Q1 2022 ManpowerGroup Inc Earnings Call
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Welcome to manpower group first quarter earnings results Conference call. At this time, all participants are in a listen only mode until the Q&A session of today's conference. This call will be recorded if you have any objections. Please disconnect at this time and now I will turn the call over to manpower group, Chairman and CEO Jonas Prising.
You may begin.
Welcome to the first quarter conference call for 2022.
Our Chief Financial Officer, Jack Mcginnis Who's on the call with me today for your convenience. We have included our prepared remarks within the Investor Relations section of our website at manpower group Dotcom.
I will start by going through some of the highlights of the quarter then Jack will go through the first quarter results and guidance for the second quarter of 2022, I will then share some concluding thoughts before we start our Q&A session.
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 COVID-19, pandemic and the Russia, Ukraine War, which are subject to known and unknown risks and uncertainties.
Statements are based on management's current expectations or beliefs actual results might differ materially from those projected in the forward looking statements. We assume no obligation to update or revise any forward looking statements slide two of our earnings release presentation. Further identifies forward looking statements made in this call and factors that may cause our actual results to differ materially.
Regarding reconciliation of non-GAAP measures.
Thanks Jack.
On our previous earnings call. The World was truly a different place it couldnt have imagined the tragic events that would unfold in Ukraine.
Let me be clear our manpower group's position.
We stand with Ukraine, we support the people of Ukraine, and we are committed to support refugees from Ukraine.
As we have previously done with refugees elsewhere and I'll talk more about this later in the call.
Turning to our financial results in the first quarter revenue was $5 $1 billion up 10% year over year in constant currency or 6% and organic constant currency.
Our EBITDA for the quarter was $148 million adjust.
Adjusting for the U S acquisition integration costs and a loss on our previously announced disposition of our Russia business.
<unk> was $162 million, reflecting growth of 64% in constant currency year over year.
Reported EBITDA margin was two 9% and adjusted EBITDA margin was three 1%, which was above the adjusted EBITDA margin from the first quarter of 2019.
Our U S business demonstrated exceptional performance during the quarter was a major driver of our significant year over year improvement.
Earnings per diluted share was $1.68 on a reported basis and $1 88 on an adjusted basis adjusted earnings per share increased 78% year over year in constant currency.
Although geopolitical uncertainty has increased we continue to see strong hiring intentions in most of our major markets in Europe as well as globally.
In this environment, our clients need us more than ever to provide them with the strategic and operational flexibility to transform and be successful.
To find workers various skill levels in very tight labor markets.
The pandemic effects, so still noticeable in many markets where supply side issues have led to pent up demand and would that continued need for workers and as a result, we see requests for skilled workers at record highs, especially in finance.
Finance and manufacturing operations.
In select industries, there has been some additional disruption due to the Ukraine prices, particularly in the automotive supply chain, but overall talent shortages remain a significant challenge for our clients, which benefits our brands and portfolio of services and solutions.
We continue to execute our DDI strategy, our initiatives to diversify digitize and innovate.
On diversification I've experienced it resourcing talent solutions and manpower permanent recruitment businesses had a very strong quarter, improving our business mix and expanding the contribution of higher growth and higher value services strengthening our gross profit.
On Digitization, we continued to execute our technology agenda, adding more value to our client and candidate experience.
And as part of our innovation plans and a b to C strategy, we continued to scale, our skilled talent pool of the future through manpower and iPad.
Upskilling and transforming associates lives to date across 12 countries, including France U S and Italy.
We now have more than 11000 clients actively engaged in this career pathways program, creating skills for our associates at scale.
Our results continue to reinforce our confidence in our strategic choices and investments. This is how we believe it will continue to drive profitable growth now and sustainable value creation for the long term for all of our stakeholders and I will now turn it over to Jack to take you through the Q1 results.
Thanks Jonas.
In the first quarter came in at the top end of our constant currency guidance range.
Profit margin came in above our guidance range as adjusted EBITDA was 162 million, representing a 64% increase in constant currency from the prior year period, or 46% increase on an organic constant currency basis as.
As adjusted EBIT margin was three 1% and came in above our guidance, representing a 100 basis points of improvement or 80 basis points organically.
Breaking our revenue trend down into a bit more detail after adjusting for the negative impact of currency of about five 5%.
Our constant currency revenue increased 10%.
Due to the impact of net acquisitions, increasing revenue about three 5%.
And slightly more billing days the organic days adjusted revenue increase was 6% compared to our guidance of 5%.
Turning to the EPS Bridge reported earnings per share was $1 68, which included <unk> <unk> related to the previously announced loss on the sale of our Russia business in January and the experienced U S acquisition integration costs during the quarter.
Excluding these items adjusted EPS was $1 88, which was well above the top end of our guidance range.
<unk> from our guidance midpoint. Our results included an improved operational performance of 26 cents.
Slightly lower weighted average shares due to share repurchases in the quarter, which had a positive impact of <unk>.
A slightly higher effective tax rate, which had a negative <unk> <unk> impact and a favorable other expenses, which added <unk> <unk>.
Next let's review our revenue by business line year over year on an organic constant currency basis, the manpower brand reported revenue growth of 5%.
Spirits brand reported revenue growth of 15% and a talent solutions brand reported revenue growth of 13%.
Within talent solutions, we continue to see exceptional revenue growth in our Po and very strong revenue growth in MSP.
As we continue to experience a record lower outplacement environment right management saw double digit percentage revenue decreases year over year.
Looking at our gross profit margin in detail our gross margin came in at 17, 4% underlying staffing margin contributed a 40 basis point increase.
<unk> acquisition added 30 basis points permanent recruitment contributed a 90 basis point GP margin improvement is hiring activity continued to be strong across our largest markets.
Experienced solutions contributed 20 basis point improvement, which was driven by the U S business.
This was offset by a lower mix of right management career transition business, which resulted in 20 basis points of GP margin reduction.
Direct cost adjustments in northern Europe represented 10 basis points of improvement and other items also represented 10 basis point improvement.
Moving on to our gross profit by business line during the quarter. The manpower brand comprised 57% of gross profit our experienced professional business comprised 28% and talent solutions comprised 15% <unk>.
During the quarter, our manpower brand reported an organic constant currency gross profit year over year growth of 11%.
Gross profit in our experienced brand increased 29% on an organic constant currency basis year over year during the quarter.
Organic gross profit in talent solutions increased 22% in constant currency year over year.
This was driven by the performance in <unk> and MSP discussed earlier, which was partially offset by the decreases in right management due to our placement trends.
Our SG&A expense in the quarter was $758 million, excluding the loss on the Russia business disposition and the experienced U S acquisition integration costs, SG&A was 16% higher on a constant currency basis, and 12% higher on an organic constant currency basis.
This reflects continued investment in the business, reflecting the addition of recruiters and sales personnel largely an experienced <unk>.
And in various growth opportunity markets and manpower.
The underlying increases consisted of operational cost of $77 million.
Incremental costs related to net acquired businesses of $31 million offset by currency changes of $33 million.
Adjusted SG&A expenses as a percentage of revenue represented 14, 5% in the first quarter.
The Americas segment comprised 24% of consolidated revenue revenue in the quarter was $1 3 billion, an increase of 26% in constant currency or 7% on an organic constant currency basis or 8% after adjusting for days.
<unk> was 73 million as adjusted OUP was $77 million and OUP margin was six 1%.
The U S is the largest country in the Americas segment, comprising 71% of segment revenues.
Revenue in the U S was $889 million, representing a 44% days adjusted increase or 13% organically compared to the prior year.
As adjusted to exclude acquisition integration costs.
For our U S business was $62 million in the quarter, representing an organic increase of 46%.
As adjusted OUP margin was 7% or six 1% on an organic basis.
Within the U S. The manpower brand comprised 25% of gross profit during the quarter.
Revenue for the manpower brand in the U S increased 6% during the quarter an improvement from the 2% growth recorded in the fourth quarter.
The experienced brand in the U S comprised 46% to gross profit in the quarter.
With an experienced in the U S. It skills comprised approximately 90% of revenues.
Experienced U S had an exceptional quarter with revenues growing 35% organically and we anticipate continued strong double digit organic growth in the second quarter.
The acquired U S experienced business had solid revenue growth during the quarter and the integration is proceeding on schedule.
<unk> solutions in the U S contributed 29% of gross profit and experienced revenue growth of 15% in the quarter.
This was driven by <unk>, which continues to win new business and experienced record revenue levels during the quarter as hiring programs continue to strengthen.
The U S. MSP business continued to perform well with strong revenue growth in the quarter within.
Within right management career transition activity continued to run off.
In the second quarter, we expect ongoing underlying improvement in revenue growth for the U S. In the range of 46% to 50% year over year or 15% to 19% organically.
Our Mexico operation experienced a revenue decline of 61% in constant currency in the quarter, representing a stable trend from the fourth quarter.
The decline was driven by the new labor legislation that commenced in the third quarter of 2021.
We anticipate a similar revenue decrease in the second quarter.
Southern Europe revenue comprised 43% of consolidated revenue in the quarter revenue in Southern Europe came in at $2 2 billion growing 8% in constant currency.
OUP equaled $95 million and OUP margin was four 3%.
France revenue comprised 54% of the southern Europe segment in the quarter and increased 8% in constant currency.
<unk> was $50 million in the quarter and OUP margin was four 2%.
As we begin the second quarter, we are estimating a year over year constant currency increase in revenues for France in the range of 5% to 9%.
Our recent revenue growth in the month of March was 7%, which also represents the midpoint of our second quarter guidance range for France.
The slight deceleration in revenue growth in March and early April in France is driven by the automotive sector.
Revenue in Italy, equaled $445 million in the quarter, reflecting an increase of 18% and days adjusted constant currency.
OUP equaled $29 million and OUP margin was six 5%.
We estimate the digitally we will continue to have strong growth in the second quarter with year over year constant currency revenue growth in the range of 8% to 12%.
Our northern Europe segment comprised 21% of consolidated revenue in the quarter.
Revenue increased 4% and organic constant currency to $1 1 billion.
After adjusting for the loss on the sale of our Russia business.
<unk> represented $9 million and OUP margin was 0.8%.
Our largest market in northern Europe segment is the UK, which represented 38% of segment revenues in the quarter.
During the quarter UK revenues were flat year over year in constant currency.
This reflects the exit of certain low margin arrangements replaced with higher fee based margin business. These.
These and other actions, including permanent recruitment growth are driving significant improvement in the margin profile of our UK business.
Our U K business is performing well and we expect a slight decrease in revenues and increase in margins during the second quarter based on the aforementioned business mix updates.
In Germany revenues decreased 6% days adjusted constant currency in the first quarter.
Although many of our European businesses have seen COVID-19 related improvements in sickness rates and related associate utilization in the second half of the quarter, Germany has lagged in this regard.
We are anticipating an improvement in sickness rates during the course of the second quarter the.
The trends in Germany also reflect a sluggish automotive sector for which supply chain issues have worsened in March overall.
Overall, we are expecting a similar year over year revenue trend in the second quarter.
The Asia Pacific Middle East segment comprises 12% of total company revenue.
In the quarter revenue grew 6% in constant currency to $618 million or.
OUP was $19 million and OUP margin was three 1%.
Our largest market in the <unk> segment is Japan, which represented 47% of segment revenue in the quarter.
Revenue in Japan grew 14% and days adjusted constant currency.
We are very pleased with the performance of our Japan business, which continues to lead the market revenue growth and we expect continued strong revenue growth in the second quarter.
As I wrap up my comments on <unk> I would like to give a brief update on our investment in manpower group Greater China.
Although this business is no longer consolidated since July 2019, IPO on the Hong Kong stock exchange, we remain the largest shareholder with a stake of approximately 37%.
The China business has performed very well recently released their 2021 results recording revenue growth of 23% for the year, including 41% growth in staffing in mainland China.
Profit attributed to owners increased 10% year over year.
Manpower group Greater China represents a significant strategic investment and we are very pleased with their performance.
I'll now turn to cash flow and balance sheet in the first quarter free cash flow equaled $52 million compared to $128 million in the prior year.
At quarter end days sales outstanding was up about one day year over year at 57 days.
Capital expenditures represented $19 million during the first quarter.
During the first quarter, we repurchased 578000 shares of stock for $60 million.
As of March 31, we have $3 9 million shares remaining for repurchase under the share program approved in August of 2021.
Our balance sheet ended the quarter with cash of 777 million and total debt of $1 6 billion, resulting in a net debt position of $287 million.
Our debt ratios at quarter end reflect total gross debt to trailing 12 months adjusted EBITDA of 144 and.
And total debt to total capitalization at 31%.
Our debt and credit facilities did not change in the quarter during the quarter, we reduced our utilization of the $600 million revolving credit facility from 75 million to $50 million.
Revolver was utilized in funding in the U S experienced acquisition and we expect to pay down the remainder over the next six months.
Next I'll review the outlook for the second quarter of 2022.
Our guidance continues to assume no material additional COVID-19, or Russia, Ukraine war related impacts beyond those that exist today.
On that basis, we are forecasting underlying earnings per share for the second quarter to be in the range of $2 31.
To $2 39.
Which includes an unfavorable foreign currency impact of <unk> 19 per share.
This does not include the impact of acquisition integration costs of $4 million to $6 million, which will continue to be broken out separately from ongoing operations.
Regarding revenues to stabilize the impact of the regulation in Mexico continues to represent a year over year revenue loss of about 2% again in the second quarter of 2022.
Considering this our constant currency revenue guidance growth range is between 6% and 10% and at the midpoint represents 8%.
After adjusting for the acquisition of the U S experienced business, the disposition of Russia, and a slightly lower number of billing days in the second quarter, our organic days adjusted revenue growth rate represents 5% at the midpoint.
This represents solid revenue growth across our industry verticals with the exception of automotive manufacturing, which we expect to continue to be sluggish predominantly in France and Germany.
We expect our EBITDA margin during the second quarter to be up 40 basis points at the midpoint compared to the prior year with the acquired U S experienced business contributing 20 basis points of the improvement.
We estimate that the effective tax rate for both the second quarter and the full year of 2022 to be 30%.
As usual our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be $54 million.
I will now turn it back to you on this.
Thank you Jack in times like this we continue to be guided by our values and all that we do.
Let me share with you more on how the teams are responding to the Ukraine crisis across our business.
We are acutely focused on where we can provide the greatest impact and be a part of the solution.
As we covered in our last earnings call, we sold our Russia business, which included operations in Ukraine in January of this year as part of our ongoing geographical portfolio strategy.
And as a result, and then before the invasion, we would no longer employing people in Russia and Ukraine.
At this time, our heartfelt sympathy and support goes out to our former colleagues in both Ukraine, and Russia as their focus and values have always been centered on providing sustainable works for others and serving clients.
We also have a long history of employing Ukrainian talent in Poland, The Czech Republic, and other neighboring countries strong motivation and foundation to provide humanitarian unemployment support during this crisis just.
Just a couple of weeks ago, I spend time with our European leaders, including with the team in Poland. The country, most impacted having received more than $2 5 million refugees in less than two months.
Saw firsthand the truly amazing works. The teams are doing to deliver on our people first approach providing incredible support to refugees driving people from danger to safety hosting them in their own homes, and then helping them on their journey of resettlement many of them women with young children.
At the same time as the Polish team continues to drive the business forward with strong profitable growth during the quarter in a very tight labor market.
Our Ukraine action plan, which kicked in days into the crisis is threefold, one providing humanitarian emotions, which supports an immediate relief on the ground and in neighboring countries.
Two inch.
Integrating people into the workforce, including expanding our might pass up skilling program to refugees with additional reset mode and language support and three.
Partnering with companies and Ngls to scale long term impact.
We are working very closely with clients in Poland and surrounding countries partnering with them to redesign roles to employ more women refugees and in the past few weeks alone. We have connected hundreds of people to roads and auto manufacturing and consumer goods production in Poland, The Czech Republic and Slovakia in.
The Czech Republic, we worked with the labor Ministry as they swiftly changed legislation to allow non EU citizens to work in the country.
And we are helping aid agencies staff up while also committing $500000 and counting the Unhcr and local humanitarian organizations, including the Polish Red Cross arm.
Management teams are managing very well in the current environment, which outside of some of the industry verticals I discussed continues to be an environment in which there are very good growth opportunities should this change we will manage risks to economic growth as we always do proactively and in a manner that continues to position manpower group for ongoing.
<unk> success, but for now we are investing additional resources in markets, where we continue to see opportunities for profitable growth.
And as always it is our people that drive our success and all we accomplished we were recently recognized by the Wall Street Journal and the Drucker Institute as one of the top 250 managed companies, scoring especially highly for sustainability. We were all so recognized as one of the world's most ethical companies.
For the 13th year by <unk>, a global leader in defining and advancing the standards of ethical business practices. We.
We are proud to be the only company in our industry to be recognized for more than a decade and we thank all of our talented teams for playing a critical role in driving our business results and also driving positive change in societies and communities around the world.
I would now like to open the call for Q&A.
Operator.
Thank you we will now begin the Q&A session participants if you would like to ask a question. Please press star followed by the number one <unk> to record your name and company name as it is required to introduce your question to cancel your request you can press star followed by the number two.
We have a first question from Andrew <unk> of Jpmorgan. Your line is open.
Hi, Good morning, Jack I'm going to ask you and economic cycle question. If I could you know kind of looking back at the 2020 was actually I was just so unusual.
Keep them brief.
And surely the economic recovery you know last year was also a typical and now we're facing the Russia conflict in inflation. So my question is assuming we get through this.
This period of.
Charity and inflation does it feel like the macro drivers are in place that we could have kind of a long tenure of economic expansion ahead.
Thanks, Andrew that's a great question.
From what we can observe you are looking at labor markets that are extremely tight and we think of course. This is in part a.
<unk> of pent up demand.
Due to the pandemic.
And when I traveled in Europe across many countries just a few weeks ago. There wasn't a conversation that did not involve helen shortages and the difficulty in finding talent and as you can tell from our results demand for talent look if you look at Perm. If you look across all of our brands all the way.
<unk> during Q1.
Between experienced very strong growth talent solutions and manpower improving broadly across many markets. We see very strong demand for workers across all of the aspects of our geographies all of the skill sets that we were looking for.
And we are still in the recovery phase after the pandemic. So at least as you can tell from our outlook. When we look into Q2, we forecast that this is going to continue and if you think about the structural drivers of demand. So you'll have growth you'll have a higher degree of uncertainty you have demographic.
Impact on a lot of labor markets, where people are less the labor markets. We feel very good about the growth opportunities as we look ahead to address <unk>.
Excellent. Thank you.
Thanks, Andrew.
Thank you. Our next question is from Manav Patnaik of Barclays. Your line is open.
I just wanted to clarify you know in terms of the guidance you said to US is assumed some impact I guess from the Russia, Ukraine Con.
Conflict and I just wanted to appreciate you know what what impact have you seen and you know where the moving pieces that could be.
Well, thanks, Manav well so far most of the impact that we are looking at as it relates to the labor markets frankly are driven by the pandemic effects. So what we saw in the first quarter as we had anticipated was that.
The COVID-19 .
Situation would improve in many markets. We expect they will continue to prove into Q2.
Explanation rates improving at a number of markets all over the world.
And you know in terms of the impact on the supply chain, which was of course impacted heavily and continues to be dealing with pent up demand.
Following the pandemic really the main segment that we saw our sector with any additional impact.
Was the automotive sector in a couple of countries, where we have a little bit higher exposure to automotive.
And we in our prepared remarks, we talked about Germany, as well as France.
But other than that as you can tell from our guidance, we feel good about the growth opportunities broadly speaking both globally as well as in most sectors.
Got it and then maybe just one quick one.
France always has had many moving pieces and I think we had another election cycle like any any thoughts and whether if that goes one way or the other impacts your business.
While overall I would say that our Q line trends were in line with the expectations.
And when I visited France, just a few weeks ago frankly every conversation that I had was about what we can do to help our clients find more people. So underlying demand is still strong.
Did experience an overall improvement of our trend between the fourth quarter and the first quarter, but we did exit the quarter with a slight downtick in growth rate and that's driven primarily by automotive. So we view the current disruptions as temporary.
Optimistic on France's recovery overall and.
The recent government budget shows ongoing commitment to recovery actions and a continuation of the French business tax reductions that were introduced last year, which is also positive for our business. So overall for instance from covered well, but we expect to see slightly slow growth of the coming quarter isolated to the automotives.
Sector and frankly on the election, we would expect presidents my call to win the election.
Which we believe would be favorable for the French government because it provides stability and the continued making France more competitive.
Our global business.
But should the unexpected macro does not win we've had a long history of working with all administrations on labor market policies and related initiatives. We would expect to continue to do that in that case as well.
Got it thank you very much on this.
Thanks, Bob.
Thank you.
Next question is from Kevin Mcveigh of Credit Suisse. Your line is open.
Great. Thanks, so much and congratulations.
You mentioned auto a couple of times.
Check your yield is could you just remind us.
How much Aldo is in France, and Germany, and then just overall and just to tie that in.
What would get to the low end versus the high end of the range with the French guidance.
Tonight It seemed like.
It was seven 7% in March if I heard you right. So maybe just some puts and takes around France.
Sure. Kevin This is Jack so I'd be happy to refresh on the auto exposure I think if you look at that appendix to our release you can see auto overall is.
<unk> been holding about 5% of our revenues.
Been pretty consistent the last couple.
Quarters, but as we said we are seeing.
Some bigger impacts specifically in Germany, So I think.
At the moment, Germany is about 30% auto.
Some of that is related to our end user business. So not those are auto industry clients, but not all of those are specifically auto manufacturing workers, but but but Germany is certainly the biggest impact from a country perspective, France is about 8% to 10%.
<unk>.
And that's been fairly consistent as well so I'd say those are the two markets, where we're seeing probably the most the most impact from the supply chain items that.
He was referring to.
And.
We do have auto exposure in some other countries, but I would say that it really has not been impacted the way it has in France, and Germany specifically.
In terms of the French guidance for the revenues so at the midpoint that would be equal to what we just experienced in March at 7% growth to get to the high end Kevin of 9%.
We would like to seize just perhaps maybe a little bit of a step up in the in the second quarter above the rate we're experiencing now driven by some of the other industry. So we've been doing a really nice job in France growing convenience. So the non enterprise part of the business there is.
Opportunity if that is stronger into the second quarter that could lift us towards the higher end of that range now on the flip side I think you know automotive is the one we're watching closely and the enterprise clients. So.
But I'd say, that's kind of how we're thinking of it at the moment, we did say that we are investing.
In recruiters and France is a market that we are investing in there is still some very good growth opportunities in France outside of the automotive sector.
And we're very focused on that so that there is a little bit of a lag from the time, we bring the recruiters on and do you see that in the in.
In the sales results, but but that is an opportunity for us as we move beyond the second quarter as well.
Thanks, so much.
Thank you. Our next question is from Mark Marcon of Baird. Your line is open.
Hey, good morning, you've shown us from Jack.
I'd like to just continue on that trend with regards to the European questions.
First before getting to some structural.
<unk>.
On Europe .
Jonas you travel a lot.
What are your clients.
<unk>, saying with regards to the <unk>.
<unk> ability or possibility of a recession occurring you know on the continent, just due to higher energy prices and maybe some of the supply chain.
You know constraints that are that are currently occurring both as it relates to Europe , and then China Lockdowns.
Or are they discussing that and how that could potentially unfold and then how do they think about those impacts relative to you know Europe had more severe lockdowns for Covid, there's a lot of pent up demand most people don't appreciate the.
The talent shortages that exist in Europe .
But they they do exist and and.
And if we do have a recession could it ended up being relatively shallow as it relates to.
To Europe .
Given that Covid is lifting and and there are all sorts of demographic factors that should boost your business.
Thanks, Mark those are those are great questions and of course, that's exactly.
What I discussed with our clients across the various countries.
I traveled to.
And the overall position.
Position.
Almost every client is that they are dealing with significant talent shortages as an effect of the pandemic the health care issues, the pandemic Lockdowns and Theyre just trying to recover from this this.
Pent up demand, where they have a lot of.
Demand for their products and services. So the main issue. They are grappling with is really where to find skilled workers. How can we help them do that faster and in all of the different brands be at higher skilled people to experience.
Manufacturing workers in manpower permanent recruitment as you've seen very very strong.
Equally experiencing wage inflation, but as you I'm sure have seen the wage inflation in Europe is quite a bit lower than it is in the U S. For instance, so wage inflation is a concern, but so far you know they are willing to take the wage.
Inflation, when as you well know wage inflation in terms of our business model.
Positive and we are able to move.
Move with the markets and increase our bill rates to reflect the ability to attract the talent.
So that is where most of the focus is in our conversation.
Clearly they are aware of the issues around rising energy costs.
And.
The food prices that are that are coming up in Arkansas and about the eventual outcome of the Ukraine crisis, but their markets, where they are seeing the demand they still have strong demand.
Case in point, you know when I go to Poland, and I traveled there of course because of the Ukraine crisis in Poland absorbing.
Equivalent to the United States absorbing 35 million people so more than the size of the population of Texas in four weeks I'm going to Poland expecting to see great difficulties.
Of course on the humanitarian level, but also on a business level.
Poland's unemployment rate is two 8% the second lowest in Europe .
And you know only beaten by the Czech Republic of 2.5% unemployment. So whilst all of this is going on with the humanitarian crisis.
No.
Tragedy, new crane demand for our products and services in Poland is very very strong we expect to have record revenues in Poland strong double digit growth with very good profitability.
During this year, so we can absorb the uncertainty, which frankly drives demand also for our services.
While at the same time working with our clients to fulfill their demand. So at least based on what our clients are seeing today and what we're seeing across the labor markets demand remains strong our clients are noting the increased turbulence of course, they are concerned but they're not.
Taking any actions discernible to us.
<unk> really change their behavior, you can tell from our second quarter outlook as well.
That's great and then can you talk experience.
Showing really nice improvement, which is awesome to see can you talk a little bit about to what extent would you attribute that to just you know market growth in the secular demand for it.
Two two actual share gains and improved positioning.
Improved systems that you have in place through all the investments that you've made.
We've you know we've.
Really doubled down on being the leader in Resourcing and solutions Mark for a number of years clarified our market position.
And.
Invested heavily in recruiters and of course the acquisition in the U S as well, which you heard from our prepared remarks, the integration is going very well there also.
Very pleased with how experience is progressing globally with that positioning across a number of practice areas that our clients are looking for today, but frankly, we think due to the structural demand we feel really good about the.
Demand for ITE resources on solutions.
Going forward as well.
And to your question on market share gain I think when we're growing strongly organically.
The 33% in the U S. We feel really good about how the U S. Operation is performing and we're gaining share there between the U K and the U S. We have 50% of our experience business globally in both of those operations are very strong, but especially our.
Experienced U S. Operation is is really progressing well and I think the team has done a great job of really positioning us for success and as you heard from our outlook, we expect that to continue into the second quarter and overall, we're very pleased with.
Our progress competitively and with the outlook of demand structural demand going forward. As every company is investing in digital transformation and we intend to be a huge part of that as it relates to resourcing and Nike solutions globally.
Fantastic. Thank you.
Thank you. Our next question is from Jeff Silber of BMO capital markets. Your line is open.
Thanks, So much in your prepared remarks, you did mentioned some inter quarter trends in France or at least how you finished up in March I'm. Just wondering if we can get any color.
Are there major regions I'm, specifically interested in if there was any impact from the Russia, Ukraine crisis or anything else that specifically impacted inter quarter trends. Thanks.
Jeff, Yes on that point.
So France definitely was the one that we called out so they moved from about an 8% growth rates in January and February to that 7% that we referenced in the month of March if I look across.
The other countries in Europe , I'd say the other one I would call out would be Germany for the same reasons, Germany.
Really stepped down as we are as we approach March they were starting to see a bigger impact from the supply chain issues on that large automotive.
Concentration we have there so I'd say that one probably step down you know about.
Mid single digit percentages from from where they were the month before.
And we're using that as part of our we think on an overall basis, Germany will have a trend pretty similar to what we saw in the first quarter because March was a big part of the quarter overall as we look forward.
I'd say those are probably the two that jump out the most the other item that we highlighted was the U K and although the U K revenues were more flat on a quarterly basis year over year. The U K is doing really well.
And we've talked about some business mix changes, which are really improving the margin. So we anticipate the U K I'd say from a quarter overall perspective, they were pretty stable and we expect them to have really good margin performance going into the to the second quarter as well, although probably a similar.
<unk> trend from a revenue perspective into the second quarter may be down slightly from the trend we saw in the first quarter, but in terms of the puts and takes I would say those are probably the three that I would call out that.
That.
Had probably a bigger impact from a European perspective.
Okay, that's great and Mark alluded to this in his question earlier, but I wanted to drill down a little bit more in terms of the recent lockdowns in China I think they only started in late March that you probably didnt see much of an impact in the first quarter I know, it's still early but.
Is there any impact you think theres going to be any impact from the recent China locked down on supply chain initiatives anything else on your business in the second quarter. Thanks.
Yeah.
That's a good question, Jeff and as you point out it's too early to say, whether they will be but.
Rather whether there was any in March we didn't notice anything there, but just as with any of these lockdowns I think there might be supply chain impact, but as we've spoken about in prior earnings calls as we've experienced they are temporary in nature. So they cause a temporary relief.
Disruption they postponed demand if there are supply chain issues. They don't cancel demand and so if there is a disruption we would expect those to come through and then subside as you know the government gets the COVID-19 breakout breaks under under control so hard.
To tell you.
Where exactly that would be but if it happens just as we've seen in all of the other countries. It's a temporary effect and then eventually it starts to catch up again, which frankly just drives more demand.
For workers as production facilities will work harder to catch up.
Okay very helpful. Thanks, so much.
Thanks, Jeff.
Thank you. Our next question is from Tobey Sommer of Chewy Securities. Your line is open.
Hey, Good morning. This is Jasper bibb on for Tobey following up on the earlier question I wanted to ask about wage inflation in the U S.
Could you quantify what the upsell rate growth was for <unk> versus the manpower brand in the quarter.
Okay.
Jasper This Jack we don't really disclose bill rate details like that just due to the number of countries that we have so that hasn't been the level of detail, but what I can tell you Directionally is we saw good GP margin expansion inexperience and manpower in the in the <unk>.
Quarter, which was very strong and if I look specifically.
Perm Perm is a big driver for experience to your question that was a big contributor to that so very very strong GP margin.
<unk> year over year in the U S organically and certainly we have the addition of the acquired business that that is helping that further and then on the manpower side similar so GP margin up very strongly in the quarter I think to your point, we found that pricing continues to be very.
Strong in.
In both experience and manpower wage inflation as Jonas mentioned does benefit the cost of the worker gets passed through to the client our margin goes on top of that so those dynamics play into our GP dollar increases. So I think on an overall basis in terms of trends that we're seeing.
It's it's still holding up quite well.
Those wage wages are being passed through and we're not seeing that impact demand at this stage.
And Jasper, maybe I would just add to that that we.
We believe that we have.
We're at peak or past the peak.
Wage inflation in the U S. It's still high but when we look at some of our most recent trends we can see some easing off in the growth rates, which we believe is positive overall, it's early days, yet and inflation as I mentioned earlier is much higher.
In the U S than it is elsewhere in but wage inflation of course also exists in.
Europe and other countries, but as it relates to the U S. Specifically, we are starting to see a little bit of an easing.
And we believe that we've seen the peak of wage increases.
Thanks, Brett.
Makes sense and then I was just hoping you could speak to the temporary employment legislation in Spain that came out in intra quarter or are you seeing any impact on your country business. There at this stage or when you say, it's still too early to tell.
Well I would say this the proposed stained labor liquidation is overall target at spray Spain's really broad use of temporary contracts at large so not related to our industry, but just generally using temporary short term contracts.
And specifically within the tourism and hospitality leisure.
Industries and that's what this legislation primarily is addressing but as part of that our temporary staffing is going to be impacted.
But the temp penetration for our parts is less than 1%.
But it will be captured by the proposed legislation. So there are various details.
The terms for the temporary assignments.
Overall and in summary, this moves them closer to Italy like model.
And we know we can manage such a model very successfully based on the performance of our Italian business.
And we would manage any of these new legislation elastic.
What we believe a positive way for the business. So the implementation of these new legislations happened on April one we are monitoring the reaction of our clients very closely we're out talking to our clients about what this.
It means for them and the opportunities that we have.
Helping them, but overall I would say, we anticipate that the impact is.
Neutral to positive because there are also some really positive impacts of the legislation that gives us opportunities to break into sectors of the market that we werent able to be in before like hospitality and tourism industries, because the requirements are pretty onerous, which we are used to dealing with.
<unk> and other actors or not and so we think this could actually be a good opportunity, but more to come on this as it evolves, but overall, we think it's entirely manageable for our business in Spain.
Okay I appreciate the color thanks for taking the questions guys.
Thank you.
Thank you. Our next question is from Hamzah <unk> of Jefferies. Your line is open.
Hi, This is Hans Hoffman filling in for Hamzah <unk>.
I was wondering if you could comment a bit on which end market verticals, maybe came in better or worse in your guide and I know you guys guide geographically or regionally, but just just curious on any additional color there by end market.
Sure I'd be happy to talk a little bit to that so I think.
Based on the experience results I think it goes it's pretty clear that on the professional side, we performed very well.
And that was a huge driver I think Jonas mentioned the performance of the U S.
That's a big driver as well I'd say the financial sector was one that we saw strengthen during the quarter.
Technology, we certainly saw strengthened during the quarter as well.
And.
As I look across I would say pharmaceuticals continues to be very strong for us as well.
We do.
Good deal of public sector work in the UK as well that was strong for us as well so I'd say a little a little color on what we saw in some of the industry verticals that were strong for us and as we look at the guidance for the second quarter.
Those are those are very those are industries that we expect to continue to show strength as we go forward and we're seeing that as we end the quarter and we would expect that to continue during the second quarter as well.
Got it thank you.
Thank you. Our next question is from Hydro flask.
Bank of America. Your line is open.
Hi, Thank you for taking my question.
I wanted to ask another one just in terms of that.
Russia, Ukraine more impact in terms of the rest of your manufacturing exposure outside of autos I'm, just curious kind of what you've been hearing from your clients and what you think is driving kind of the delta in terms of.
Auto is being impacted firsthand.
The rest.
Other manufacturing industries, just to kind of better understand the dynamics there. Thanks.
Well, it's it's a great question and we'd already seen during the pandemic issues around you know automotive and.
As is the case is in eastern Europe , specifically in Ukraine, as well as in Russia. There are a number of suppliers.
That are supplying into the European automotive.
Sector. So I think that's the reason they are more exposed European car manufacturers to Russia, and Ukraine in their supply chain that makes sense. That's close proximity easy access but of course when there is a crisis like this all of that gets up ended and we believe that.
As you know a reason why they are feeling it more but frankly, the automotive sector along with many other sectors of course is still dealing with the pandemic.
Packs across their various supply chains globally in different geographies. If you look at the used car prices in the U S and you try to order a new color of just about any make right now you're going to be waiting a long time and you know it.
One of those industries that that was hit the hardest during the pandemic still working its way out and then incrementally no not need a little bit more difficult by the crisis and the war in Ukraine.
Thank you that's really helpful and.
Second question on permanent.
Staffing.
<unk> has done well.
Recently and also provided a really nice tailwind to margins can you talk about the demand dynamic there and kind of where you see the margins Kelly.
Well this has been one of the fastest growing areas of our business portfolio and the outlook for Perm is that it continues to be very strong.
Into Q2 as well in Q1 that was up 55% in constant.
Currency. So it is really a reflection of the very tight labor markets.
And our clients are increasingly recognizing us as a great channel to find excellent talent.
On a temporary or more flexible basis, and also increasingly a great way of binding.
<unk> that they need on a permanent basis. So it's really been a good evolution for.
Manpower and experience and manpack talent solutions as well.
But we are seen as a provider of.
Perm hiring at a scale that leads frankly never seen before and we are reaching record numbers of Perm.
Every quarter, which is a really good shifts in terms of the perception of the kinds of services and the value that we can provide to our clients in the market that is very tight now but of course, we also know that demographically speaking.
All of the countries, where we do business are demographically challenged so even past.
Any pandemic pent up demand, we feel really good about our opportunity to be a very strong player in the permanent recruitment space globally as well.
Great. Thank you very much.
Okay.
Thank you. Our next question is from George Tong of Goldman Sachs. Your line is open.
Hi, Thanks, Good morning, I wanted to try to understand some of the supply chain dynamics that are occurring outside of the auto sector. Given some of the broad based supply chain issues globally can you could you.
Talk about weather Manpower's business has been affected.
But supply chain issues in other verticals across your geographies.
Thanks, George that's a it's a good question and frankly based on the performance that we had.
In Q1, and also looking ahead for manpower business in Q2.
We're still working our way through the pent up demand.
Caused by the pandemic across all of our geographies and most other industries as well so we.
We feel really good about the demand for both permanent because we just discussed as well as temporary staffing.
Manpower and I can't really think of any specific sector that would have experienced something similar. So we think demand remains broad based strong and you know really really positive for us as we look into the second quarter.
Okay. That's helpful.
The performance in the UK reflected the exit of certain low margin arrangement can you elaborate on the exits there in your overall mix strategy in the U K.
Yeah, George I'd be happy to I think this is a reflection of what you've seen us do in some other markets as well really it's Lee.
Looking at the nature of the services, we provide and really what we're seeing in the UK are certain arrangements are being moved to more of a services type arrangements. So similar to like an MSP, where we manage.
Workers for a client where the client continues to be responsible for those workers well. The substance of that is we're really providing more of a service as opposed to providing the workers to them and so in those type of.
Arrangements.
We would look at the nature of those contracts and in.
And that's what we're seeing is the shift to more of a services type approach as we as we work through that with our clients. So.
The traditional.
<unk> I think.
There is some payroll ing in our industry where.
That tends to.
Cost some lower margin activity and they are just traditionally isn't a lot of value in those type of services. So it's really a move away from.
Those lower margin payroll type arrangements and into higher services higher margin type arrangements with our clients and that's really what youre seeing in the U K, so driving really strong margins the underlying business is doing quite well and I would say.
Youll see youll see that continue a little bit into the second quarter trend and then we would expect to.
You see that.
Sort of work its way through since we've.
Entered into some of those arrangements in the second half of last year. So you would see that start to have a more muted impact in the second half of the year.
Got it very helpful. Thank you.
Thank you at this time, we don't have any questions on queue speakers you May proceed.
Excellent.
Well. Thank you very much everyone for your questions and interest in our earnings call today, and we look forward to speaking with you on our next earnings call.
<unk> second quarter during the summer thanks, everyone have a good rest of the week.
Thank you that concludes today's conference. Thank you all for joining you may now disconnect.