Q2 2020 ManpowerGroup Inc Earnings Call
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Good morning.
Welcome to the second quarter conference call for 2020.
On the call with me today is our Chief Financial Officer, Jack Mcguinness for your convenience. We have included our prepared remarks within the Investor Relations section of our website at Manpowergroup Dot com.
We will start by going through some of the highlights of the second quarter than Jack will go through the operating results on the segments, our balance sheet and cash flow and guidance for the third quarter and all been share some concluding thoughts before we start our Q and a session. Before we proceed Jack will now cover the Safe Harbor language.
Good morning, everyone. This conference call includes forward looking statements, including statements regarding the impact of the cobot 19, pandemic, which are subject to known and unknown risks and uncertainties. These statements are based on management's current expectations or beliefs actual results might differ materially from these projected in the forward looking statements.
We assume no obligation to update or revise any forward looking statements.
Hi to earnings release presentation includes additional forward looking statement considerations and important information regarding previous SEC filings a reconciliation of non-GAAP measures.
Thanks Jack.
Since our last earnings call. The World has continued to be impacted by the health crisis, which is now also global economic and social crisis.
Some countries in Latin American parts of the U.S. continued to deal with the pandemic at elevated levels.
Elsewhere in the world the impact of the pandemic has been contained an economies are slowly reopening.
We didn't easing of the Lockdowns people are gradually returning to lifestyle. We know is very different from the pre pandemic life in workplace.
The effects of Cobot 19 made the second quarter, what are the most challenging quarters in the history of our company, but we were pleased to see the gradual business improvement as the quarter progressed.
Having said that we recognized that we still have a long way to go to get back to normal levels of business activity.
We are taking this opportunity to continue to drive towards the highest efficiency, while still preparing for growth when the economy rebounds, and ensuring we make investments to position the business for profitable growth in the long term.
You will see in our Q2 financials that weve, partially offset the significant gross profit declines with aggressive asked you in a reductions and generated an operating profit excluding the impairment charges.
In this environment, we believe that it's critical to control every cost and we're doing just that mindful to to ensure that the organization is also able to seize opportunities for growth.
The plans will be put in place in March at the start of the crisis were executed throughout the second quarter. This involves significant cost and collection actions that will continue during the third quarter.
In the second quarter revenue was $3.7 billion down 20% year over year in constant currency.
On a same day organic basis, our underlying constant currency revenue decreased 27%, reflecting the sudden drop of activity that began in March and continued in the second quarter.
On a reported basis, we recorded an operating loss for the quarter of $50 million excluding impairment.
Operating profit was $23 million down 88% in constant currency.
Reported operating profit margin goes down 370 basis points from the prior year end after excluding the impairment charges operating profit margin was positive 0.6% down 310 basis points on the prior year, excluding the probably your special items.
Reported loss per share a $1.10 cents reflects the impact of impairment charges, which had a $1.22 cents negative impact and the discrete tax item that had an impact of six cents.
Excluding the special items or earnings per share was positive 18 cents for the quarter, representing a decrease of 91% in constant currency.
During the quarter, we experienced some of the most turbulent an uncertain market conditions in modern history.
Reflecting the unprecedented speed a magnitude of the shutdowns.
Effects were felt across the world in March and April it quickly impacted labor markets, resulting in rapidly rising unemployment as well as high levels of governments supported furloughs.
What started as a quick freeze to our global economies and labor markets inevitably going to take much longer to stall around the world and consequently, we expect the improvement in labor market conditions will be slow and gradual.
By the start of the second quarter, we saw the biggest workforce shift and reallocation of skill since World War II with skills needs shifting from aviation and hospitality to driving and information security has an unprecedented scale.
Despite the fastest ships from almost full employment to multi decade high levels of unemployment or furlough levels at levels at or worse than those of the great recession. We are also already seeing evidence that this crisis is accelerating the technical and soft skills transformations, but we have been tracking and predicting for some time.
Hi.
Acute skill shortages in tech cyber security software development at Daytona list. For example continue unabated reinforcing that the need for skills Revolution is here in force.
We are confident that the investments, we have been making and diversification digitization and innovation in recent years position us very well to weather the pandemic and also help us emerge stronger from these crisis to take advantage of the market opportunities when they present themselves.
We are confident in our strategy to improve the diversification of our business or the growth of Experis, our professional resourcing and I'd expertise. We believe this will serve to provide higher growth following the pandemic as companies accelerate technology investments.
Our new talent solutions brand that combines our global market, leading our appeal NSP and right management offerings is helping our clients with customize workforce solutions in this downturn and preparing their organizations for the return of economic growth.
Investments in technology roadmap, I mean tools for remote working a stronger collaboration allowing us to create more value for candidates on clients to help them shaped our future work, while also building our ability to operate our business in different ways.
Our innovation that assessment centers of excellence or enabling us to access to date and identify fast changing skills demands, while developing predictive performance and Upskilling and re Skilling Academy and might pass programs that help progress people from one role to the next from declining industries to growth sectors to close the skills gaps and.
Yes, the economic and social impact all the pandemic and finally, we believe that organizations globally will increasingly recognized the value of operational and strategic workforce flexibility delivered through our staffing brands, particularly manpower as they've had to adjust to unprecedented unpredictable changes in market can.
Nations your independently.
I'd now like to turn it over to Jack to take you through the financials and country performance details.
Thanks, Jonas revenue in the second quarter, representing the reported decline of 30% year over year and on a constant currency basis, representing a decrease of 28%.
Net dispositions contributed to about 1% to the revenue decrease and billing days were largely the same year over year.
This results in organic constant currency days adjusted revenue decline of 27% in the second quarter and compares to the first quarter decline of 7% on a similar basis and reflects the material impact to the cobot 19 crisis, which began to impact our business in March.
As investors are interested in the pace of any improvement driven by the impacts of reopening activities.
Including more information in my remarks, this release on the monthly progression during the quarter.
Our organic revenue trend during the quarter on a constant currency billing days adjusted basis, including the monthly year over year revenue decline of 31% in April.
26% may and 24% in June.
The improvement in the rate of decreased during the quarter reflects the reopening of economies largely in may as governments lifted locked on requirements.
I will give more details on large country trends when I cover the regional segments.
Our gross profit margin was down 80 basis points year over year and reflected a higher mix of enterprise client business higher rates of sickness and death absenteeism in certain countries at the beginning of the quarter at significantly lower permanent recruitment fees as a result of the cobot 19 crisis.
Our second quarter performance resulted in operating profit decline, excluding impairment charges of 88%.
This reflects the material operational deleveraging experience in the period in which government lockdowns restrictions were at full force.
This resulted in an operating profit margin of 0.6% excluding impairment charges.
As we did not provide guidance for Q2, our EPS bridge walked from the prior year quarter to the current your quarter.
On a reported basis earnings per share was a loss of $1.10, which included impairment charges, which had a $1.22 negative impact and discrete tax items, which had a six cents negative impact.
Excluding these non cash special items earnings per share was 18 cents.
Excluding the impact of the special items, our effective tax rate was 38%.
This higher than usual rate reflects the outsize impact to the French business tax within tax expense that I mentioned last quarter.
Looking at our gross profit margin in detail our gross margin came in at 15.4%.
Stepping interim margin represented a decrease of 40 basis points and the significant decline and permanent recruitment fees drove an additional 40 basis points gross margin decline as a result, and the covered 19 crisis impact on hiring activity.
Our staffing margin reflects a higher waiting of enterprise clients in our mix as well as the high rate of sickness at the beginning the quarter offset by reduced direct costs in certain countries due to government crisis response programs and our execution of various bill pay yield initiatives in the current environment.
Next let's review our gross profit by business line.
During the quarter the manpower brand comprise 59% of gross profit our experience professional business comprised 24% and talent solutions brand comprised 17%.
During the quarter, our manpower brand reporting organic constant currency gross profit decreased from 37%.
Gross profit in our Experis brand declined 20% year over year during the quarter on an organic constant currency basis.
Although organically Experis revenues were only down in the high single digits to low double digits percentage range during the quarter, the almost 50% drop in Perm gross profit combined with a higher mix shift to enterprise clients and a lower utilization of consultants within our Germany, I T and user support business drove a more significant gross profit decline.
And our two largest experis markets. This reflects a gross profit declined 14% in the U.S. and 23% in the UK.
Tell solutions includes our global market, leading our BPO MSP right management offerings organic gross profit declined 12% in constant currency, which was driven by RPL.
As we mentioned last quarter beginning in mid March we experience a sharp reduction in our IPO activity as many client programs initiated hiring freezes in light of the cobot 19 crisis and this double digit percentage decline continued through the second quarter.
Our MSP business has been very resilient during the crisis and experienced growth in the low single digit percentages in gross profit year over year during the quarter.
All right management business experienced a decline in gross profit of 4% in organic constant currency during the quarter, which included a mid single digit increase in outplacement gross profit, which was offset by reduced talent management consulting.
Our reported yesterday expense in the quarter was 627 million, including the $73 million of impairment charges.
The impairment charges included 67 million goodwill impairment for Germany, and a 6 million impairment of capitalized software in the U.S.
Although we've made good progress in executing various initiatives within our Germany business the ongoing decline within the manufacturing sector, particularly automotive has made an extremely difficult to project the pace of recovery and the timing of improvement and our German business results.
As a result of the increase uncertainty in the outlook of the manufacturing sector in Germany, we impaired the remaining balance of our Germany goodwill during the quarter.
After excluding special charges from both years SGN expense was 554 million a decrease of $120 million from the prior year on a constant currency basis, excluding special charges SGN, a expenses were down 16% compared to the prior year.
Excluding special charges SGN expenses as a percentage of revenue in the quarter represented 14.8%, which reflected significant deleveraging on the material drop in revenues during the quarter.
As a result, a strong cost management actions across all of our businesses the impact of the revenue and gross profit declines was significantly offset by SGN, a decreases which after excluding impairment charges allowed us to post an operating profit for the quarter.
I'll now turn to cash flow and balance sheet.
The cash flow defined as cash from operations less capital expenditures equaled $577 million for the first six months of the year.
This compared to underlying free cash flow in the prior year of 149 million after excluding the sale of the France I see receivable.
During the second quarter, we were very successful and receivable collections, while incurring lower payroll costs on lower activity.
Improved cash flow also benefited from certain government payment to for all measures introduced as part of the Cobot 19 crisis.
Impact of these benefits is maturing and during the second half of the year, we expect lower levels of free cash flow in the third and fourth quarter.
At quarter end day sales outstanding decreased by about one day.
In this environment one of our top priorities is maintaining strong cash flows from collection activities.
Today, we have not experienced a significant deferral of cash receipts from clients and are watching this very carefully and ensuring our collection teams are appropriately staffed to diligently pursue payments as per original payment terms.
Capital expenditures represented 19 million during the first six months of the year.
During the quarter, our board declared a semiannual dividend of one dollar nine cents keeping the amount stable with our 2019 levels, which was paid on June 15th.
We did not purchased any shares of stock during the second quarter and our year to date purchases stand at 871000 shares of stock for $64 million.
As of June Thirtyth, we have 5.9 million shares remaining for a purchase under the 6 million share program approved in August of 2019.
Our balance sheet was strong at quarter end with cash of 1.4 billion and total debt of 1.05 billion.
Resulting in a net cash position of 384 million.
Debt ratios remain comfortable at quarter end with total gross debt to trailing 12 months EBITDA of 1.88, and total debt to total capitalization at 29%.
As I mentioned, the cash increases associated with collecting out our accounts receivable and timing of certain payments will begin to reverse in the second half of the year.
Our debt and credit facilities and not change in the quarter and the earliest zero note maturity is not until September of 2022 in.
In addition, our revolving credit facility for 600 million remained unused.
Now I will turn to the segment results.
The Americas segment comprised 23% of consolidated revenue.
Revenue in the quarter was 837 million a decrease of 17% in constant currency.
The excluding impairment charges equaled 26 million and represented a decrease of 51% in constant currency from the prior year 6 million of impairment charges related to capitalized software in the new us.
You asked was the largest country in the Americas segment, comprising 62% of segment revenues.
Revenue in the U.S. was 516 million down 21% compared to the prior year.
Adjusting for billing days and franchise acquisitions. This represented a 23% decrease year over year.
Year over year monthly organic days adjusted revenue trends during the quarter was a 24% decline in April a 22% decline in may and a 23% decline in June.
During the quarter, excluding the impairment charge Oh, you pay for our US business decreased 59% to 15 million I know you pay margin was 3.0% a decrease of 280 basis points from the prior year.
Within the U.S. the manpower brand comprise 31% of gross profit during the quarter.
Revenue for the manpower brand in the U.S. was down 31% in the quarter or down 35% when adjusted for billing days in franchise acquisitions.
The Experis brand in the U.S. comprise 34% of gross profit in the quarter.
Within Experis in the U.S.T. skills now comprise approximately 80% of revenues.
Revenues within our I T vertical within Experis U.S. declined 8% during the quarter and total Experis US revenues declined 12% as the finance and engineering verticals experienced more significant decreases.
Talent solutions in the U.S. contributed 35% of gross profit and experienced a 3% revenue declined in the quarter.
As indicated earlier RPL business has experienced significant client hiring freezes in late March which continued throughout the second quarter as a result of the covered 19 crisis.
The RPL declines were offset by low single digit percentage revenue increases an MSP.
And mid single digit increases and right management.
On an overall basis based on July activity to date, our us business is experiencing a revenue decline of about 22% and reflects a slightly improving trends in manpower and a continuation of late second quarter trends in the Experis Intown solutions businesses.
Our third quarter forecast for the U.S. as cautious based on the uncertainty of the path of the recovery based on additional restrictions being introduced in certain states based on recent health concerns.
Provided there are no significant reversals of reopening activity across the us in the third quarter. We expect an overall rate of decline the U.S. of minus 24% to minus 19%, which reflects modest improvement and manpower and the continuation of the current experis until solutions trends.
Our Mexico operations experienced revenue decline of 10% in constant currency in the quarter the constant currency revenue trend during the quarter included the 5% decline in April 14% decline in may during the height of the restrictions and a 12% decline in June.
The business environment in Mexico continues to be challenging as a result is covered 19 crisis and we expect a similar revenue trend for the third quarter has experienced in the second quarter certain lockdown restrictions continued to be in effect in Mexico as well as many of the other Latin American countries as a crisis impacted these countries later than the other regions.
Revenue in Canada declined 4% in constant currency during the quarter.
The days adjusted revenue trend during the quarter included a decline of 5% in April and May which improved to a 3% decline in June.
We're pleased with the performance of our Canada business in a very challenging environment. We expect the revenue declined in the third quarter to be similar to the second quarter decline in Canada.
Revenue in the other countries within Americas declined 12% in constant currency.
Southern Europe revenue comprised 39% a consolidated revenue in the quarter revenue in Southern Europe came in at 1.5 billion a decrease of 38% in constant currency.
Oh, you P. equaled 12 million and represented a decrease of 90% from the prior year in constant currency I know you pay margin was down 440 basis points, driven by France, and Italy as result of the severe impacts of the carpet 19 crisis.
France revenue comprised 50% of southern Europe segment in the quarter. It was down 47% from the prior year in constant currency.
Year over year monthly days adjusted revenue trend during the quarter was 62% decline in April a 49% decline in may and a 33% decline in June.
He was a loss of 2 million.
P. improved over the course of the quarter and France regain profitability in June as a rate of revenue decline improved above the 40% decline threshold.
We have taken significant actions in France to reduce our cost during this period of materially reduced activity.
Our French business took significant cost actions and this resulted in SGN a reduction of 23% during the second quarter.
Although improvement has been steady in France the rate of improvement in the revenue trend has slowed.
During July activity to date the business is currently experiencing a year over year decline of about 30%.
We are cautiously estimating a slow and gradual improvement and the rate of decline for the third quarter of between minus 30% and minus 25%.
Revenue in Italy, equaled 269 million in the quarter, representing a decrease of 30% in constant currency after adjusting for billing days.
Year over year monthly days adjusted revenue trend during the quarter was 41% decline in April.
31% decline in May and a 20% decline in June.
The material decrease in permanent recruitment activity that we noted in March and April continued throughout the quarter, leading to a 55% decline in permanent recruitment gross profit during the quarter.
Oh, you P. declined 63% in constant currency to 11 million I know you pay margin decreased 340 basis points to 4.1%.
We have taken significant action in Italy to reduce cost during this crisis, which reduce SGN a significantly in the quarter.
We estimate that Italy will continue to see Sloan gradual improvement in the rate of revenue declined during the third quarter with the decline within a range of minus 18 to minus 13%.
Revenue in Spain decreased 13% on the days adjusted constant currency basis from the prior year in the quarter.
We expect a slight improvement in the rate of revenue decline in Spain for the third quarter.
Having anniversary the purchase of our manpower, Switzerland franchise in early April 2019, we're now breaking out the revenue trend for our entire Switzerland business.
On a day's adjusted basis and constant currency, our Switzerland business experienced revenue decline of 19% in the second quarter.
The business experience, an improving trend from the April low point and the rate of improvement is now more gradual.
We expect a slight improvement in the rate of decline during the third quarter from the second quarter trend.
Our northern Europe segment comprised 23% of consolidated revenue in the quarter revenue declined 24% in constant currency to 866 million.
Oh, you Peel was flat for the quarter.
Very challenging environment in Germany, Sweden, and the Netherlands was offset by reduced profits in the UK, Norway, Belgium and Poland.
The largest market in northern Europe segment is the UK, which represented 35% of segment revenue in the quarter.
During the quarter UK revenues decreased 22% in constant currency.
The UK bottomed out in May.
And has experienced gradual improvements since that point.
Year over year monthly days adjusted constant currency revenue trend during the quarter was a 17% decline in April 26% decline in May and 23% decline in June.
We estimate that to UK will continue to see slow and gradual improvement in the rate of revenue declined during the third quarter with the decline in the range of minus 20% to minus 15%.
In Germany revenues declined 32% on a constant currency adjusted for billing days basis in the second quarter.
Year over year monthly days adjusted revenue trend during the quarter was a 33% decline in April and a 32% decline in both May and June.
Our German business has not experienced a rate of recovery that many of our other European businesses have experienced as a manufacturing sector and particularly automotive continues to be experiencing extremely challenging conditions.
I previously mentioned the impairment of the remaining balance of goodwill related to our Germany business during the quarter.
Our German business took significant cost actions during the quarter that reduce SGN, a by 25% year over year, which partially offset the significant loss in gross profit.
As a result of the ongoing challenges within the manufacturing sector, we expect only a slight improvement in the rate of revenue declined during the third quarter.
And the Nordics revenues declined 22% on the days adjusted constant currency basis.
The two primary businesses, the Nordics, our Norway and Sweden.
On a day's adjusted constant currency basis, Norway experienced a decline of 17% in Sweden declined 28%.
Both countries leverage government programs to reduce headcount during the quarter, which resulted in significant decreases in SGN a year over year.
During the third quarter for the Nordics overall, we expect a moderate improvement in the rate of revenue decline experienced in the second quarter.
Revenue in the Netherlands decreased 24% in constant currency on the days adjusted basis during the second quarter. The Netherlands also took out significant cost during the second quarter, which significantly offset reduced gross profit.
During the third quarter, we expect a slight improvement and the rate of decline from the second quarter.
Belgium experience a day's adjusted revenue decline of 37% in constant currency during the second quarter.
We expect a moderate improvement during the third quarter and the rate of revenue declined from the second quarter.
Other markets in Northern Europe had a revenue decreased 11% in constant currency. We expect these markets experienced a slight improvement in the rate of decline during the third quarter.
The Asia Pacific Middle East segment comprises 50% of total company revenue in the quarter revenue decreased 19% in constant currency to 569 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 decrease of 3% in the second quarter.
The PMC region has held up relatively well during this crisis.
Represent $18 million in the quarter, a constant currency decrease of 40% year over year and after adjusting for the greater China deconsolidation represent an organic constant currency O U P decline of 23%.
Oh, you P. margin was 3.1% and represented a decrease of 100 basis points or 80 basis points on an organic basis.
Revenue growth in Japan was up 6% adjusted for billing days on a constant currency basis during the quarter.
Japan instituted new legislation at the beginning of the second quarter, which increased the cost of temporary staffing.
Our business manage the adoption of this legislation very well and this did not have a significant impact on our results. Our Japan business continues to perform very well and we anticipate third quarter growth to reflect a slight decrease from the second quarter level of growth.
Revenues in Australia declined 21% in constant currency adjusted for billing days during the second quarter.
During the third quarter, we expect a moderate improvement and the rate of revenue decline from the second quarter.
Revenue in other markets in Asia Pacific Middle East were down 37% in constant currency and adjusting for dispositions. This represented a 7% rate of decline.
Largest market in this group includes our India business, which experienced double digit revenue declines in the second quarter in light of various cobot 19 restrictions.
We estimate that other markets in 18 me overall will experience a slight improvement in the rate of decline in the third quarter.
Next I'll review our outlook for the third quarter of 2020, we're resuming guidance as a major uncertainty associated with the government Lockdowns is largely been lifted.
However, our guidance assumes no major rollbacks of reopening activities in any of our largest markets.
On that basis, we are forecasting earnings per share for the third quarter to be in the range of 59 cents to 67 cents, which includes a negative impact from foreign currency of one cents per share.
Our constant currency revenue guidance range is between a decline of 20% to a decline of 18%.
The midpoint constant currency decline of 19% also equals the organics days adjusted rate of decline as billing days are essentially the same year over year and impacts of the US franchise acquisitions are very slight.
This represents an improvement of 8% from the organic days adjusted constant currency decline of 27% in the second quarter.
We expect our operating profit margin during the third quarter to be down 190 basis points compared to the prior year quarter, reflecting steadily improving performance and what will continue to be an extremely challenging environment.
This reflects continued strong cost actions, but at lower levels of year over year, SGN, a reductions as activity levels progressively increase.
We expect our income tax rate in the third quarter to approximate 41%, which reflects the outsized impact of the French business tax effect that I discussed last quarter.
As usual our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 58.5 million.
With that I'd like to turn it back to you on us.
Thank you Jack from the very beginning of this crisis, the health and wellbeing of our people and partners our employees clients and associates has been and continues to be our top priority.
I'm incredibly proud of and thankful to our team for their resilience hard work and continued innovation to be able to deliver for our clients in Canada. This throughout these unprecedented and challenging times.
A great example of this is the call that we received from one of our largest global clients. Recognizing elsewhere, then exceptional partner award to Manpowergroup, where they specifically identified or invaluable support to them. During Covance 19, which is directly attributable to our amazing team.
In times like this when organizations seek the strategic and operational flexibility in their workforce that we can provide and the simplification efficiency and risk mitigation. They need we are well positioned to provide these solutions through our diversified business makes and our global brands.
We're hearing more and more of companies intentions to move to organizations like manpower.
And we are confident are reliable trusted and innovative service on solutions, our global scale and broad national reach together with our balance sheet strength positions us well for that just before we close and move to questions. Let me also reflected in our role on the social crisis, we see emerging.
We believe organizations need to be part of the solution to address the polarization unrest and racism that is playing out in many of our communities in countries.
When our society is broken for some it is eventually broken for all of us and while the business environment continues to be difficult. We are confident that manpowergroup is uniquely positioned and able to help our clients in Canada to succeed now and in the longer term.
We will contribute solutions within our field of expertise, which is providing meaningful and sustainable employment for millions of people across the world by matching their aspirations and skills with companies needing to become more agile and competitive in a very turbulent environment.
We are committed to delivering on our values to making workplaces more equitable and more inclusive and to ensuring organizations individuals and communities can emerge from this crisis stronger more skilled more competitive and more successful than ever before.
I'd now like to open the call for Q and eight.
Operator.
Thank you Sir you will now begin to question and answer session.
I'd like to ask a question. Please dial star and then one.
Record your name and company when it comes to cancel.
Sorry.
One moment please for the question.
First question is coming from the line of.
Morgan Your line is now.
Hi, when I look at your France trends of July being minus 30, and then your third quarter guide to be minus 30 to minus 25.
Obviously at the low end minus 30, assuming no continued improvement, but at the mid and obviously, that's a better end, you're assuming continued improvement in France, and so that's like on an average you're assuming continued improvement in France, and just give us a sense of if that's just kind of like Hey, This is at.
Total or is there good reason to assume that there'll be continuing narrowing declines in France is as we kind of move through the summer fall.
Good morning, Andrew Yes.
Sensations with clients and companies they clearly are indicating.
A gradual and continued gradual improvements, albeit within the context of greater amounts of uncertainty.
Overall, but we don't see anything that's changing the trend that we that we saw during the second quarters with a gradual improvements and we expect that to carry on although at a slightly lesser rate than what we saw of course when the Lockdowns were released at the beginning of May.
Great and is there kind of hard to look through to September you know September is really kind of the key money for Fran.
Yes September is a key milestone friends up for a number of other markets, but we believe that from our conversations that we've had with our clients that they expect to see the continuation looking much beyond that however becomes much more much more difficult, but youre right September is an important month for us and we're assuming.
That there are no further setbacks in terms of health scares that would necessitate lockdowns in our assessment of the continued gradual improvement.
Yes, I would just add to that Andrew that's part of the reason we put the range in.
Ill, France returns from the holidays will be important and were at that midpoint that you mentioned, we're assuming progressive steady improvement at a slower pace as as we ended the quarter.
And the ranges there in case.
The return from the holidays is at a slower pace of recovery.
So we'll see how that turns out but that's that's the intent of the range.
Okay. Thank you.
Our next question is coming from line of Mark Marcon Baird. Your line is now open.
Hi, Good morning, everybody I was wondering if you could just talk a little bit more about what you're seeing in.
Germany.
Mentioned.
Lack of progress basically due to what's occurring on the automotive.
On to to what extent to your clients.
You know pliers suggest or hope.
Things might get better in the fourth quarter or when when they would expect things to improve.
The the discussions with our clients is really around and near term and very few of them have any clear idea as of the strength of the recovery.
Into the fourth quarter I think that is one of the hallmarks of or the situation. The high degrees of uncertainty as to the pace of the recovery.
Areas economies because of course, Germany is an export intensive country, so a lot or their economic growth depends on the ability to exports to markets that are recovering and themselves. So overall as we said in our prepared remarks. The automotive sector is the one that is really casting a shadow.
Over the German economy and.
The outlook that we have provided.
Really shows the continuation of a.
Gradual us a very slow if any improvement into the third quarter until we have better basis visibility into the fourth quarter what companies intend to do.
Okay, and then you you materially reduced your SGN a reacted very quickly.
In terms of putting in place actions can you talk about how much capacity do you how much excess capacity do you have when when things eventually get back and.
In the.
Hopefully doesn't happen, but if we do have another series of lockdowns across the globe.
How much further room do you have four.
For us junior reductions or do you have contingency plans in place.
Things get worse.
Yes, Thanks, Marc I'll I'll take that one so to your point.
What we did on inorganic.
Constant currency basis was take cost down 16% in the second quarter, so that reflected leveraging programs in place in our and our biggest markets as we look forward to your question for the third quarter, we're anticipating based on our guidance increased activity levels and.
With that we see a resumption of some SGN a cost base coming back in to be able to serve that increased activity. If that doesnt. We're monitoring that very closely if that doesn't materialize. The way. We're forecasting then we will take action and reduce the level of assets.
Slide eight coming in so that it is falling in line with what we're seeing on the GP side. So we think in terms of we're covering the amount of GP dollars lost through SGN, a savings and when we look at that in the second quarter. We came very close to about a 40% recovery of the SGN $8.
Yes, gionee of GP dollars through us DNA reductions and when we look to the third quarter, what our guidance is implying that although additional costs are going to be coming in to be able to serve that additional activity. We're going to continue to manage have very strong offset to GP decline. So in line.
With the same ratio that we just experienced in the second quarter and we'll just have to continue to monitor that if it's fair to your to your question. If there is a setback in a major market and there is significant rollbacks.
We'll do what we always do we'll reassess will take additional actions if we need to.
We do have contingency plans in place we know what actions.
To be taken so we've done very detailed analysis by each market and we're prepared to take additional actions if we need to.
Should those events transpire, but right now we're looking at the current trends in those trends are showing.
Some good progress and some of our key markets and we're monitoring our costs in line with that trajectory.
Terrific. Thank you.
Our next question is coming from the line of Jeff Silber.
Capital markets. Your line is now open.
Thank you so much just a follow up in the US DNA comments are you expecting I know, it's hard to gauge, but we expect some of that ESG gnostic come back once we get out of this crisis.
Yeah, we've been spending a lot of time on that as you would imagine Jeff and so when we look back at the second quarter. One. Good example of this is obviously travel costs as an area that everyone's talking about we reduced travel caused by at least $10 million in the second quarter and we're looking very very hard at that there is definitely a piece.
That's not going to come back.
We know we there will be some level of travel that will resume after we get through this crisis, but we've been harnessing all the great technology that we put in place.
Prior to the crisis, and we really didnt get to see the full potential of all that technology. So we were forced to use it.
For the working remotely and really it's changed a lot of the way that were working and so we're looking very closely at that we do think there will be more permanent savings as a result of that which is great. Because it will help offset some of the technology spend that we continue to do on as we as we look through.
Continued investment in our technology roadmap so.
There are clearly portions of it that will be permanent and I'd say another opportunity for us is.
We have a great track record and optimizing our branch network.
Going to continue to look at that I think.
Certainly on the Experis side I think we.
We have a workforce that is very keen to working remote there and just like we've done in the past on the right management side and moving to more virtual worked work offices, we have an opportunity to do more of that I think on the experience side and we'll continue to look at branch optimization on the manpower side and we're also looking at our headquarter space.
And our key in our key markets and in global as well and we know we can probably get some savings out of reducing some of that footprint as well.
Okay, Great and then looking at a rate of recovery, so far and it's going to is moving into right direction, but some of the private companies that we've been speaking to in the U.S. and telling us that it's a little bit weaker than they would have spot. What you typically see in an upturn because some of their clients are rehiring furloughed employees first before they hire 10.
On the other and they're also seeing a little bit more in terms of apps instead as in terms of just filling in a few days here a few days there I'm wondering if you're seeing the same thing not only in the U.S., but even globally. Thanks.
Yes, Jeff we're seeing similar trends in our own business. So a few comments, it's clear that the leveler unemployment.
Programs that exist in the U.S. are making some of the workforce.
Harder to get to come back to work.
We are also seeing the flare ups that did that we have in various states having some impact now that's countered by the general easing of the Lockdown effect that is looking at an improved activity and improved demand for our services and by and large.
The level of furlough schedules as well as unemployment in Europe, and the unemployment subsidies that we have here in the U.S. may temporarily dampen some of the traditional rapid return because the unemployment levels are really still in Europe at very low.
Due to the furlough programs, but overall, we don't think that the dynamics of the industry will be a structurally impact as we think that as the healthcare crisis Morse into a economic crisis. The demand for our services will continue to be be.
During the same kind of return you would expect during a cyclical downturn that's coming out all the recession. So we don't think the furlough programs on the unemployment programs may have a temporary effect or they are short term in nature and they expire so when that happens companies decide whether they want to restructure their workforce or has having brought everyone back.
And then we expect to see the increase in demand that we typically would see when you come out of a recession.
Okay, great really helpful. Thanks, so much.
Our next question is coming from the line of hands from Jefferies. Your line is now open.
Good morning. Thank you just just following up on on the last question.
You touched on furloughs and the impact on the recovery this cycle, but maybe you can touch on also what your expectations are in terms of temp and forum, increasing at the same time or or do you see one leading the other any any kind of changes in the mix between temp and perm as as the recovery.
He continues to mature.
Good morning, I'll tell you I know, we think the trends are going to be similar to what we've seen another cycles frankly as you can tell we had a pretty steep drop off from that that is really not projected to materially improve in the third quarter. Yes, we are seeing our resourcing business improve.
In our outlook into the third quarter. So we would expect him to be lagging our resourcing business are temporary sourcing business or consultancy business within Experis and then from would come back.
After that as we would normally and typically see during the.
The recovery from the recession.
Got it and just my follow up question I'll turn it over.
Could you maybe update us on.
Any kind of diversification or initiative to increase spend their creation from sort of non larger enterprises, so sort of small medium sized businesses.
Maybe just where you are in that process in terms of penetrating that customer base.
Thank you.
Right now arms the strength of the enterprise.
And this on the national enterprise sized clients that we have as a strength for us because it provides a level of stability. These are global or national enterprises large enterprises that continues to wants to have strategic and operational flexibility with clearly seen a softening in demand from our convenience clients.
All in all of our brands and that is going to be something that we think would continue to be the case until the see some strength in the recovery from the recession. So we're actually leveraging the fact that we have very good.
Strengthen the enterprise segment than that provides us with great stability and upward momentum.
Or upward movement at least in in the in the short term subsequently, we still think that the convenience segments or the market is a very good place to be and we've made some good progress in a number of countries and when this period passes we continue to expect to make make progress also in that customer segments.
Great. Thank you.
Your next one is coming from the line of Kevin Mcveigh of Credit Suisse. Your line is now open.
Great. Thank you.
I wonder.
Jack agenda, she talked about.
Celebrating skill shifts.
Maybe help us frame, where your physician to capture that revenue percentages or legacy versus where you see some emerging.
Whether it's 80 versus some of the legacy skill sets and how you transition.
Yes.
Thanks, Kevin the way, we think about this is that the underlying structural changes that.
Were in place before the pandemic.
We're going to be accelerating so essentially means that the movements towards a more skilled workforce is going to be accelerating and Weve. Jack gave an example of our own evolution.
When you have technology in place using some of it and then suddenly have to use all of its to be able to running your business that means you very quickly have to shift how you do business, which also requires a different skill sets. So we don't really anticipate a major change in those trends, but rather an acceleration and.
We've been preparing for that acceleration on those trends for many many years, we invested in technology ourselves, but of course, we're diversifying our business strengthening our experienced business and and making sure that that represents a bigger part of our portfolio. Our talent solutions business is really aligned with.
That.
Focusing on the areas that are within our core expertise and where companies are deeming that this is not part of their core expertise and that's why we've seen very good growth in that area and would expect to see very good growth also in those areas going forward, probably accelerated by the effects of the pandemic.
And lastly, I would say the manpower business if companies ever needed. The reminder, how unpredictability environment can be and how quickly things can change and therefore, the need for strategic and operational flexibility to provide the agility for those organizations.
The unfortunate reminded that we've gotten to the pandemic. We think will also benefit the manpower business as that as that goes through this and then comes on the other side.
Very helpful. Thank you.
Our next question is coming from the line of Ryan Leonard from Barclays. Your line is now open.
Hey, guys. Thanks for the time.
If you kind of look out to the third quarter I'm kind of curious you talk a little bit about.
Having no real flare ups or incremental shutdowns, but I guess what level of kind of macro activity is underpinning your expectations and if we get into September October and the next earnings call.
Later at the lower end of kind of what you expect today that can be more a function of macro activity not picking up do you think or is it more just kind of the virus impact.
So the impact that we've actually seen in the markets is really unprecedented Ryan if you look at the amount of stimulus that the governments have been pouring into this all over the world.
You look at the.
Labor market subsidies are from those schemes or or other actions that they've taken it's actually quite difficult to predict.
What the long term impact is going to be and how quickly we're going to get out of this and I think that is really the key issue here. It's clear that you would expect to see recovery from the very deep levels of drop that you saw in the second quarter. So the question is all going to be how quickly how quickly are we.
Going to come out of this and most of the companies that we spoke to at the beginning of the pandemic. We're clearly thinking about this as a V shaped recovery based on the stimulus and all of the extraordinary actions that governments, we're taking all over the world most of our client conversations today are clearly more around.
Gradual recovery that is slower at some more of a U shaped recovery, but still within that there's a whole range of opinions on on how big of the you and how long of a bottom on on the U.S. So.
Looking at our own business the projections that we make into the third quarter is really a slowing rate of improvement, but continued improvement thinking that the flare ups that will inevitably happen all over the world are going to be managed and contained and that will benefit from the gradual reopening all of those economies.
Today, all large euro market.
Operations that we have operating environment that is that it doesn't have any locks downs in place and our outlook really is.
Soon is that going forward as well.
Got it if I could just follow up on Germany, specifically has there been any impact from kind of the wire cards jasko in.
Generally kind of dampened sentiment in the country is all of the commentary on journey that really just purely macro specifically or is there any wire card impact that is kind of hanging over things today.
Yes, Brian I can tell you there is no impact.
Specific to our business from wire card, specifically I think when you look back at our at our comments it really was reflecting more than manufacturing industrial sector that.
It was a big concentration far Germany business and.
Really the automotive sector, which we've been talking about for quite some time continues to be under a lot of pressure. So as we looked at.
The German business and the goodwill impairment it really was a reflection of that segment.
Of the economy that continues to just be very challenging and so it makes it very hard to forecast and predict.
Over the medium term and Thats really was the driving force in terms of our comments on on Germany.
Got it thank you.
The next one is coming from the line of George.
Your line is now open.
Hi, Thanks. Good morning, you indicated that into Q you were effective in receivables collections and benefited from government payment deferral measures and expect these benefits to mature resulting in lower.
Free cash flow in the third and fourth quarter can you talk about how much government pay deferral measures helped you in the quarter and the library, Doug your free cash flow expectations for the second half of the year.
Sure George.
Specifically, what we're seeing in some of our key markets not all of them, but some of our key markets as the government put programs in place to defer the payment of payroll taxes. You asked is a good example, I think it's about 20 million of benefit a quarter temporary benefit and that will reverse and that's really what were we were.
We're talking to that same level of benefit is not currently in place in France from a payroll tax perspective, so really differs by market, but what I, what I really was trying to get across was there is some impact on our free cash flow that is some level of benefit from the program. The majority that's driving.
Free cash flow increases our collections activities and our teams around the world have really done a spectacular job in the second quarter staying on top of collections, we see that evidenced by the Dsos decrease of about a date as well.
And looking to the second half for the year, we do expect that free cash flow will be down as we continue to look at that phenomena of collecting out our hey are is that matures.
We are expecting that free cash flow levels would be down in the second half of the year and that's really what we're trying to guide too so.
We feel very good about the ability to collect the cash in as part of the second quarter, we have a very strong position in the balance sheet and we'll be able to withhold that lower level of free cash flow in the second half of the year.
Got it that's helpful.
Unit that you expect your income tax rate in the third quarter to be approximately 41%, which reflects the outsized impact of the French business tax effect until when do you expect the French tax effect.
Persist.
Yes, I'd say, it's probably going to be a couple more quarters, George I think.
The whole dynamic there is the way that French business tax referred to as CV is calculated.
Thats it for us it ends up being calculated primarily on revenues in France and.
As a result of that even though pre tax earnings are down as result of the crisis revenue levels.
Still end up being a significant part of.
The overall and result in terms of the tax and under US GAAP were required to record that CV and our income tax line. So it'll be a couple more quarters until we see.
A stronger recovery rate in in France. So I'd say looking forward, we gave our guide for the third quarter, but if you look at that trend continuing and we'll know more based on the pace of that trend in the third quarter, but I would expect to at least for the next two quarters, George and will give an update in the future on that.
Got it very helpful. Thank you.
Next one is coming from the line of Gary Bisbee Bank of America Securities. Your line is now open.
Hi, guys good morning.
First question just.
Other question on the on the margins in the Q3 commentary I heard you that Theres. Some as you know that comes back to support.
Parts of the business that are rebounding sequentially, but.
And I think about the decremental margin.
The third quarter, plus worse than the second quarter, even though revenue trend getting a lot better and if I looked at that change in GP relative to change in SGN day.
Quarters in aggregate.
Seem to be a lot less unit coming out and what happened in 2009.
In relation to the GP.
Is there anything that's changed with the cost structure since then or or is it more just this happened. So suddenly you could move as quickly.
Just any thoughts on how we should think about margins playing out revenue continues to give moderately better. Thank you.
Gary I would say I think were pretty closely aligned to actually to the level of SG nine if you look back to 2009 in the height of where our business was impacted I think that SGN a decrease of 16%.
That we saw.
As adjusted this quarter was very close to what we experienced last time I'd say, one one important thing to keep in mind.
During the great recession, there was more of an outplacement market happening at the time companies, where we're dealing with.
Prolonged downturn and they were making decisions around outplacement, which increased our GP pretty significantly for right management at the time. So as we said in our prepared comments, we're not seeing that surge in outplacement at this time and.
As a result, we're not getting that same contribution to gross profit that we were in the last at the height of the last great recession. So.
And so we'll monitor that going forward.
And that could change as dynamic, but I think if you adjust for that.
I'd say, we did a very good job of taking out significant cost actions and I'd say that recovery level is inline with what we've seen in the past if not perhaps even a tad stronger currently based on the strength of some of the programs in place okay.
Thats helpful color. Thank you and then just the last one.
Yes, the castle, obviously strong I hear you that some of that working capital timing in particular will reverse but with the liquidity strong confidence around the numbers enough to give guidance again curious how you're thinking about putting some of that cash to work through any share repurchases. This quarter. The stocks, obviously down a lot from.
From a ties pre Covidien do you.
We anticipate using some of that cash to repurchase shares here or.
Are you more of the view that.
Well you have more visibility you are likely to continue to focus on liquidity as the number one.
Thank you yeah, yeah. Thanks, Gary I guess I'd say in terms, our overall strategy very consistent to what we've done in the past.
We have a great track record and being able to return cash to shareholders and we were very pleased to.
Declare and pay a dividend in the second quarter. So thats, our first priority and in terms of excess cash will continue if there isn't an acquisition will continue to look at share buybacks. We don't we don't forecast are.
Share repurchase activity, we don't guide on that but we do consider the current environment and Thats what.
As we left the first quarter, we talked about ensuring we had a strong balance sheet for whatever late ahead lies ahead for us going forward and that's what we're focused on in the second quarter. So we'll continue to monitor the environment and we will give an update in the future on share repurchases. Thank you.
Our next question is from the line of Tobey Sommer Suntrust. Your line is now.
Thanks, I want to step back from the near term just think little longer term.
In the context of your.
Prior margin targets.
Do you think that those are youre going to it.
Endeavor on additional cost cuts during this downturn and perhaps more structural realignment afterwards, such that those margin targets could be hit that lower revenue levels than 2009 Ses. Thanks.
Yes, Tobey I think when we look back at our targets and so first I should say they remain unchanged. We are committed to those financial targets.
We purposely didn't put a revenue target associated with that for that exact reason, we we believe that.
With the various actions we have planned so costs our continued to be one of our major initiatives to continue to optimize the cost base of the organization.
And that will be a key driver and gross profit margin is definitely one of the other key drivers for us so youngest talked earlier on the call about the progress, we're making inconvenience prior to the downturn that helped and that will continue to help and those that mix shift will come back to the business as we continue to recover.
It shifted a bit more to enterprise, which is natural based on the environment and we see that coming through in our staffing margin, but it will start to shift back as the recovery continues to gains gain steam. So I would say, we feel very very good about our opportunities to get to those margins without hitting a specific revenue target.
We will obviously need some level of the environment to return to a more conducive environment, but we won't we're not anchoring to a specific revenue level that we have to hit so it is possible that we will make progress even as we come out of the downturn in accelerating our op.
Operating profit margin increase overtime.
Thanks, and as a follow up in the ARPU segments.
Could you comment about.
Whether your customer conversations are.
Leading you to believe that customers are going to look to shifts more of their fixed recruiting costs to very when it could get a step functions kind of higher demand for our appeal as a result.
And our the hiring freezes that you described in Twoq is still in place or some of those loosening up in Threeq.
So some of those hiring freezes are still in place, but just as we said in our.
Q2 earnings call, we've not lost any any clients and we believe that to just as you outlined as companies come out on some of this this recession and and this pandemic.
The idea that they would be meeting support in hiring and want to have flexibility in hiring.
Should drive some continued very good growth for our RPL business on the whole. We were also pleased to see given.
Within the context of declining permanent burst that RFP, all held up better than our general Perm business and that's because we had strong penetration and some in some industries that I've actually.
Seen good business activity. During this time and others of course that have suffered significantly but on average our appeal business. Despite being perm held out that held up better than our general purposes.
Thank you.
Our next question is coming from the line of Seth Weber of RBC capital markets. Your line is now.
Hey, guys good morning.
Well I wanted to ask a couple of questions on the Experis business.
Okay. Jack that you said revenue down kind of high single low double digits can you just talked too.
The appetite for clients to kind of continue to place.
We continue to enter into contracts and projects going forward you know.
Just trying to understand if we're going to hit an air pocket here as contracts roll off or can you talk to whether you're seeing.
Requisites.
You know amount of contracts kind of coming back on you know.
That will support growth going forward and then my follow up questions just to better understand what happened on the on the gross margin side. Thanks.
Yes.
I can add a little color to that so on the Experis side.
We have seen pretty stable enterprise client activity. So that's been good I think I did refer to the fact that we we did see a bit of.
Decrease in the second half of the quarter in the U.S. business, but that really was focused on the finance and engineering side. Those those parts of the business had bigger decreases the Gi side actually held up quite well.
With only 8% decrease in revenues. So I'd say, it's really the two sites holding up really well and we talked a little bit earlier on the call about.
The benefits of our actions to invest in the IP business, So that's holding up but but there has been.
A bit more pressure in the second half for the quarter on the finance in engineering side. So we're not anticipating that that's going to deteriorate further what we're holding in our in our forecast now is that that slight adjustment.
On the second half of the quarter rate holding into the third quarter. So that thats really what we're trying to get out there I think on the margin side the margins been holding up quite well on the experience side. So we if you look at what we've talked about in terms of the.
The staffing margin.
The one thing to keep in mind with experiences they do have a heavier.
Portion of permanent recruitment fees and that's that's impacting the gross profit.
Margin and the gross profit dollars. So thats why that is a bit heavier when you look at it on a gross profit side.
But that would that would explain why why experis was a little bit bigger of a divide on the gross profit side.
Okay Thats helpful. Thanks, and then if I could just follow up on the on the talent solutions side are you able to use any of the current dislocation in the markets to help.
Grow the business outside the U.S. are you seeing any more interest.
In Europe et cetera front on the on the talent solutions side. Thanks.
Well, we've seen some really good.
Evolution on the TAPFIN vendor consolation MSP part of the business with positive.
Growth and a very strong pipeline, but I would say that overall, that's that's true of course for the outplacement part for rights management, although not as surgeons Jack referred to were starting to see some some good growth and pipeline there as well as companies are thinking about their restructuring plans although they.
Don't know, which is why we don't think we've seen much of that yet we're starting to see a good evolution there as well so I would I would say that we're we're seeing some some strong traction on the MSP side really globally and in pockets and right to management on the outplacement side and our appeal was we met.
Second is still holding its own performing better than our overall perm business and we haven't lost any clients and we think that theres. Some good growth opportunities there for us as well going forward.
Thank you very much appreciate it.
Our last question is coming from the line of the silver from CL King Your line is now.
Okay.
Yeah. Thank you.
So I had a couple of bigger picture question I guess, the first one would be about reassuring.
So in your discussions with clients and customers I think you highlighted in your prepared remarks, there shorter term perspective.
But I'm wondering about one potential maybe medium term effect are you seeing global clients.
Open discussions or are they starting plans of reassuring activities currently conducted in other countries with on thinking maybe China or maybe certain countries emerging countries that are suffering on duly from from the pandemic.
Thank you.
I'd say that the trends in our discussions with clients is really an acceleration of the trends that we saw it before the pandemic as you know there have been various natural disasters in different places that really tested the.
Fundamentals of the global supply chain. So most companies are looking at near shoring, but I was I would say that they are really looking at rate building great to resilience in their global supply chain. So we're not hearing.
Any major initiatives that many companies have all of reassuring into the U.S market forensic, but we are hearing is that companies on being very thoughtful around holiday can.
Protect their global supply chain and that's a combination of.
Offshore.
Near shore and onshore so that's a trend that we saw ready before and as we spoke about earlier on the call. We think that trend will continue.
And we'll accelerate following the pandemic as it's been a reminder of the importance of making sure that you have a resilient supply chain.
Okay. Thank you for that and then I just wanted to ask maybe about how you're thinking about your global footprint.
So manpowergroup I believe it has been operating in roughly 80 countries for for many many years now.
And you did.
Some changes in the current.
Business environment, and the shifting demand amongst employment sectors.
That you highlighted again in your opening remarks, and I'm just wondering.
How does that prompt maybe any rethinking of your overall.
Entry strategy I mean do you have do you still believe you have critical mass in 80 countries here or.
How does the changes in the business environment as you interpret them kind of.
Cause you to think about that thank you.
Let's start by saying that we think geographical.
Diversification and market leading footprint in the 80 markets is a strengths as it helps us a diversification.
In terms of.
Catching on to emerging trends.
Being able to participate in labor markets in emerging markets that are starting and they are we can apply our diversification strategy in terms of our brands very early and take leading positions.
On those on those brands in those markets. So we feel very good about our geographical diversification. We think it's a great strength for the company we have a very good strength in emerging markets, which is where.
All of the population growth is really going to be coming from having said that as any company of course, we're looking at the portfolio of our of our operations and looking at whether we can make the same and get the same kind of coverage in other ways. If we don't think thats a potential in those markets is as big as we had originally anticipated, but that sort of part of.
Part part of a normal management discipline to ensure that we have operations that can contribute today and then also in the longer term and making meaningful contribution and finally, making sure that those operations are there for the benefit of our clients and so that we can serve the needs. Our strengths is the ability to service our clients on a global base.
This is and Thats, where the geographical diversification is a tremendous asset for us.
Okay. Thank you very much.
And when that would come to the end of our second quarter earnings call. We look forward just speaking with you again in the on the third quarter earnings call. Later on this year. Thanks again have a good rest of the week.
Thank you.
That concludes today's conference. Thank you all for joining you may disconnect.