenue trends during the quarter on billings day adjusted basis, including the monthly year over year constant currency revenue decline of 17% in March.
In March the majority of the decline was driven by our European businesses. During the last two weeks of the month as governments issued states of emergency and related locked on requirements.
Our gross profit margin was down 30 basis points year over year, and reflected lower permanent recruitment fees and higher sickness and absenteeism in certain countries as well as increased direct costs associated with early termination client contracts during the cobot 19 crisis in March.
First quarter performance resulted in operating profit decline after restructuring costs of 41% or 39% on a constant currency basis.
This reflects the significant and sudden operational de leveraging experienced in March.
This resulted in operating profit margin of 1.9% excluding restructuring costs.
On a reported basis earnings per share was three cents, which included restructuring costs, which had a 68 cents negative impact and a previously disclosed pension settlement charge, which had an 11 cents negative impact. Excluding these costs earnings per share was 82 cents.
Regarding our effective tax rate.
Finally, we had guided to a full year estimated rate at 34%.
As we've discussed in the past our effective tax rate is significantly impacted by the French business tax. Although this French business taxes, primarily calculated based on revenues and not pre tax earnings. It is considered income tax for U.S. GAAP purposes, and the normal in normal economic periods, the French business taxes represented about 70% of RF.
Active tax rate, meaning our 34% to 35% estimate was comprised of an underlying 27% to 28% corporate tax rate component based on blended country income tax rates globally, plus the 7% impact of the French business tax component.
Although corporate income taxes in France will be scaled downward due to lower pre tax income the French business tax will not see as comparable level of decrease since it remains calculated on revenue levels.
As a result, the French business tax component will become a more significant portion of our total income tax expense in 2020 as our underlying corporate income tax amount will decrease on lower taxable income, but the French business tax amount will not decreased significantly as derived from revenues of our French business, which will not be as reduce.
Differently as pre tax income.
This incremental French business tax waiting within our overall tax expense increased our effective tax rate about 7% in the quarter and we will provide further updates as your progress is as a result is dependent on revenues in France.
Separately, the first quarter tax expense included discrete favorable benefit of 4.3 million, which lowered the effective rate by about 6%.
The effective tax rate for the first quarter, excluding restructuring and pension settlement costs represented 36.3%.
Looking at our gross profit margin in detail our gross margin came in at 15.7%.
Staffing interim margin increase of 10 basis points year over year was offset by decline in permanent recruitment fees year over year as result of the cobot 19 impact in March as well as lower talent based outcome activity within the manpower business.
We anticipate the ongoing material decline in higher margin permanent recruitment activity during the duration of government lockdowns in most of our markets as a covered 19 crisis continues into the second quarter.
Next let's review our gross profit by business line during the quarter. The manpower brand comprised 62% of gross profit our experienced professional business comprised 23% and our newly launched health solutions brand comprise 15%.
As part of our year end 2019 earnings release, we discussed our brand updates our year over year comparisons reflect the restatement of our brands for the prior year period.
During the quarter, our manpower brand reported organic constant currency gross profit decrease of 10%.
Gross profit in our experienced brands declined 6% year over year during the quarter on an organic constant currency basis, and our two largest experis markets. This reflects flat gross profit in the UK and a decrease of 2% in the U.S.
This was offset by declines in Sweden, Germany, the Netherlands and Australia.
Sounds solution.
Solutions and foods, our global global market, leading ARPO, MSP and right management offerings organic gross profit growth in the quarter increased 5% in constant currency, which was driven by MSP and RPL activity in the first two months of the quarter.
We experienced a sharp reduction in ARPU activity during March as many client programs initiated hiring freezes in light of the cobot 19 crisis.
All right management business experienced a decline in gross profit of 3% and organic constant currency during the quarter.
Right management has historically experienced an increase now placement activity during economic downturns, we're not seeing an increase now placement activity at this time as we believe clients are uncertain as to the duration of the downturn.
Our reported SGN expense in the quarter was 686 million, including the $48 million restructuring costs.
Assuming a expense was 638 million a decrease of 21 million from the prior year after excluding restructuring costs from both years.
On a constant currency basis, excluding restructuring costs SGN, a expenses were down 1% compared to the prior year.
Excluding the restructuring costs us unit expenses as a percentage of revenue in the quarter represented 13.8%, which reflected the significant de leveraging on the sudden drop of revenues in March.
As a drop in activity in mid March was significant in sudden we were not able to meaningfully scaled down SG names is very short time period. However, we have taken significant actions in late March in early April which will allow us to reduce SGN eight to a much greater degree to better offset the significant gross profit declines anticipated in second quarter.
This includes leveraging government on employment related benefits, which allowed us to move Unutilized staff and associates quickly onto these programs.
We expect to recover the restructuring costs of 48 million through cost savings over the next 12 months with full run rate savings beginning in the third quarter.
As we previously announced geographical segments now include the results of right management in prior periods have been restated for comparative purposes.
Yes.
I'll now turn to cash flow and balance sheet I movies slides up in the order as result of current market conditions.
Free cash flow defined as cash from operations less capital expenditures equaled 172 million.
This represented strong growth compared to free cash flow in the prior year of 92 million.
We have historically experienced increase in free cash flow as we enter downturn as we begin to collect our receivables, while we incur lower payroll costs on lower activity.
This contributed to a strong free cash flow effect in March we would expect to similar underlying trends for the beginning of the second quarter provided that we experienced consistent client payment patterns.
At quarter end day sales outstanding decreased slightly year over year in this environment one of our top priorities is maintaining strong cash flows from collection activities to date, we have not experienced a significant decrease in cash receipts from clients and are watching is very carefully and ensuring our collection teams are appropriately staffed due diligently pursuit.
Payments as per original payment terms.
Capital expenditures represented $9 million during the quarter.
During the quarter, we purchased 871000 shares of stock for 64 million.
As of March 30, Onest, we have 5.9 million shares remaining for repurchase under the 6 million share program approved in August of 2019.
Our balance sheet was strong at quarter end with cash of 1.1 billion and total debt of 1.04 billion, resulting in a net cash position of 56 million.
Our debt ratios are very comfortable at quarter end with total gross debt to trailing 12 months EBITDA of 1.42, and a total debt to total capitalization at 28%.
Our debt and credit facilities and not change in the quarter and the earliest zero note maturity is not for another two and a half years.
In addition, our revolving credit agreement for 600 million remained unused.
Now I will turn to the segment results.
The Americas segment comprised 22% of consolidated revenue revenue in the quarter was 1 billion an increase of 1% in constant currency.
Including restructuring costs equal 17 million. This represented a decrease of 26% in constant currency from the prior year, excluding restructuring costs of the $13 million restructuring cost 11 million related to the us where we consolidated branches and other facilities and optimize front and back office processes and the balance related to Canada.
In other countries in the Americas, where we continue to simplify our operations.
The U.S. is the largest country in the Americas segment, comprising 60% of segment revenues revenue in the U.S. was 611 million down 2% compared to the prior year adjusting for billing days and franchise acquisitions. This represented a 6% decrease year over year, which included a 12% decrease in the month of Mark.
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The impacts of the Covet 19 crisis became more significant in the us as we ended the quarter.
During the quarter VP for our us business decreased 44% to 13 million excluding restructuring.
Hey costs included 4 million of one off items, and putting a bad debt charge and the state sales tax related charge.
Excluding restructuring charges GP margin was 2.2% a decrease of 160 basis points from the prior year.
Within the U.S., which now includes right management as part of town solutions. The manpower brand comprise 34% of gross profit during the quarter revenue for the manpower brand and US was down 5% in the quarter or down 12% when adjusted for billing days and franchise acquisitions.
The Experis brand in the U.S comprise 33% of gross profit in the quarter within Experis in the us to skills comprise approximately 70% of revenues.
During the quarter, our experience revenues declined 1% from the prior year and after adjusting for billing days. This represented a decline of 3%.
Our experience business in the U.S has held up well during the cobot 19 crisis.
Now solutions in the U.S. contributed 34% of gross profit experienced a 9% revenue increase in the quarter or 7% increase on a day's adjusted basis.
As indicated earlier RPL business has experienced significant client hiring freezes in late March into April as result of the as a result of the cobot 19 crisis.
On an overall basis based on April activity to date, our us business is experiencing a revenue decline of about 20% and that reflects the manpower and talent solutions businesses are both down significantly and double digit declines and the Experis business is in the mid single digit decline.
It is uncertain when cobot 19 related restrictions will be lifted in different parts of the us and how those developments will impact our revenue trends.
Our Mexico operation had flat revenue growth in the quarter in constant currency in the month of March.
And the month of March was inline with the quarter overall, the business in Mexico performed well in the quarter in a difficult environment.
Government and Mexico issued lockdown requirements at the beginning of April which is having an impact on our business. During April our Mexico business is currently experiencing percentage revenue declines in the mid to high single digits.
The Mexico government has extended cobot 19 restrictions through May thirtyth.
Revenue in Canada was up 9% in constant currency or 7% on a day's adjusted basis and this included a 3% revenue declined in the month in March.
We're very pleased with the performance of our candidate businesses. They continue to lead the market.
During April activity to date, Canada's current rate of revenue decline is in the low double digit percentage range Canada's extended their covet 19 restrictions through may twelveth in large parts of the country.
Revenue growth and the other countries within Americas was up 10% in constant currency.
Southern Europe revenue comprised 42% of consolidated revenue in the quarter revenue in Southern Europe came in at 1.9 billion a decrease of 5% in constant currency.
Including restructuring costs equal 53 million, excluding restructuring costs decreased 26% from the prior year in constant currency I know you pay margin was down 100 basis points, driven by France, and Italy as result of the severe impacts of the covet 19 crisis in March.
Of the $13 million restructuring costs in the region about a third relates to Portugal, where we are significantly reducing our less profitable call center operations, 20% relates to Spain for front office, centralization, and organizational simplification and about 15% each relates to Italy, and Switzerland for front office delivery changes including branches.
Yes, and back office optimization, and the balance primarily relates to simplification of our Israel and eastern European operations.
France revenue comprised 56% of southern Europe segment in the quarter and was down 14% from the prior year in constant currency are down 15% on a day's adjusted basis in March France experienced that days adjusted constant currency decrease of 34% driven by the government's declaration of a state of emergency.
Months.
During April activity to date, our business has been experiencing a year over year decline of approximately 65%.
Oh, you P. was 38 million a decrease of 29% in constant currency and ODP margin was down 70 basis points in constant currency at 3.5%.
We have taken significant actions in France to reduce our cost during this period of materially reduced activity.
We have moved about of Oh, we have moved about a quarter to a third of our full time equivalents through government temporary unemployment programs and other initiatives and have cut virtually all discretionary spend these actions should reduce France's SGN a significantly in April as we manage through the crisis improvement in the rate of revenue decline is dependent on the timing of.
The government's actions to ease the locked on requirements.
As of today, France's announced that they are covered 19 restrictions will be extended through May 11.
Revenue in Italy, equaled 328 million, representing a decrease of 5% in constant currency, which included a 17% days adjusted decline in March.
At the end of March the government imposed additional significant restrictions due to the crisis and April activity to date has been down approximately 20% to 25% year over year.
Finally recruitment has been an important component of our Italy business and has declined materially during the crisis.
We experienced a 50% decline in permanent recruitment gross profit in March and April activity to date is down approximately 70% year over year.
Excluding restructuring costs declined 28% in constant currency to 16 million and ODP margin decreased 150 basis points to 4.8% largely driven by lower gross profit margin on a lower perm contribution.
We have taken significant action in Italy to reduce costs. During this crisis, which also involves moving fts onto a temporary unemployment programs.
This combined with the benefits of the restructuring actions should allow our talent business to significantly.
Reduce their SG in a in April.
As of today, Italy's broader restrictions have been extended through May threerd and there may be some businesses opening before that date.
Revenue in Spain increased 4% on today's adjusted basis in constant currency from the prior year in the quarter, which includes a day's adjusted decrease of 5% in March as the impact of the crisis to cold.
During April activity to date, Spain is currently operating at an estimated year over year revenue decline of about 25%.
Although Spain has recently ease certain work related restrictions the government has announced they intend to extend their broader locked down through may nine.
We acquired the remaining interest in our manpower, Switzerland franchise at beginning of second quarter last year.
This business represented 5% in southern Europe's revenues and experienced trends similar to the other countries in the region due to the cobot 19 crisis.
Our northern Europe segment comprised 23% of consolidated revenue in the quarter revenue declined 8% in constant currency to 1.1 billion.
Oh, you p., including restructuring costs represented a loss of 14 million.
Excluding restructuring costs was 5 million, representing a decline of 72% in constant currency.
The margin was down 120 basis points.
The.
The decline was driven by Germany, the Netherlands, and Sweden of the 20 million of restructuring costs, two thirds relates to Germany, where we are taking significant actions to reduce finance and shared services back office costs with the balance relating to the Nordics, the Netherlands, and Belgium, where we continue to simplify our operations.
Our largest market in northern Europe segment is the UK, which represented 36% of segment revenue in the quarter.
During the quarter UK revenues were flat in constant currency and down 2% on a day's adjusted basis, which included the days adjusted decline of 6% in March and April activity to date, our UK business experienced an estimated year over year revenue decline of approximately 20%.
As of today, the U.S. government has imposed covet 19 restrictions through at least may 7th.
In Germany revenues declined 15% on a constant currency basis or 60% on today's adjusted basis in the first quarter, which includes a day's adjusted decline of 23% in March.
In April activity to date, we estimate a year over year revenue decline of 30% to 35%.
As Germany is a bench market.
Meaning our temporary workers are staffed his full time employees for which we absorb the cost of Unutilized time and sickness, our ability to utilize government unemployment benefits for our bench associates and full time equivalents is critical to being able to preserve gross profit margin and minimize operating losses in the current environment.
The German program is subject to certain conditions and is providing 60% of loss after tax wages due to the covet 19 crisis.
We anticipate this program will allow us to avoid absorbing substantial levels of unutilized bench cost to preserve gross margin.
In addition to the restructuring actions I mentioned the business is also taking significant SGN a actions to reduce the cost of running operations also utilizing the government program, which is which is allowing us to reduce us unit cost significantly in April.
Germany has announced they will start to gradually lifts certain provisions of their lockdown beginning may 4th.
In the Nordics revenues declined 11% on a day's adjusted basis in constant currency, which includes a 15% decline in March.
The two primary business in the Nordics, our Norway, and Sweden, which are both bench model businesses.
During April activity to date, our Nordic businesses estimated total revenue decline of approximately 20%.
Government programs for unemployment benefits for our bench associates enough to ease running the operations are also critical in these markets.
And we expect this will allow us to minimize the impact of gross profit margin erosion and reduce SGN a significantly in Sweden, Norway. During these steep declines in activity.
Revenue in the Netherlands decreased 18% in constant currency on a day's adjusted basis during the first quarter, which includes a decline of 21% in March and April activity. Today. We are currently experienced experiencing a year over year revenue decline of 30%.
We previously mentioned new legislation, increasing the cost of temporary work in Netherlands effective at the beginning of the quarter and this did not appear to have a significant impact on our revenue trends as we experienced an improvement in the rate of revenue at the beginning of the first quarter.
No. It's also has significant bench operations related to our experience business and current governor pro programs will be utilized to compensate for wages pertaining to bench associates as well as our fts running operations.
Belgium experienced a day's adjusted revenue declined to 15% in constant currency during the first quarter, which includes a decline of 30% in March.
During April activity to date, we are currently experienced a year over year revenue decline of 45%.
Other markets in Northern Europe had a revenue increase of 6% in constant currency, primarily driven by January and February results in evolved your year over year growth in Poland in Ireland. We expect these markets to experience a high single digit revenue decline approaching a double digit decline in April.
The Asia Pacific Middle East segment comprises 13% of total company revenue in the quarter revenue decreased 14% in constant currency to 595 million adjusting for the deconsolidation of our greater China operations. Following their initial public offering in July 2019.
This represented an organic constant currency revenue increase of 1% in the first quarter.
Including restructuring costs equal $17 million in the quarter.
Excluding restructuring costs. This represented the constant currency reduction.
<unk> of 21% and after adjusting for the greater China deconsolidation represented in organic constant currency decline of 6%.
Oh, you P. margin decreased 30 basis points, excluding restructuring costs.
All of the restructuring costs of about 3 million involve Australia, where we continue to simplify the business after exiting certain low margin clients.
Revenue growth in Japan was up 8% on constant currency basis during the quarter, which includes a day's adjusted revenue increase of 6% in March.
The government of Japan initiated more restrictive coded 19 measures in April in Tokyo, and other large districts, which will be in place through may.
In April activity to date, we are experiencing a year over year revenue growth in the low single digit percentage range, but this trend could be negatively impacted as result of the recent restrictions.
Revenues in Australia declined 22% in constant currency adjusted for billing days includes a decline of 31% in March as a cobot 19 crisis to cold.
In April activity to date, we are currently experiencing a year over year revenue decline of 30%.
Revenue in other markets in Asia Pacific Middle East were down 26% in constant currency and adjusting for dispositions. This represented a 7% growth rate.
The largest market in the group.
Includes our India business, which is experiencing double digit revenue declines in April as the country as impose various covet 19 restrictions, we estimate that other markets overall, well experienced double digit revenue declines in April.
As you know as young as mentioned previously our business has impacted significantly by the Kogut 19 restrictions in place in the markets in which we operate.
We cannot forecast when and to what extent these restrictions will be lifted throughout the world or the change in demand for our services as restrictions are lifted and as a result, we cannot forecast our second quarter earnings will not be providing guidance I will cover a couple of quick administrative items the impact of net dispositions in Q2 represents a year over year.
Net revenue reduction of about 100 million in second quarter, largely representing the deconsolidation of greater China for one last full quarter.
As I mentioned, the French business tax, which is recorded as income tax expense for us gap will have an impact on our tax rate in 2020 as is based on revenues and not earnings.
We estimate that our weighted average shares to be 58.5 million, reflecting share repurchases through March 30 Onest.
In summary, as we manage a very difficult environment. During the second quarter, we're taking significant actions to scale back IRS you need to respond to the immediate significant gross profit reduction we entered this environment with significant liquidity and balance sheet strength and our laser focused on optimizing cash flow through strong collections and balance sheet management activities.
Second quarter, although we have outlined.
The significant immediate actions, we're taking we're also continuing to move our strategic programs forward.
We believe this will allow us to capitalize on new business opportunities and we enter recovery phase and will make us a stronger more efficient and more productive enterprise with that I'd like to turn it back to you on us.
Thank you Jack.
As we mentioned earlier, we're taking actions to maintain margins through GP preservation programs and SGN a reductions to preserve operating profit margin to the greatest degree in the short term, while keeping our operational and financial strengths position to rebound when market conditions improve.
We believe we have an opportunity to accelerate our strategies of several areas in the short term, we intend to emerge stronger and better positioned in the market over the long term.
As we manage through this crisis and prepare the business for future opportunities I'd like to emphasize the following points.
First our number one priority is to support our clients candidates and I am pleased through this difficult healthcare and economic crisis as a global leader in workforce solutions, we can provide our clients with customized solutions as they continue to adjust their workforce during the crisis and prepare for the recovery and help our candidates navigate a turbulent labor market.
Finding new opportunities and acquiring new skill sets our employees will go above and beyond to achieve these objectives and we will provide the necessary tools processes and learning opportunities to ensure we help them to fulfill this mission.
Second we have a leadership team with deep experience in managing through significant downturns and this is certainly the case in key markets, where many of operational leaders have previously managed the business there was a great recession.
This experience together with our additional capability in technology, and innovation will allow us to identify and capitalize on new opportunities as they emerge. We will also be well positioned to respond to industry rebounds, and I believe this is a competitive advantage as we manage through this crisis.
Third we are leveraging our diversification.
Different from the last recession, we now have a larger portion of our business dedicated to professional services and talent solutions, we've seen a much smaller declines within our experis business compared to the MEMP our business our investments in the growth of this business is serving us well as it has been more resilience of the sudden changes and a global leader.
Additionally, portions of our talent solutions business are focused on helping our clients through this downturn with customized solutions, although we've seen a decline in hiring activity from some of our major our PEO clients as expected in the current environment. We are also finding select opportunities elsewhere.
Right management hasn't yet seen a significant uptick in our placement activity, which we take us an indication that our clients are uncertain as to the duration of this downturn.
And finally, we will continue to optimize our operations as we focused on improving our structural efficiency, we're continuing our transformational journey to take out costs out of our back office and our delivery models, which is reflected by a first quarter restructuring actions. We also continue to invest in digital tools to position ourselves for both.
Efficiency and growth.
As we continue these transformational activities. We're also taking the needed short term actions in light of the coal that 19 crisis and are cutting discretionary cost and scaling operations back as needed.
This also includes our executive officers and other senior global leaders as well as our board of directors, leading the way by reducing their own compensation.
We are focused on managing costs as efficiently as possible in the short term, while ensuring we continue to progress transformational actions, which will allow us to accelerate our strategic priorities and emerge stronger on the other side of the pandemic when the economy shifts back to growth.
And these are some of the reasons why im very confident that we will be able to manage the significant short term challenges, while keeping our long term strategic objectives and opportunities firmly insight and allow us to emerge stronger when this crisis passes.
I would now likes to open the call for Q, an eight units were ready for the questions.
Thank you we will now begin to question and answer session to ask a question. Please press star one please UN mute your selling record your name clearly ones from your name is needed to introduce your question and to cancel your request. Please press star one.
One moment please for our first question.
Our first question is from the line of Andrew Steinerman of Jpmorgan. Your line is now open.
Hi, Good morning. This is Michael Chill on for Andrew. Thanks for taking my question. My first question is because we think about restructuring costs.
In the quarter against this downturn is prolonged how should we think about areas for more cost actions in the future.
Mike Michael This is Jack I think.
On the restructuring costs as we talked about will start to see those savings fully ramp up in the third quarter will be pretty close I think probably about.
80% of the run rate effect in the third quarter. So we will start to see some immediate impact on that in addition to all the other actions that we've talked about but I would say, we definitely have more opportunity to continue to take out costs from the organization I think what you've seen us do.
In phases is takeout back office costs in different regions and we've done that in a very significant way in North America, and we continue to do that based on the restructuring actions, we've just announced and we're doing that more significantly in Europe at the moment and we're doing that in Germany, as we talked about in our prepared remarks. So.
So I would say as we continue to optimize our organization. These type of programs will continue to be roll out to other large markets and there's there's further opportunity as we move ahead. So I think you should expect that that is clearly one of the key levers we're going to continue to pull.
His ongoing optimization at the moment, we're dealing with very short term actions that we've talked about to immediately take SGN a down as result of the crisis, but we are continuing to move forward, our strategic programs and we havent stopped those and so we will continue to move forward our transformation programs, which includes taking up back office costs.
Yes.
Great. Thanks for the contract if I could just squeeze one more and you gave some great color on trends through April and I guess, I'm, particularly thinking about Europe than in the us put.
The third temps hilcorp today in April despite the broad government shutdowns.
Is there any reason to think that they will remain with clients in the near term as to downturn prolonged.
No I'd I'd say.
What we're seeing now and I think we talked about.
In our prepared remarks, where we are seeing some up growth opportunities and.
Particularly food and consumer goods are an area, where we continue to see good activity logistics transportation, we continue to see good activity.
And there are parts of manufacturing related to those those segments that are continuing.
To be quite strong so I.
I think what we've seen is our model is working for a lot of our clients continues to be an important part of their workforce and we don't see that changing I think.
If anything.
As we emerge from this crisis I think we'll start to see an increase in I think a lot of employers will continue to see the benefits of temporary staffing on their business models as as as a result of this crisis and as we continue to emerge from it. So I don't see there is a lot of core underlying we're continuing to.
Your point and I don't see that changing.
Okay, great. Thanks.
Thank you next question is from the line of hands in MS area of Jefferies. Your line is now open.
Hey, guys. This is ryan cutting on problems.
Just real quick could you update us on any regulatory changes use youre seeing upcoming in the business you're tracking across the various regions.
Yes, maybe homes or other Ryan the.
The regulation changes that we've talked about to be at Pryor was really around Japan as well as the Netherlands and in in the case of Netherlands as Jack mentioned in his prepared remarks, we've not really seen an impact.
To that business as far as those regulations were concerned and also in Japan. So far at least we are seeing no material impact to the equal equal pay legislation. Those that was introduced earlier. This year. So I think both of those are really some.
Thing that we don't expect to see any major business impact from.
Okay, Great and just a quick follow up.
Could you talk little bit about how the man business days different versus 2009 recession and alongside that any thoughts in general how you're thinking about your downturn playbook in during this pandemic.
Yes, so stepping back and thinking about what how this involves compared to the 2008 2000 and right nine recession of course. This is very different both in terms of why its occurred it's a healthcare crisis first and the speed and magnitude of the change that happened in waves across different parts of the world.
Was really is very very different from what we've experienced.
In the 2008 2009 recession.
As it relates to us what we've really seen as we were able to very quickly adapt to remote working which of course helps when it's a healthcare crisis and we have to practice social distancing or business mix is much stronger today than it was in the last recession Experis today is 23% of our business and back.
And to only it was 14% our solutions business was only 4% in a wait and it's now 11%.
Excluding right management.
We also have a lower percentage of success today than we did over the last recession and.
Taking as an example, we had 4.5 thousand physical branches in 2008, the now we have less than 2.5 thousand.
We have really been able to move thanks to the technology investments that we've made a lot of activity online, which should help us in terms of moving this to a more flexible cost structure and finally, we also went through a simplification.
Initiative in Twoq 2012 in 2013.
Lower structurally lower our cost base as well. So it is in terms of our our preparedness essentially allows us to be more flexible in cost we have more technology impacting the business and were able to adjust and adapt and much more much quicker to a changing.
Environment than we would've been in 2008 in 2009.
I would just add as we mentioned in our prepared remarks. The one other item that's very different now is the strength of the government programs in the very immediate term. So we are much better to leverage those so two units is points. This has moved much faster than it did in the last.
Big downturn.
As a result, the governments have responded with bigger programs in the immediate terms. So we are better able to leverage those programs now which wouldn't have existed to the same degree previously.
Great very helpful. Thanks, guys.
Thank you next question is from the line of Jeff Silber BMO capital markets. Your line is now open.
Thank you so much really appreciate the color in March and April by the different regions.
Thank you mentioned that France was down 65% in April to date, I, just want to confirm that and if so why is that country doing so much worse than some of the other countries here. Thanks.
Yes, that's correct. So that is that is the run rate we're seeing in April in France, and before I answer your question around why and its of course.
Our our review as we look across the world and we see the different levels of Lockdowns occurring I should say that for France and that is true also across Europe. The effects of the lock down appeared to have stabilized across Europe. So what we're seeing in France. Today is roughly what we saw a few weeks ago and that's true.
All across all of Europe as well so.
The reaction to by the market and to to our business.
Volumes appears to have stabilized in Europe as to your question less.
What and why is France, so much deeper than most of the other markets.
France implemented the strongest lockdowns that we've seen across Europe on March 16th and there are a few things that are different in France, you had very strong union representation number one.
The President and President My call Center that we will we will lock the country down at.
Whatever call whatever it may cost and that means from an employee or perspective, and an employee perspective. They are essentially being held whole by the French government for the duration of the locked down.
And third all of those programs that were in place were put in place where known by the 16th of March in many of the other countries locked on was established and then it took a number of weeks for companies to know how they would be compensated on what rules were in place for the employee.
Support programs that Jack mentioned.
In France. This was all established from the very beginning and essentially in terms of the workers. They are covered virtually to 100% all that lost income for the duration of the locked down and companies are also getting support activities. So I think it's a combination of the severity of the lockdown.
The NASA financial support program and the fact that they were very transparent in new what those support programs word that that essentially shut the country down within the course of 48 hours, which was something of course that weve never experienced that weve never Ics.
Periods before so if you take this in the equivalent terms to the US it would be the same as having roughly 70 to 80 million people not working and out of the workforce because that's roughly the percentage of workers that are today on the.
On the temporary unemployment programs in France, so 50% the private employment today is subject to these programs. So the numbers were massive and all of it happened within.
36 to $40.
That was very healthy I really appreciate that.
Switching gears unit I think in your prepared remarks at the beginning you talked about maybe some of the lesson that you learned in EMEA since the crisis started a little bit earlier, there can you give us some color what you learned in I know sign up because of the deconsolidation you may not be as privy to the issues there, but I'm wondering if we're seeing any green shoots in China in your business. Thanks.
Well I start to your last part first in China since we Deconsolidated and we appealed to business in the summer of last last year, we don't really have any operational insights and the last earnings release came out covering the period towards the end of 2009.
Teen so there will be releasing results later on so we don't really have operational insights other than what you can read from the papers of what's happening in China, but in terms of the lessons learned in APN knee was really going through our business continuity process and starting to ramp up.
All of the measures we would take to protect the business. Both in terms of revolt working as well as the safe working for those that were not able to work for mostly.
And really just establish our processes because we expected that the waves starting in Asia would make it to Europe as they did and then they would move from Europe to North American subsequently to Latin America. So our business is really benefited from the global visibility.
What we needed to prepare for so whilst the changes in France worked very very sudden and the change in Italy and Spain.
A little bit less sudden but still very quick over the arc of two two weeks, we had process in place as a company both from a technology perspective from a business continuity perspective from a employee.
Safety and health and wellbeing perspective that we could activate and in some cases already anticipate and thats been very helpful. In our ability to adapt to this rapidly changing environment very very quickly.
Okay, great. Thank you so much.
Thanks, Jeff.
Thank you and our next question is from the line of Seth Weber of RBC capital markets. Your line is now open.
Hi, good morning, guys.
Question on the Experis margin was better than kind of what we would have expected do you think that that is.
Is there or is that sustainable that you can you continue to outperform on the gross margin side on nextera stores or just some sort of a lag effect. There that you think will that will.
Soften more going forward. Thanks.
Yes, I would say that if you step back it generally speaking all of our businesses were performing to expectations up until.
The middle of March manpower was facing the you know the headwinds we had anticipated as it relates to the slowdown and global manufacturing, but experis with dish was showing very well showing good growth in our talent solutions business was showing very strong growth.
But the Experis business as we would expect holds up a better because the projects are all of a longer term nature. The skillsets remain very in very high demand and technology is going to be a sector that after before the pandemic and after the pandemic is going to be a very good sector.
To be to be in our margin profile in the Experis business is stronger than what we had in the manpower business now having having said all of that of course, we you saw it delayed action and some of the cases and most of the downturn, we saw and extend the experience business wouldn't be occurring in the bench.
In markets that we have in Germany, and the Netherlands in Europe for the first quarter, we really didn't see much of the change in Experis in the rest of the world and now of course as Jack talked to Buck in his prepared remarks, we are starting to see some of that come through but there have a much smaller in nature. Then we would then we would see.
In in manpower, but we do expect to see some softening in the Experis business as a whole, but we continue to feel really good about our positioning overall and and the opportunity for profitable growth in when when growth returns.
For the experience business.
Okay. Thanks, and then maybe Jack in your in your prepared remarks, you mentioned something about Hillary termination of contracts.
Is there any more color around that.
Whether sizing.
Just.
Okay.
How the mechanics of that work any anything you could you could add to sort of flesh that out. Thanks, Yes, no I would say sat on that really was getting at at the very end of March when some of the contracts typically with some of the staffing contracts. They are shorter terms and commonly they will end at the end of the month end of quarter. So.
We had a lot of contracts.
Turing at the end of March so as we worked with our clients and you own as mentioned what was happening in France in France was a piece of this.
We had to work with our clients on early termination of those contracts, which meant.
Looking at the associates on assignment and ensuring that they were going to get paid through the end of a contract and some specifics and those type of items. So as a result of that we ended up absorbing a little bit more direct costs than we normally would have.
I would say that's isolated to March because it really was dealing with what was happening with those contracts mid month.
A lot of those contracts have been resets at the beginning of April so I wouldn't anticipate that that's going to be an ongoing issue for the second quarter was really trying to get at we were experiencing a bit more direct costs and absorbing a bit more costs as we unraveled some of that activity at the very end of March. We also had the impact of our.
Bench countries I would say, that's a bit different thats, where we had a bit more on utilize time in higher degrees of absenteeism.
And sickness, which we absorbed as part of that but as we mentioned.
The good news is we're able to leverage some of those government programs beginning in April so we wouldn't expect to have that same degree.
At the end of March that we have that we will have in April.
Okay very helpful. Thank you guys.
Thank you and the next question is from the line of Mark Mark Klein of Baird. Your line is now open Mark.
Okay, great good morning.
Bonus and Jack I was wondering if you could just.
What are your capital allocation priorities.
Specifically, how are you thinking about dividend.
Yes, so mark I'd say, our capital allocation strategy remains consistent and we've been pretty clear on that in the past so.
The dividend has been a priority for us in the past and we and we continue to rank that very high on the list. If we look at excess cash beyond that we tend to look at whether there's an acquisition that needs cash. If that's the case, we will devote excess cash to that if there is.
Question and there hasn't been any any very very significant acquisitions for us than excess cash has been return through share repurchases now with that being said, we don't pre announced share repurchase activity. You can see we did we were active in the first quarter.
But we also said at this time, we're very focused on.
Very strong preserving a very strong balance sheet as we get through the second quarter on the dividend specifically Mark that is typically in action that we review with our board at our me Board meeting. So after that meeting we have an announcement on the dividend for the next 12 months and we will we will wait to review that with our board and.
And we'll make an announcement after that meeting.
Okay, Great and then.
Yes.
You gave really good color in terms of what you're seeing thus far.
Rule.
Some of the walk downs are going to be coming off.
I'm wondering how are you thinking about what the what's the magnitude of the rebound is going to end up being when the when both lockdowns come off particularly.
Any sort of experiences or color that you're getting from your clients.
Some of the markets, where either it's happened such as in China or.
Markets that are just that the early stages like Australia, We're Germany is talking about it for covering your future. What's the discussion like what's the what's the expectation in terms of the rebound.
Well Mark the it's and it's a great question and it's very hard to tell and the reason it's hard to tell us at the disappoints as we mentioned, we don't really have much operational insight into the China rebound more than what you read about various industries coming back in China, and I don't know that China is.
Good proxy for the rest rest of the world what I can say, though is that you know we are relatively pleased in terms of we're not pleased with the locked down effects of course in our business.
We are pleased to see that across Europe.
The trend has stabilized at the levels that that Jack that Jack described so we wouldn't expect once the lockdowns open up that that that trend will improve now the difficulty in predicting how that that improvement will take shape is the lack of specificity and the lack of clarity on part of the gun.
Elements on which sectors are opening up what is essential what is non essential and how that all plays out in the various countries and frankly, the Austrian opening up or Denmark opening up is still it's still too early to to see any meaningful trend that we can extract.
Late and that's why.
In summary, it's so hard for us to predict where it's where it's coming back but of course, what we expect to see so we've seen stabilization in Europe, which is a good starting point and when the Lockdowns come off we would expect to see improvement in those trends.
Degree and you know the momentum of which is very difficult to guests at this point just as we couldn't guest that the French market would drop down.
To 65% in the course of $48. So, we'll we'll monitor that of course very carefully.
We would expect North America to lag Europe in terms of the stabilization by another couple of weeks two to three weeks maybe.
Then so towards the beginning of may that activity should to be if it plays out the way it has in Europe.
That should be the next starting point for us to think about the improvement in trends as the locked on eases in the us as well as in Canada, and then followed by Latin America, which is the last ways, where we have business.
Significant businesses and they will probably be seeing some things stabilize towards the mid mid mid may maybe towards the end of may. So it's very dependent on how the government is planning to release that we are expecting it to be gradual. So I don't think it's going to be the reversal.
The French shutdown starting up again.
But it is clear that there there is a desire from many governments to is the economic pain that follows the health crisis and the good news is the health crisis in many parts of the World now appears to be.
Under control or more manageable, which means we can now put our focus and attention too.
Working or softening the effects of an economic crisis and as we would expect to be in the forefront of that based on our industry and Jack talked about.
You haven't needed a reminder of why operational and strategic flexibility is important.
This this.
Demick clearly illustrates that to many of our planned companies. So we're going to be watching and of course as we talked about also in our prepared remarks, we've been very careful in terms of we've taken significant actions.
In Q1 that but especially also in Q2, but all the while preserving our ability to rebound when demand improves and so we can respond to our clients needs at that time, so being very careful and making sure that we balance the short term by maintaining our ability to take advantage of the market when it improves.
Great and then just wondering.
Thanks to the U.S., how do you think the.
Widespread use furloughs is going to impact.
But the demand for for temporary staff when when things eventually start rebounding.
It's hard to tell living furloughs in the US really you know, it's a very different mechanism, but the aim of the furlough mechanism and to support the PPP support programs and others are very similar to what all of the European governments and other governments in Asia or trying to achieve which is.
Some of the economic crisis by making the pain of unemployment not felt by the employees. So that when the economy starts to come back that they havent had a material reduction in their purchasing power to the greatest degree.
Possible. So one would expect that of course, those employees are going to becoming bag, but by the same token.
The ability to flex the workforce is going to be important if not more important going forward as well. So we would expect this to look similar after the the the economy starts to gain traction again that the this would play out in a similar way to what we've seen in past recessions.
Great. Thank you.
Thanks Mark.
Thank you very next question is from the line of Gary Bisbee of Bank of America. Your line is now open.
Hey, guys. This is this is Jay can on for Gary This morning.
Just to get a little more granular on I guess, the differentiation and market performance.
All the insight you gave on Transco is great but.
Yes, the expecting at 65% decline in April versus just I believe said, 20% to 25% in Italy in April.
I mean that seems like a pretty big difference, particularly seems like Italy, with maybe even hit a little bit harder.
Yes that goes for Spain, as well just in 25% decline, so what's really driving that that gap there.
While Jay in if you look at how the government implemented the lockdowns. It it was in a social locked down was announced early.
But for all intents and purposes companies could still operate reasonably unimpeded, except some sectors up until probably the last week of March in Italy and.
Following on with Spain really starting in April. So there was a lot of the social distancing and the evidence sector, a certain high contact sectors like hospitality and restaurants and hotels and all of those were impacted early on.
But a lot of the businesses that that we serve continues to operate well in.
Further into March and that's one of the reason why you're seeing a smaller effect in.
Italy, and Spain, but as I mentioned earlier in our in our Q an 80, the very severe impact in France is I think you'll is unique to France due to the severity on the speed of the lockdown the very transparent.
Lawyer and employee support programs that were well known and strong Union influence those are a number of factors that made Francis reaction come on faster and go deeper so France is really a bit of an outlier at this point.
So those would be the reasons that I think you can think of that they are being a difference between Italy, Spain, and France for instance that otherwise have reason to be similar labor market structures.
Okay.
And then obviously.
Like Experis and held in there a little bit better have you seen any.
Meaningful success.
Yes, and the other lines with with tense working remotely.
Yes, we've had customers also within within manpower as well as on our talent solutions business, where we are able to run.
Parts of that business remotely with remote recruiters engaging with clients.
And all of that is really thanks to some of the technology investments we've made over a number of years and that we think that vis vis pandemic in actual fact is going to accelerate and give us more flexibility in how we deploy technology not only how to run our own internal operations, but how we support our clients in how we engage with.
With candidates and I think you're seeing that on the Experis side, but we've also seen at on the talent solutions side and in some cases Olson them MPAR side and I would just add Jonas within talent solutions MSP has been holding up fairly well so far too so.
Obviously, that's going to depend on what happens next with some of the restrictions and so forth in the U.S., but that MSP. So far through mid March has been actually holding up well.
Great. Thanks, guys and good luck from here.
Thank you.
Thank you Sir your next question is from the line off Ryan Leonard of Barclays. Your line is now open.
Yes, Hey, guys. Thanks for squeezing me in here.
Yes, I was just curious.
We look out I think you walk through some of the rationale for.
I guess not providing official guidance, even though you get a lot of detail about trends.
Is it safe to say that the trends you've seen in April our your expectations for the worst case or is there still a number of.
Enough uncertainty out there that you don't really want to put numbers out there until you have a better sense of how these different countries start to recover.
Yes, so I would say the trends for April clearly based on what Jonas was giving some color too in terms of what we're seeing in Europe.
We have seen consistent levels at these lower levels. They have been consistent the last couple of weeks here in April where we see really the height of the restrictions in place in many of those countries. So.
So.
The.
The question will be to the extent that does the U.S.C. Some additional pressure we're not sure I think you own has mentioned that the U.S. is behind a couple of weeks from what we saw in Europe. It could be that the U.S. ends up very consistent for the rest of the restriction period at the levels were seeing right now.
Now, we just don't know that for sure. So you know is April a pretty good view of what will be kind of the low point for the quarter very likely but it's really hard hard to say at this point so for that reason.
We want it to be very transparent and what we're seeing in April it really is going to be.
The quarter overall is going to be dependent on the impact of the restrictions being lifted and how that impacts the demand for our services immediately upon those restrictions being either so that's that's what we can't predict at this stage and that's why we did all that color on April.
Got it that's helpful. And then just on the U.S. experience business down mid single digit Naples.
Relatively stable.
You bet the nature of existing contract or are they are going.
Yes, maybe can you comment on new business trends, you're seeing there is to help kind of understand what the wagging were leading indicator I would say, it's a mix, but I'd say largely it's a continuation of our of our business and our strategy in the US I think what we've talked about the last couple of quarters is our convene.
Since business has been very very strong in the U.S. and that's actually contributed to GP margin increase.
In the last few quarters and that continues so that the experience business as we mentioned was.
Down about 3% days adjusted in the first quarter and it's only come off very slightly so far at the minus 5% or so here in April so, it's holding up well and that's that's largely due to the existing clients. We continue to serve but they are actually have been wins in there as well and we've had.
Wins in April that are part of that as well, which have helped offset some replenishment of other business. So.
No we feel good about that and we also mentioned that UK was was flat.
In the quarter overall as well so UK, we'll likely see some pressure as we mentioned the UK overall, we expect to see declines in April, but but I would say experis specific to the US where your question was.
It's a bit of both in there have been some wins as part of that in April.
Very helpful. Thank you.
Thank you every next question is from the line of George Tong with Goldman Sachs. Your line is now open.
Hi, Good morning. This is Blake on for George.
Sounds like labor strikes and discussion of reforms have taken a benefit back seat in France, but lockdowns.
What are your expectations for discussion of labor reforms and strikes in France going forward once the labor market starts to pick up and we see more activity in France.
Well as you might recall that pension reform at this point hasn't been passed.
So thats that's already.
The new law and those were those were the main that was the main reason for the strikes and of course, the French labor market is always evolving with various with various initiatives. So you know it's there's nothing on the horizon that would that would say that we would no.
About further labor market tension coming in in France since the pension.
The pension legislation has been passed by by their Parliament.
So that being said, there's there's there's nothing we know of today, but that can of course, certainly change, but overall as we mentioned.
Our fourth quarter earnings call, whilst there were some strikes the overall impact was reasonably limited at the time and I think they've moved beyond that at this point in time, So France continues to work on their labor market reforms, but as it relates to our business, what we can see other things and that Jay.
Changes that have been made are by and large favorable to our industry and we don't see any of those new legislation so reforms being reversed at this point.
Got it was helpful.
And then it looks like in for Q, we had seen some improving trends and bill pay spread pretty broadly across your businesses.
How do you see bill pay spreads evolving as labor market absorbed this shock and in sectors gradually reopened just curious.
What kind of trends you're expecting.
In terms of bill pay spreads.
Well I would say we were pleased to see that our staffing margin continued to improve in the first quarter, even though we were in this kind of environment. So that tells us that our underlying.
Hey, Bill spread is looking good and I would also as an overall comments say that the changes that we're seeing in staffing and GP staff, the staffing GP as well as overall GP today, our order related to business mix changes as well as the changes that are occurring because of the coal fit 19.
Endemics, they're not due to any price pressures that we're seeing so I think fundamentally what we had before which was a good market and.
Our ability to fairly price for the skills that our customers are looking for.
Continued and we were pleased to see that that continue to all the way through the first quarter. So there's not been really any any any change to that view.
Great Thats helpful. Thank you.
Thank you. Your next question is from the line of Tobey Sommer Suntrust. Your line is now open.
Thank you I was wondering if you could comment on.
The scope.
Of potential acquisitions as we come out of this.
And.
Areas of interest to the firm as you kind of see the experience in the experience TNL versus the core manpower brand and the rest of the business.
As you did come out pretty aggressively after the last downturn. Thank you.
Well as Jack mentioned, our capital allocation, our strategy hasn't really changed so.
As we focus we focused on organic growth, but should we consider acquisitions, we are very careful.
And but should we consider acquisitions they would be in the area of experience and talent solutions. So they would not be in the area of manpower unless it relates to franchise acquisitions and we are a very careful on acquisitions in our in our industry, making sure that not only is that a good business that it's a good strategic fit it also has.
To be a very strong and good cultural fit so that we ensure we can retain the key talent within within any business that we would be looking at such a strategy and approach hasn't really changed.
In the ARPU business.
There been any surprises in the performance some in how do you.
Hi, how do you see that evolving in this environment.
I think we saw some very good evolution in the fourth quarter and that strengths carried on very nicely into the first quarter as well until.
The pandemic hit and then as you would expect the number of our clients that were in sectors that were exposed.
First lines, such as airlines and in other businesses in that particularly K in those cases, they pulled back pretty strongly and Thats. What were reflects what we're seeing reflected in our activity right now, but the good news is none of those clients have left US. These are program. So that's why they work with.
Yes, we provide the strategic and operational flexibility for them and when their business picks up again, we would expect to see a strong rebound also on the RPL side.
In those sectors that were affected but of course, we're also doing business in many sectors that aren't affected and as we talked about in our prepared remarks, we are seeing those some of those sectors actually be beneficial to our appeal business in the us as well as elsewhere in the world.
Thank you.
And that brings us to the close of our first quarter earnings call. Thank you for participating today and we look forward to speaking with you all again at our second quarter earnings call.
In July.
Thanks and have a good rest of the date.
Thank you speakers and this does conclude today's conference call. Thank you all for participating you may disconnect now.