Q1 2024 ManpowerGroup Inc Earnings Call
Okay.
Operator: Hello, and welcome to the Manpower Group First Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode.
Speaker Change: Hello, and welcome to the manpower group first quarter 2024 earnings call.
Speaker Change: At this time, all participants are in listen only mode.
Operator: After the speaker's remarks, there will be a question and answer session. To ask a question at that time, please press star 11. As a reminder, this call is being recorded. I would like to turn the call over to Jonas Prising, Chairman and CEO. Please go ahead.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session to ask a question at that time. Please press star one one.
Speaker Change: This call is being recorded.
Speaker Change: Like to turn the call over to your illness breathing Chairman and CEO. Please go ahead.
Jonas Prising: Welcome, and thank you for joining us for our first quarter 2024 conference call. Our Chief Financial Officer, Jack McGinnis, is with me today. And for your convenience, we have included our prepared remarks in the investor relations section of our website at manpowergroup.com. I will start by going through some of the highlights of the first quarter, and then Jack will go through the results and guidance in more detail. And I'll then share some concluding thoughts before we start our Q&A. Jack will now cover the safe harbor line. Morning, everyone.
Speaker Change: Welcome and thank you for joining us for our first quarter 2024 conference calls.
Speaker Change: Our Chief Financial Officer, Jack Mcginnis with me today and.
Speaker Change: For your convenience we have included our prepared remarks within the Investor Relations section of our website at manpower group Dot com.
John Thomas McGinnis: I will start by going through some of the highlights of the first quarter and then Jack will go through the results and guidance in more detail and I'll then share some concluding thoughts before we start our Q&A session.
John Thomas McGinnis: Jack will now cover the Safe Harbor language.
John Thomas McGinnis: Good morning, everyone. This conference call includes forward looking statements, including statements concerning economic and geopolitical uncertainty, 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 those projected in the forward looking statements.
John Thomas McGinnis: This conference call includes forward-looking statements, including statements concerning economic and geopolitical uncertainty, which are subject to known and unknown risks and uncertainty. Such 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 2 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 and information regarding reconciliation of non-GAAP measures. Thanks, Jack!
John Thomas McGinnis: No obligation to update or revise any forward looking statements.
John Thomas McGinnis: Slide two of our earnings release presentation. Further identify forward looking statements made on this call and factors that may cause our actual results to differ materially and information regarding reconciliation of non-GAAP measures.
Speaker Change: Thanks Jack.
Jonas Prising: Last quarter, we stated that though the economy remains resilient in many markets, uncertainty around the outlook persists, leading employers to be cautious in their hiring, pause non-critical spend, and deferring projects until more clarity emerges. One quarter in, we see a continuation of this trend. Labor markets are cooling in North America and in Europe, yet they remain strong. In our most recent ManpowerGroup Employment Outlook Survey, employers reported increased caution in their hiring due to economic uncertainty.
Speaker Change: Last quarter, we stated that though the economy remains resilient in many markets uncertainty around the outlook persists, leading employers to be cautious in their hiring pausing noncritical spend and deferring projects until more clarity emerges.
Speaker Change: One quarter and we see a continuation of this trend.
Speaker Change: Labor markets are calling in North America and in Europe, yet remained strong.
Speaker Change: Most recent manpower group employment outlook survey employers reported increased caution in their hiring due to economic uncertainty at.
Jonas Prising: At the same time, as they look beyond the current period of economic uncertainty, business leaders feel optimistic about the future, and they are clear that skilled talent is the cornerstone of success and are holding on to their existing workforces today. That's how demand remains strong for some skilled workers, and talent shortages persist despite a cooling broader environment. Our industry remains on the leading edge of the labor market, and the impact of the softening environment has been felt here first.
Speaker Change: At the same time.
Speaker Change: Looking beyond the current period of economic uncertainty.
Speaker Change: Many of us feel optimistic about the future and there are clear that skilled talent is the cornerstone for success and are holding onto their existing workforces today.
Speaker Change: That's how demand remained strong for some skilled workers and talent shortages persist despite a cooling broader environment.
Speaker Change: Our industry remains on a leading edge of labor market trends and the impact of the softening environment has been felt here first.
Jonas Prising: Demand for temporary staffing has been running at lower levels in most markets in North America and in Europe. We have, however, seen continued stabilization in various key markets, most notably in the U.S. and the U.K., but now also in some other European markets, albeit at a low level. Permanent recruitment activity also continues to trend at stable levels over the last three quarters. However, although stabilization is often an encouraging first step towards growth, at this point, it is still too early to call out an inflection in improving demand.
Speaker Change: Demand for temporary staffing has been running at lower levels in most markets in North America and in Europe.
Speaker Change: We have however seen continued stabilization in various key markets, most notably in the U S. The U K, but now also in some other European markets, albeit at low levels.
Speaker Change: Permanent recruitment activity also continues to trend at stable levels over the last three quarters.
Speaker Change: With that said, although stabilization is often an encouraging first step towards growth.
Speaker Change: At this point it is still too early to call out an inflection and improving demand.
Speaker Change: We continue to navigate the current environment with agility and experiment.
Jonas Prising: We continue to navigate the current environment with agility and expertise, driving increased sales activities to generate demand and maintaining focus on strategic initiatives that position us to capture growth and greater productivity when market conditions improve. Turning to our financial results, revenue for the first quarter was $4.4 billion, down 5% year-over-year in constant currency or down 6% as adjusted. EBITDA for the first quarter was $74 million.
Speaker Change: <unk> increased sales activities to generate demand and maintaining focus on strategic initiatives that position us to capture growth and greater productivity when market conditions improve.
Speaker Change: Turning to our financial results in the first quarter revenue was $4 4 billion.
Speaker Change: Down 5% year over year in constant currency or down 6% as adjusted.
Speaker Change: Our reported EBITA for the first quarter was $74 million.
John Thomas McGinnis: Adjusting for a runoff for Serbian business in Germany and a minor loss for Argentina-related currency translated losses, EBITDA was $80 million, representing a decrease of 38% in constant currency year-over-year. The reported EBITDA margin was 1.7%, and the adjusted EBITDA margin was 1.8%. Earnings per diluted share was $0.81 on a reported basis, while earnings per diluted share was $0.94 on an adjusted basis In the first quarter, I spent time with our teams in Europe, Asia-Pacific, Latin America, and North America.
Speaker Change: Just be for a run off for Serbia business in Germany, and a minor loss for Argentina related currency translation losses.
Speaker Change: <unk> was $80 million, representing a decrease of 38% in constant currency year over year.
Speaker Change: Reported EBITA margin was one 7% and adjusted EBITA margin was one 8%.
Speaker Change: Earnings per diluted share was <unk> 81 trends on a reported basis, while earnings per diluted share was 94 on an adjusted basis.
Adjusted earnings per share decreased 39% year over year in constant currency.
Speaker Change: In the first quarter I spent time with our teams in Europe Asia Pacific Latin America, and North America.
Speaker Change: Local labor market is diverse and disparities exist across regions industries and demographic groups.
Jonas Prising: The global labor market is diverse, and disparities exist across regions, industries, and demographics. While some sectors have experienced job losses and economic downturns, others have seen growth and expansion. And this corresponds with the shifts we're seeing. Demand in Latin America and Asia-Pacific remains solid.
Speaker Change: Some sectors have experienced job losses in economic downturns.
Speaker Change: Others have seen growth and expansion.
Speaker Change: And this corresponds with the shifts we're seeing.
Speaker Change: And in Latin America, and Asia Pacific remained solid while in North America and in Europe, We continue to see subdued demand for Resourcing and except for a placement <unk> workforce solutions.
Speaker Change: At the same time, we expect the digital transformation across industries, the rise of AI and the strength of the green transition will create new opportunities as demand for specialty talent grows.
Jonas Prising: While in North America and in Europe, we continue to see subdued demand for resourcing and, except for our placement, workforce solutions. At the same time, we expect the digital transformation across industries, the rise of AI, and the strength of the green transition will create new opportunities as demand for specialist talent grows. Amid these shifts, the ability to build a workforce that can adapt at pace as transformation accelerates is critical, and we believe ManpowerGroup has a big role to play in filling these needs for our clients in the future. I will now turn it over to Jack to take you through the results in more detail. Thanks, Jonas.
Speaker Change: These shifts the ability to build a workforce that can adapt at pace as transformation accelerates is critical.
Speaker Change: And we believe manpower group has a big role to play in filling these needs for our clients in the future.
Speaker Change: I will now turn it over to Jack to take you through the results in more detail.
John Thomas McGinnis: Thanks, Jonas revenues in the first quarter came in at the midpoint of our constant currency guidance range at.
John Thomas McGinnis: As adjusted gross profit margin came in above our guidance range and was at the midpoint of our range on a reported basis.
John Thomas McGinnis: As adjusted EBITDA was $80 million, representing a 38% decrease in constant currency compared to the prior year period.
John Thomas McGinnis: Adjusted EBITDA margin was one 8% and came in at the midpoint of our guidance range, representing a 100 basis points of decline year over year.
John Thomas McGinnis: Revenues in the first quarter came in at the midpoint of our concurrency guidance range. As adjusted, gross profit margin came in above our guidance range and was at the midpoint of our range on a reported... As adjusted, EBITDA was $80 million, representing a 38% decrease in constant currency compared to the prior year period. As adjusted, EBITDA margin was 1.8% and came in at the midpoint of our guidance range, representing 100 basis points of decline year-over-year.
John Thomas McGinnis: During the quarter year over year foreign currency movements had an impact on our results foreign currency translation drove a 2% unfavorable impact to the U S. Dollar reported revenue trend compared to the constant currency decrease of 5% or 6% as adjusted.
John Thomas McGinnis: Organic days adjusted constant currency revenue decreased 4% in the quarter slightly better than our guidance.
John Thomas McGinnis: Turning to the EPS bridge on Slide four reported net earnings per share was <unk>.
John Thomas McGinnis: Which included 13 related to the runoff of our pro Serbia managed service business in Germany, and a minor noncash foreign currency loss related to the translation of a hyperinflationary Argentina business.
John Thomas McGinnis: Excluding these items adjusted EPS was <unk> 94.
John Thomas McGinnis: During the quarter, year-over-year foreign currency movements had an impact on our results. Foreign Currency Translation drove a 2% unfavorable impact on the U.S. dollar reported revenue trend compared to the consequential decrease of 5% or 6% as adjusted. Organic days adjusted concert currency revenues decreased 4% in the quarter, slightly better than our guidance. Turning to the EPS bridge on slide four, reported net earnings per share were 81 cents, which included 13 cents related to the runoff of our ProServia managed service business in Germany and a minor non-cash foreign currency loss related to the translation of our hyperinflationary Argentina business. Excluding these items, adjusted EPS was $0.94.
John Thomas McGinnis: Walking from our guidance midpoint, our results included a stronger operational performance of <unk>.
John Thomas McGinnis: Our weighted average shares due to share repurchases in the quarter, which had a positive impact of one <unk>.
John Thomas McGinnis: Foreign currency impact that was <unk> <unk> worse than our guidance.
John Thomas McGinnis: On the tax rate, which had a positive impact of <unk>.
John Thomas McGinnis: And interest and other expenses had a negative impact of <unk>.
John Thomas McGinnis: Next let's review our revenue by business line year over year on an organic constant currency basis, the manpower brand declined by 3% in the quarter.
John Thomas McGinnis: The experienced brand declined by 11% and the talent solutions brand had a revenue decline of 11%.
John Thomas McGinnis: Within talent solutions, our RTL business experienced the year over year revenue decline in line with the trend from the fourth quarter.
John Thomas McGinnis: NSP business revenues were basically flat compared to the prior year period, reflecting sequential improvement from the fourth quarter right management experienced solid year over year revenue growth and higher outplacement volumes in the quarter.
John Thomas McGinnis: Walking from our guidance midpoint, our results included a stronger operational performance of one cent and overweighted average shares due to shareholder purchases in the quarter, which had a positive impact of one cent. For our currency impact, it was two cents worse than our guidance, and the tax rate had a positive impact of $0.04, and interest and other expenses had a negative impact of $300,000. Next, let's review our revenue by business line. Year-over-year, on an organic constant currency basis, the Manpower brand declined by 3% in the quarter.
John Thomas McGinnis: Looking at our gross profit margin in detail our gross margin came in at 17, 5% for the quarter after adjusting for the runoff of our Germany <unk> business.
John Thomas McGinnis: Staffing margin contributed a 50 basis point reduction due to mix shifts and lower volumes, while pricing remained solid permanent recruitment.
John Thomas McGinnis: <unk>, including talent solutions, our Po contributed a 50 basis point GP margin reduction as permanent hiring activity in the first quarter remained stable at lower levels consistent with recent quarter trends.
Right management career transition within talent solutions contributed 20 basis points of improvement as outplacement activity continued to be solid in the first quarter.
John Thomas McGinnis: Other items resulted in a 10 basis point margin increase.
John Thomas McGinnis: Moving on to our gross profit by business line during the quarter. The manpower brand comprised 58% of gross profit our experienced professional business comprised 25% and talent solutions comprised 17%.
John Thomas McGinnis: The Experience brand declined by 11%, and the Talent Solutions brand had a revenue decline of 11%. With InTown Solutions, our RPO business experienced a year-over-year revenue decline in line with the trend from the fourth quarter. Our MSP business revenues were basically flat compared to the prior year period, reflecting sequential improvement from the fourth quarter, while white management experienced solid year-over-year revenue growth on higher outplacement volumes in the quarter. Looking at our gross profit margin in detail, our gross margin came in at 17.5% for the quarter after adjusting for the runoff of our Germany pro-Soviet business.
John Thomas McGinnis: During the quarter, our consolidated gross profit decreased by 9% on an organic constant currency basis year over year, representing a slight decrease from the 8% decrease in the fourth quarter.
John Thomas McGinnis: Our manpower brand reported an organic gross profit decrease of 6% in constant currency year over year.
John Thomas McGinnis: Presenting a mix related additional decline from the 4% decline in the fourth quarter.
John Thomas McGinnis: Gross profit in our experienced brand decreased 16% and organic constant currency year over year, representing a slight additional decline from the 15% decrease in the fourth quarter driven by Continental Europe.
John Thomas McGinnis: Gross profit in talent solutions decreased 11% and organic constant currency year over year, representing an improved sequential trends from the 14% decline in the fourth quarter.
John Thomas McGinnis: Although RPM volumes were relatively stable from the fourth quarter year over year GP decrease improved slightly.
John Thomas McGinnis: MSP experienced an improved GP trend from the fourth quarter, while right management continued to experience solid outplacement activity.
John Thomas McGinnis: Reported SG&A expense in the quarter was $698 million, excluding the run off of our Germany Conservative business SG&A was 5% lower year over year on a constant currency basis.
John Thomas McGinnis: Staffing margin contributed a 50 basis point reduction due to mixed shifts and lower volumes, while pricing remained solid. Permanent recruitment, including Talent Solutions RPO, contributed a 50 basis point GP margin reduction as permanent hiring activity in the first quarter remained stable at lower levels, consistent with recent quarter trends. Light management career transition within Town Solutions contributed 20 basis points of improvement, as outpacing activity continued to be solid in the first quarter. Other items resulted in a 10 basis point margin increase.
John Thomas McGinnis: Representing a further decrease from the 4% decline in the fourth quarter on an adjusted basis.
John Thomas McGinnis: This reflects organic head count reductions of 10% year over year.
John Thomas McGinnis: Our digitization strategy focused on transforming back office functions will drive further cost efficiencies and our corporate expenses reflect this investment.
John Thomas McGinnis: These strategic investments are progressing nicely and are expected to drive medium and long term productivity and efficiency enhancements across our technology and finance functions worldwide through shared service centers, leveraging leading global technology platforms.
John Thomas McGinnis: The underlying year over year SG&A decreases largely consisted of operational costs of $32 million and currency changes of $9 million.
John Thomas McGinnis: Adjusted SG&A expenses as a percentage of revenue represented 15, 7% in constant currency in the first quarter.
John Thomas McGinnis: Moving on to our gross profit by business line, during the quarter, the Manpower brand comprised 58% of gross profit, our experienced professional business comprised 25%, and talent solutions comprised 17%. During the quarter, our consolidated gross profit decreased by 9% on an organic constant currency basis year-over-year, representing a slight decrease from the 8% decrease in the fourth quarter. Our Manpower grant reported an organic gross profit decrease of 6% in constant currency year over year, representing a mixed-related additional decline from the 4% decline in the fourth quarter.
John Thomas McGinnis: The Pro survey, Germany runoff expense represented $2 million.
John Thomas McGinnis: I'm pleased to note there were no restructuring charges during the quarter.
John Thomas McGinnis: The Americas segment comprised 23% of consolidated revenue.
John Thomas McGinnis: In the quarter was $1 billion representing.
John Thomas McGinnis: Representing a decrease of 1% compared to the prior year period on a constant currency basis.
John Thomas McGinnis: <unk> was $26 million and OUP margin was two 5%.
John Thomas McGinnis: The U S is the largest country in the Americas segment, comprising 66% of segment revenues.
John Thomas McGinnis: In the U S was $680 million during the quarter, representing an 8% days adjusted decrease compared to the prior year.
John Thomas McGinnis: OUP for our U S business was $12 million in the quarter, representing a decrease of 61% after adjusting the prior year for minor restructuring costs.
John Thomas McGinnis: Margin was one 8%.
John Thomas McGinnis: Within the U S. The manpower brand comprised 22% of gross profit during the quarter.
John Thomas McGinnis: Revenue for the manpower brand in the U S decreased 13% during the quarter, which was stable from the decrease in the fourth quarter.
John Thomas McGinnis: The experience brand in the U S comprised 45% of gross profit in the quarter.
John Thomas McGinnis: Gross profit in our experience brand decreased 16% in organic concert currency year-over-year, representing a slight additional decline from the 15% decrease in the fourth quarter driven by Continental Europe. Gross profit in talent solutions decreased 11% in organic concert currency year-over-year, representing an improved sequential trend from the 14% decline in the fourth quarter. Although RPO volumes were relatively stable from the fourth quarter, the year-over-year GP decrease improved slightly. MSP experienced an improved GP trend from the fourth quarter, while White management continued to experience solid outplacement. The reported SG&A expense in the quarter was $698 million.
John Thomas McGinnis: We then experienced in the U S. It skills comprised approximately 90% of revenues.
John Thomas McGinnis: Experienced U S revenue decreased 6% during the quarter an improvement from the 13% decline in the fourth quarter and reflects increased short duration healthcare project activity and other items benefiting the first quarter.
John Thomas McGinnis: Talent solutions in the U S contributed 33% of gross profit and experienced a revenue decline of 2% in the quarter an improvement from the 14% decline in the fourth quarter.
John Thomas McGinnis: Our apio revenue declines in the U S reflects relatively stable level of permanent hiring programs in the first quarter compared to the fourth quarter.
John Thomas McGinnis: The U S. MSP business saw a slight revenue decline representing an improvement from the fourth quarter, our outplacement activity within our right management business drove strong year over year revenue increases.
John Thomas McGinnis: In the second quarter of 2024, we expect a slightly improved revenue decline for our overall U S business as compared to the first quarter decline as we continued to anniversary the more significant pullback in demand in the year ago period.
John Thomas McGinnis: Excluding the runoff of our Germany pro serviette business, SG&A was 5% lower year over year on a concert currency basis, representing a further decrease from the 4% decline in the fourth quarter on an adjusted basis. This reflects organic headcount reductions of 10% year over year. Our digitization strategy, focused on transforming back-office functions, will drive further cost efficiencies, and our corporate expenses reflect this investment. These strategic investments are progressing nicely and are expected to drive medium and long-term productivity and efficiency enhancements across our technology and finance functions worldwide through shared service centers leveraging leading global technology platforms.
John Thomas McGinnis: Southern Europe revenue comprised 45% of consolidated revenue in the quarter revenue in Southern Europe was 2 billion, representing a 5% decrease in constant currency.
John Thomas McGinnis: The Pea for our southern Europe business was $70 million in the quarter and OUP margin was three 5%.
John Thomas McGinnis: France revenue comprised 56% of southern Europe segment in the quarter and decreased 5% and days adjusted constant currency.
John Thomas McGinnis: OUP for our France business was $33 million in the quarter, representing a decrease of 27% on a constant currency basis.
John Thomas McGinnis: OUP margin was 3%.
John Thomas McGinnis: Activity to date in April 2024 is consistent with trends experienced in the first quarter. We are estimating the year over year constant currency revenue trend in the second quarter for France to be consistent with the first quarter trend.
John Thomas McGinnis: Revenue in Italy, equaled $404 million in the first quarter, reflecting a decrease of 6% on a days adjusted constant currency basis.
John Thomas McGinnis: Equaled $27 million and OUP margin was six 8%.
John Thomas McGinnis: The underlying year-over-year SG&A decreases largely consisted of operational costs of $32 million and currency changes of $9 million. Adjusted FG&A expenses as a percentage of revenue represented 15.7% in constant currency in the first quarter. The ProServia Germany runoff expense represented $2 million.
John Thomas McGinnis: We estimate that Italy will also have a slightly improved revenue trend in the second quarter compared to the first quarter in constant currency.
John Thomas McGinnis: Our northern Europe segment comprised 20% of consolidated revenue in the quarter.
John Thomas McGinnis: <unk> of $870 million represented a 12% decline in constant currency.
John Thomas McGinnis: As adjusted to exclude the run off from somebody a Germany business OUP was $6 million and OUP margin was 0.7%.
John Thomas McGinnis: Our largest market in northern Europe segment is the UK, which represented 35% of segment revenues in the quarter during the quarter U K revenue decreased 13% on a days adjusted constant currency basis.
John Thomas McGinnis: I'm pleased to note there were no restructuring charges during the quarter. The Americas segment comprised 23% of consolidated revenue. Revenue in the quarter was $1 billion, representing a decrease of 1% compared to the prior year period on a currency basis. OUP was $26 million, and OUP margin was 2.5%. The U.S. is the largest country in the Americas segment, comprising 66% of segment revenue. Revenue in the U.S. was $680 million during the quarter, representing an 8% days-adjusted decrease compared to the prior year. OUP for our U.S. business was $12 million in the quarter, representing a decrease of 61% after adjusting the prior year for minor restructuring costs. OUP margin was 1.8 percent.
John Thomas McGinnis: This reflects a stable trend from the rate of decline in the fourth quarter on the same basis.
John Thomas McGinnis: We estimate a similar year over year revenue trend in the second quarter compared to the first quarter.
John Thomas McGinnis: In Germany, adjusted revenues decreased 8% and days adjusted constant currency in the quarter.
John Thomas McGinnis: As previously reported the wind down of our <unk> managed services business in Germany was substantially completed in the previous quarter and the final run off of client activity will be completed in the second quarter of 2024.
John Thomas McGinnis: In the second quarter, we are expecting a slightly increased year over year revenue decline compared to the first quarter.
John Thomas McGinnis: The Asia Pacific Middle East segment comprises 12% of total company revenue.
John Thomas McGinnis: In the quarter revenues equaled 535 million, representing a decrease of 4% and organic constant currency.
John Thomas McGinnis: <unk> was $20 million and OUP margin was three 7%.
John Thomas McGinnis: Our largest market in the <unk> segment is Japan, which represented 51% of segment revenues in the quarter.
John Thomas McGinnis: Revenue in Japan grew 10% on a days adjusted constant currency basis.
John Thomas McGinnis: We remain very pleased with the consistent performance of our Japan business and we expect continued strong revenue growth in the second quarter.
John Thomas McGinnis: I'll now turn to cash flow and balance sheet in the first quarter free cash flow was strong and represented $104 million during the quarter and compares to $111 million in the prior year.
John Thomas McGinnis: At quarter end days sales outstanding decreased about a day and a half to 55 days.
John Thomas McGinnis: Within the U.S., the Manpower brand comprised 22% of gross profit during the quarter. Revenue for the Manpower brand in the U.S. decreased 13% during the quarter, which was stable from the decrease in the fourth quarter. The Xperia brand in the U.S. comprised 45% of gross profit during the quarter.
During the first quarter capital expenditures represented $12 million.
John Thomas McGinnis: During the first quarter, we repurchased 665000 shares of stock for $50 million.
John Thomas McGinnis: As of March 31, we have $3 9 million shares remaining for purchase under the share program approved in August of 2023.
John Thomas McGinnis: Our balance sheet ended the quarter with cash of $605 million and total debt of $985 million net.
John Thomas McGinnis: Net debt equaled $380 million at quarter end.
John Thomas McGinnis: Our debt ratios at quarter end reflect total gross debt to trailing 12 months adjusted EBITDA of $1 98, and total debt to total capitalization at 31%.
John Thomas McGinnis: Within experience in the U.S., IT skills comprise approximately 90% of revenue. Experis US revenue decreased 6% during the quarter, an improvement from the 13% decline in the fourth quarter, and reflects increased short-duration healthcare IT project activity and other items benefiting the first quarter. Account Solutions in the U.S. contributed 33% of gross profit and experienced a revenue decline of 2% in the quarter, an improvement from the 14% decline in the fourth quarter
John Thomas McGinnis: Our debt and credit facilities remained unchanged during the quarter as displayed in the appendix of the presentation.
Speaker Change: Next I'll review, our outlook for the second quarter of 2024.
Speaker Change: Based on trends in the first quarter and April activity to date, our forecast anticipates that the second quarter will continue to be challenging in North America and Europe.
Speaker Change: Our forecast for Q2 also anticipates ongoing stable, but low levels of permanent recruitment activity.
Speaker Change: That said, we are forecasting earnings per share for the second quarter to be in the range of $1 24 to $1 34, which excludes a forecasted unfavorable impact of <unk> related to the final quarter impact of the runoff of the pro Serbia, Germany business.
John Thomas McGinnis: RPO revenue declines in the U.S. reflect a relatively stable level of permanent hiring programs in the first quarter compared to the fourth quarter. The U.S. MSP business saw a slight revenue decline, representing an improvement from the fourth quarter.
Speaker Change: Guidance range also includes an unfavorable foreign currency impact of <unk> <unk> per share and our foreign currency translation rate estimates are disclosed at the bottom of the guidance slide which includes the Argentine peso, which is impactful.
John Thomas McGinnis: Our outplacement activity within our right management business drove strong year-over-year revenue increases. In the second quarter of 2024, we expect a slightly improved revenue decline for our overall U.S. business as compared to the first quarter decline, as we continue to anniversary the more significant pullback in demand in the year-ago period. Southern Europe revenue comprised 45% of the consolidated revenue in the quarter. Revenue in Southern Europe was $2 billion, representing a 5% decrease in constant currency. OUP for our Southern Europe business was $70 million in the quarter, and OUP's margin was 3.5%. France revenue comprised 56% of the Southern Europe segment in the quarter and decreased 5% in days adjusted constant currency.
Speaker Change: Our constant currency revenue guidance range is between a decrease of 2% and 6% at the midpoint is a 4% decrease.
Speaker Change: Although the impact of net dispositions was minor there are slightly more working days in the second quarter. This year contributing to about half a percentage additional decrease on an organic days adjusted constant currency basis.
Speaker Change: It still rounds to a 4% decrease at the midpoint.
Speaker Change: This represents a similar rate a decrease compared to the first quarter trend on the same basis.
Speaker Change: Excluding the Germany Pro Servier runoff business impact on the second quarter of 2024.
Speaker Change: Adjusted EBITDA margin is projected to be down 20 basis points at the midpoint compared to the prior year.
Speaker Change: We estimate that the effective tax rate for the second quarter will be 32, 5% on an adjusted basis, which reflects the overall mix effect of lower earnings from lower tax geographies and the current environment.
Speaker Change: As usual our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be $48 7 million.
John Thomas McGinnis: OUP for our France business was $33 million in the quarter, representing a decrease of 27% on a constant currency basis. OUP's margin was three percent. Activity to date in April 2024 is consistent with trends experienced in the first quarter. We are estimating the year-over-year constant currency revenue trend in the second quarter for France to be consistent with the first quarter trend. Revenue in Italy equaled $404 million in the first quarter, reflecting a decrease of 6% on a days-adjusted constant currency basis.
Speaker Change: Our guidance also does not include the impact of the noncash hyperinflationary balance sheet related currency translation adjustment for our Argentina business.
Speaker Change: And we will report that separately.
Speaker Change: I will now turn it back to you on us.
Speaker Change: Thanks Jack.
Speaker Change: History shows that investing in operational improvements during economic uncertainty can lead to greater resilience some faster growth in more favorable conditions.
Speaker Change: So the external environment remains dynamic our commitment to digital transformation and executing our diversification digitization and innovation strategy remains steadfast.
Speaker Change: The continued diversification of our services and product offerings and our global footprint has enabled us to capture new opportunities to help offset softening demand in certain regions and verticals.
John Thomas McGinnis: OUP equaled $27 million, and its OUP margin was 6.8%. We estimate that Italy will also have a slightly improved revenue trend in the second quarter compared to the first quarter in constant current. A Northern Europe segment comprised 20% of consolidated revenue in the quarter. Revenue of $870 million represented a 12% decline in constant current. As adjusted to exclude the runoff for the Soviet Germany business, OUP was $6 million, and its OUP margin was 0.7%. Our largest market in the Northern Europe segment is the UK, which represented 35% of segment revenues in the quarter. During the quarter, UK revenues decreased 13% on a days-adjusted constant currency basis.
Speaker Change: In Q1, our experience business saw increased demand in health care in the U S. Our manpower business saw solid demand in automotive and transportation in various European markets.
Speaker Change: Talent solutions, our career transition business in right management performed well, but our captain MSP business delivered improved trends from the prior quarter.
Speaker Change: Our manpower business clients continue to focus on hiring specialist skills at the intersection of technology and production.
Speaker Change: Well equipped to meet this growing need.
Speaker Change: Our manpower my path program, our experienced academies and our worldwide network dedicated talent agents and recruiters, we mentor coach and guide hundreds of thousands of people to Upskill and move up in their careers.
Speaker Change: My recent travels I saw those dynamics play out in a very tight labor market like Japan, where the value of our Upskilling services is a very important part of our value creation for our client companies and our ability to attract talent to the opportunities in the market.
On Digitization.
John Thomas McGinnis: This reflects a stable trend from the rate of decline in the fourth quarter on the same basis. We estimate a similar year-over-year revenue trend in the second quarter compared to the first quarter. In Germany, adjusted revenues decreased 8% in days adjusted constant currency in the quarter.
Speaker Change: To make good progress in our technology roadmap and are proud to lead the industry through the deployment of Power's fleet, our global cloud based platforms for front and back office.
Speaker Change: The first quarter, we reached a significant milestone with the opening of our global business Services Center in Porto, Portugal, a regional finance center to serve all of Europe, and a central component of our global strategy to standardize centralize and transform finance service delivery.
John Thomas McGinnis: As previously reported, the wind-down of our pro-service and managed services business in Germany was substantially completed in the previous quarter, and the final runoff of client activity will be completed in the second quarter of 2024. For the second quarter, we are expecting a slightly increased year-over-year revenue decline compared to the first quarter. The Asia-Pacific Middle East segment comprises 12% of total company revenue. In the quarter, revenues equaled $535 million, representing a decrease of 4% in constant currency.
Speaker Change: As follows our successful mature finance shared service center in Mexico City, serving Latin America.
Speaker Change: For 75 years manpower group has been committed to doing business the right way for our people our clients and the communities in which we operate.
Speaker Change: We know these high standards are valued by all who work with us.
Speaker Change: As AI advances, we're guided by our people first approach we have established a multi functional ethical AI committee that helps sustain front of AI related risks, while enabling us to innovate and pilot new approaches that create value for our people and our clients.
Speaker Change: In March our ethical leadership was once again recognized by Ethisphere as we were named <unk>.
Speaker Change: World's most ethical company for the 15th time.
Speaker Change: And I'd like to thank our teams around the world deliver standards create value for our clients and candidates and helped propel our strong ethical culture each day.
John Thomas McGinnis: OUP was $20 million, and OUP's margin was 3.7%. Our largest market in the APME segment is Japan, which represented 51% of segment revenues in the quarter. Revenue in Japan grew 10% on a days-adjusted constant currency basis.
Speaker Change: I would like to open the line for Q&A operator.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one.
Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
John Thomas McGinnis: We remain very pleased with the consistent performance of our Japan business, and we expect continued strong revenue growth in the second quarter. I'll now turn to cash flow and the balance sheet. In the first quarter, free cash flow was strong and represented $104 million during the quarter, which compares to $111 million in the prior year. At quarter end, day sales outstanding decreased about a day and a half to 55 days. During the first quarter, capital expenditures represented $12 million.
Speaker Change: Again to ask a question Thats Star 111 moment for questions.
Speaker Change: And our first question comes from Jeff Silber with BMO capital markets. Your line is open.
Jeffrey Marc Silber: Thanks, So much I was wondering if you can give us a little bit more color on intra quarter trends.
Jeffrey Marc Silber: And I know it's early in April, but anything you can tell us about what's been going on in the current quarter would be great.
Jeffrey Marc Silber: Sure. Jeff This is Jack I'd be happy to talk about that so I think as we've talked about in some of our larger markets activity levels. In April so far are pretty much aligned with what we've seen in the first quarter.
John Thomas McGinnis: See that in France, with our guide there pretty much in line with where we ended up in the first quarter overall.
John Thomas McGinnis: During the first quarter, we purchased 665,000 shares of stock for $50 million. As of March 31st, we have 3.9 million shares remaining for a purchase under the share program approved in August of 2023. Our balance sheet ended the quarter with cash of $605 million and total debt of $985 million. Net debt equaled $380 million a quarter.
Speaker Change: We've talked a lot about the U S. In our prepared remarks, and I would say in the U S. You see the benefit of Anniversarying and lapping the prior year declines.
Speaker Change: I'd say on an underlying basis.
Speaker Change: Stable results as you look stable activity levels as you look at the manpower and experience.
Speaker Change: <unk> as well.
Speaker Change: In April I would say that's the main thing I would say theres, a little bit of an Easter impact March over April in some markets like Italy, as well and in northern Europe, as well and I'd say over the course of the first quarter I think what we saw in many of our markets were stable trends.
John Thomas McGinnis: Our debt ratios at quarter-end reflect total growth debt to trailing 12-months adjusted EBITDA of $1.98 and total debt to total capitalization at 31%. Our debt and credit facilities remain unchanged during the quarter, as displayed in the appendix of the presentation. Next, I'll review our outlook for the second quarter of 2024. Based on trends in the first quarter and April activity to date, our forecast anticipates that the second quarter will continue to be challenging in North America and Europe.
Speaker Change: I'd say the month of March is a little tricky because of the Easter timing this year year over year, but I'd say, if you step back from that and take that a bit out of the equation I think what we saw was a lot of stable trends, we knew France was going to step down in the first quarter from the fourth quarter on an overall basis that came in.
Speaker Change: Line with our expectations and when we looked at activity levels. During the course of the quarter I think we're ending the quarter pretty much in line with where we were on a full quarter basis. Overall, so that's a little color on our largest markets I'd say, maybe maybe one more would be the U K, which was pretty stable as well.
John Thomas McGinnis: Our forecast for Q2 also anticipates ongoing stable but low levels of permanent recruitment activity. With that said, we are forecasting earnings per share for the second quarter to be in the range of $1.24 to $1.34, which excludes a forecasted unfavorable impact of $0.08 related to the final quarter impact of the runoff in the pro-Soviet Germany.
Speaker Change: UK has been stable for a few quarters now and as we look into activity levels into the second quarter, we're seeing a similar expectation as well.
John Thomas McGinnis: The guidance range also includes an unfavorable foreign currency impact of $0.07 per share, and our foreign currency translation rate estimates are disclosed at the bottom of the guidance slide, which includes the Argentine peso, which is impactful. Our Consequency Revenue Guidance Range is between a decrease of 2% and 6%, and at the midpoint is a 4% decrease. Although the impact of net dispositions is minor, there are slightly more working days in the second quarter this year, contributing to about half a percentage additional decrease on an organic days-adjusted constant currency basis.
Speaker Change: Alright, Thats really helpful. If I could step back and maybe a more of a macro quick question. It looks like in the U S.
Speaker Change: <unk> is probably going to keep interest rates higher for longer but if we look at the ECB they seem to be closer to making cuts if that does happen. How do you think that would impact your businesses in those different geographies.
Speaker Change: Sure.
Speaker Change: But just say, Jeff but of course, it's the.
Speaker Change: Central banks are deciding to lower the interest rates. They are acknowledging that the cooling effects of higher interest rates is coming to bear onto those economies and I think we are seeing that play out in Europe, where economic activity is slowing down labor markets.
John Thomas McGinnis: And this still rounds to a 4% decrease at the midpoint. This represents a similar rate of decrease compared to the first quarter trend on the same basis. Excluding the Germany pro servia runoff business impact in the second quarter of 2024, the adjusted EBITDA margin is projected to be down 20 basis points at the midpoint compared to the prior year. We estimate that the effective tax rate for the second quarter will be 32.5% on an adjusted basis, which reflects the overall mixed effect of lower earnings from lower tax geographies in the current environment.
Speaker Change: Our cooling and air cooling slightly faster than they are cooling here in the U S.
Speaker Change: So the idea then of course with dropping interest rates would be too.
Make sure that the economy lands softer ore starts accelerating again and when that happens our business of course will start to see the effects of that in improving demand.
Speaker Change: Alright, great. Thanks for the color.
Speaker Change: Thanks, Jeff.
Speaker Change: Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open.
Jonas Prising: As usual, our guidance does not incorporate restructuring charges or additional share purchases, and we estimate our weighted average shares to be $48.7 million. Our guidance also does not include the impact of the non-cash hyperinflationary balance sheet related currency translation adjustment for our Argentina business, and we will report that separately. I will now turn it back to Jonas.
Trevor Romeo: Hi, good morning, Thanks, so much for taking the questions.
Trevor Romeo: First one I had was just on the U S experienced business.
Trevor Romeo: Thinking about the overall labor market for it talent.
Trevor Romeo: What are you seeing now as far as kind of a supply and demand for the tightness of that labor market has there been any kind of additional slack coming in as the downturn has continued.
Trevor Romeo: Trying to get a sense for how quickly that business could snap back once a client confidence improves.
Speaker Change: Well thanks Trevor.
Jonas Prising: History shows that investing in operational improvements during economic uncertainty can lead to greater resilience and faster growth in more favorable conditions. But the external environment remains dynamic. Our commitment to digital transformation and executing our diversification, digitization, and innovation strategy remains steadfast. The continued diversification of our services and product offerings and our global footprint has enabled us to capture new opportunities to help offset softening demand in certain regions and countries.
Speaker Change: The market for it skills and the U S remains strong, but it's not as tight as it was and of course, not even close to as tight as it was immediately post pandemic, what we're seeing is.
<unk> weakness on the enterprise the large tech companies.
Speaker Change: Yeah.
Speaker Change: Being cautious in terms of their overall hiring and coming off a pandemic hiring boom.
Speaker Change: Convenience demand looks reasonable it is still weak, but it's stronger than the demand that we see from enterprise tech clients or enterprise clients at large.
Just as Jack just mentioned, what we've observed is a stabilization sequentially, which we take as an encouraging first sign up.
Jonas Prising: In Q1, our experienced business saw increased demand in healthcare IT in the US, and our manpower business saw solid demand in automotive and transportation in various European markets. Talent Solutions, our career transition business in rights management, performed well, while our captain MSP business delivered improved trends from the prior quarter. In our manpower business, clients continue to focus on hiring specialist skills at the intersection of technology and production. We're well-equipped to meet this growing need. Through our Manpower MyPath program, our experience academies, and our worldwide network of dedicated talent agents and recruiters, we mentor, coach, and guide hundreds of thousands of people to upskill and move up in their careers.
Speaker Change: Companies are looking for more specialized skills and we believe that as the outlook firms up and employers feel better about the economic outlook and see less uncertainty, but those trends are going to continue to improve.
Speaker Change: Okay. Thanks, that's helpful and then for a follow up just kind of curious on the level of I guess competition across some of your major markets at some of these lower levels of demand as the competitive environment is still generally rational are you seeing competitors try to grab share at all by kind of undercutting on pricing.
Speaker Change: I guess generally does it feel like you are.
Speaker Change: Gaining maintaining or losing share in some of your key markets.
Speaker Change: Overall, I think we would.
Speaker Change: Gauge ourselves as being with the market and competition remains intense but rationale Linda I think you can see this come through also in our staffing margin and our overall GP margins, which are holding up well. Despite the headwinds that we're seeing in particular in Europe.
Jonas Prising: In my recent travels, I saw those dynamics play out in a very tight labor market like Japan. But the value of our upskilling services is a very important part of our value creation for our client companies and our ability to attract talent to the opportunities in the market. On digitization, we continue to make good progress in our technology roadmap and are proud to lead the industry through the deployment of power-based cloud-based platforms for front and back offices.
Speaker Change: In North America. So it is always a competitive environment.
Speaker Change: Underlying reason for that stability of the rational part is that labor markets continued to be strong there's no doubt that labor market. It's our cooling both in Europe and in North America, but there are still tight from a historical perspective and that means it's still not easy to find the talent that you.
Jonas Prising: In the first quarter, we reached a significant milestone with the opening of our global business services center in Porto, Portugal, a regional finance center to serve all of Europe, an essential component of our global strategy to standardize, centralize, and transform finance service delivery, as follows our successful, mature, finance-shared service center in Mexico City, serving Latin Americans for 75 years. ManpowerGroup is committed to doing business the right way for our people, our clients, and the communities in which we operate.
Speaker Change: Need you may be more judicious more surgical in your hiring you might may be more cautious in terms of how many people you want to bring on but employees are still looking for talent that you can also see that talent shortage survey that we do on a regular basis that employers are still finding it difficult to find the exact skill sets.
Speaker Change: They want exactly when they want them. So overall, it's rational and I think it remains competitive, but we can see pricing stability.
Speaker Change: All of our markets and Thats reflected in our staffing and overall GP margins.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Thank you. Our next question comes from Mark Marcon with Baird. Your line is open.
Jonas Prising: We know these high standards are valued by all who work here. As AI advances, we're guided by our people-first approach. We have established a multifunctional ethical AI committee that helps us stay in front of AI-related risks while enabling us to innovate and pilot new approaches that create value for our people and our planet. In March, our ethical leadership was once again recognized by Ethisphere as we were named the world's most ethical company for the 15th time.
Mark Steven Marcon: Hey, good morning, and thanks for taking my questions.
Mark Steven Marcon: A few different questions one really quick one.
Mark Steven Marcon: This firm.
Mark Steven Marcon: As a total percentage of GP.
Mark Steven Marcon: Including our Po, where does that come and check.
Speaker Change: Mark that came in at 16, 8% in the first quarter for us. So I know, we've talked about that in the previous quarter, where it came down a bit what youre seeing in the first quarter Mark is.
Speaker Change: Seasonally it's a lower staffing quarter for us just in terms of GP dollars typically so.
Jonas Prising: And I'd like to thank our teams around the world who live our standards, create value for our clients and candidates, and help propel our strong ethical culture even further. Now, I'd like to open the line to Q&A. Operator?
Speaker Change: <unk> actually sequentially actually improved very very slightly $1 perspective, so you're seeing a little bit of a higher mix.
Work in at that ratio of $16, 88%.
Speaker Change: Okay, Great and then just.
Speaker Change: A couple of very short numbers questions just with regards to.
Operator: Thank you. If you'd like to ask a question, please press star 1. If your question hasn't been answered and you'd like to remove yourself..., please press star 11 again.
Speaker Change: Experience in terms of the trends.
Speaker Change: What is how much were the I T.
Speaker Change: Healthcare projects in.
Operator: Again, to ask a question, that's star 1-1. One moment for questions. And our first question comes from Jeff Silber with BMO Capital Markets. Your line is open. Thanks so much. I was wondering if you could give us a little bit more color on intracorner trends, and I know it's early in April, but anything you can tell us about what's been going on in the current quarter? Sure, Jeff. This is Jack
Speaker Change: Particularly in the U S and if.
Speaker Change: If we strip that out how did things look and would you expect things to.
Speaker Change: Still be stable to improving.
Speaker Change: If we strip out those staffing projects unless those are sustainable.
Speaker Change: New promising line of business.
Speaker Change: Yeah. Thanks, Mark I think on the U S experienced business, yes, we did call out that health care it.
Speaker Change: We did see.
Speaker Change: A good deal of work in the first quarter I would attribute that to some of those.
John Thomas McGinnis: I'd be happy to talk about that. So, I think, as we've talked about in some of our larger markets, activity levels in April so far are pretty much aligned with what we've seen in the first quarter. And you see that in France, with our guide there, pretty much in line with where we ended up in the first quarter overall. And we've talked a lot about the U.S. in our prepared remarks, and I'd say in the U.S., you see the benefit of anniversarying and lapping the prior year declines, but I'd say, on an underlying basis, stable results as you look, stable activity levels as you look at the So, in April, I'd say that's the main thing. I would say there's a little bit of an Easter impact, March over April, in some markets like Italy, as well as in Northern Europe as well.
Speaker Change: Those go live.
Speaker Change: Works in the hospital system, where deferred during 2023, so we did see a start of that activity in the first quarter.
And we did call it out as a bit project related because I wouldn't anticipate that that level of activity will continue in that in that specific space.
Speaker Change: In future quarters here a bit of that was considering that catch up if you will but what I would say maybe broader to your point is I think we are seeing generally relatively stable trends in the U S experienced business at lower levels of course based on what we experienced last year and I think to be honest this point.
Speaker Change: When we look at enterprise tax still very sluggish in terms of demand, but expect convenience holding up a bit better so.
John Thomas McGinnis: And I'd say, over the course of the first quarter, I think what we saw in many of our markets were stable trends. And I would say the month of March is a little tricky because of the Easter timing this year, year over year, but I'd say, if you step back from that and take that a bit out of the equation, I think what we saw was a lot of stable trends. We knew France was going to step down in the first quarter.
Speaker Change: As we step back and we look forward I would expect.
Speaker Change: The underlying stable trends that we've talked about we'll continue we're not seeing a big step up in enterprise.
Speaker Change: And we're seeing convenience kind of continuing at current levels and as we go forward.
Speaker Change: We start to anniversary the second quarter of last year was the.
Speaker Change: Biggest decline of the year and so we will anniversary that and that will help.
John Thomas McGinnis: From the fourth quarter, on an overall basis, that came in in line with our expectations. And when we looked at activity levels during the course of the quarter, I think we're ending the quarter pretty much in line with where we were on a full quarter basis overall. So, that's a little color on our largest markets. I'd say maybe one more would be the UK, which was pretty stable as well.
Speaker Change: On the year over year trend as we as we go into the second quarter. So that's how I would say at this point kind of in line with what <unk> said no inflection point at this point, but what we are seeing stability.
Speaker Change: Great.
Speaker Change: If I could just if I could ask a couple of kind of bigger picture questions.
Speaker Change: One with regards to just kind of the U S.
John Thomas McGinnis: The UK's been stable for a few quarters now, and as we look into activity levels into the second quarter, we're seeing a similar expectation as well. All right, that's really helpful. If I could step back and maybe ask a more of a macro question, you know, what does it look like in the U.S.
Speaker Change: Predominantly the manpower business when we when we think about like what's happened with regards to.
Speaker Change: Higher wage rates, particularly in certain states that have come through and then thinking about.
Speaker Change: All the various schemes opportunities that are out there that are available to individuals.
Speaker Change: Are you seeing just in terms of.
Speaker Change: The quality of the people that you can place.
Speaker Change: And what is their what's the productivity level or how are our clients responding to these higher wage rates.
Jonas Prising: Well, it's hard to say, Jeff, but of course, it's the... Central banks are deciding to lower interest rates. They're acknowledging that the cooling effects of higher interest rates are coming to bear on those economies. And I think we are seeing that play out in Europe, where economic activity is slowing down, labor markets are cooling, and they're cooling slightly faster than they are cooling here in the U.S. So the idea then, of course, with dropping interest rates, would be to make sure that the economy lands softer or starts accelerating again. And when that happens, our business, of course, will start to see the effects of that in improving demand. All right. Great. Thanks, Jeff.
Speaker Change: What are your thoughts there.
Speaker Change: So mark I think the.
Speaker Change: What we're seeing in the manpower business is clearly the headwinds.
Speaker Change: From a manufacturing sector Thats had a tough time now frankly for a number of years and we've seen that reflected in <unk>.
Speaker Change: PMI, but from a demand perspective, what we see playing out in the U S is it really still.
Speaker Change: The effect of the pandemic and the post patent that makes so the dislocation in the U S market joined the Covid.
Speaker Change: <unk> was much bigger than it was in any other place across the world and so lots of workers left left their workplaces. Then they came back and employers who are really faced with shortages that were scrambling to fill in some cases such as in the tech sector.
Speaker Change: They really engaged in a pandemic boom, but every category employer was struggling trying really hard to find the talent that they needed to recover and then take advantage of the.
Operator: Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open. Hi, good morning. Thanks so much for taking the questions. The first one I had was just on the U.S. Expirus business.
Speaker Change: The post pandemic demand search for products and services.
Speaker Change: We're seeing now though is that employers are still holding on to their workforce theyre much more surgical in their hiring of temporary staff and as an industry. We're at the leading edge of a cooling labor markets. What's unusual in this cycle is the length between the decline in the temporary.
Jonas Prising: Thinking about the overall labor market for IT talent. What are you seeing now as far as supply and demand, or the tightness of that labor market? Has there been any kind of additional slack coming in as the downturn has continued? Just kind of trying to get a sense for how quickly that business could snap back once client confidence improves. Thanks, Trevor.
Speaker Change: <unk> industry and a more rapid cooling.
Speaker Change: To a limited degree we still believe off the broader labor market and that we can just reflect on the very strong labor market numbers. We saw at the end of March.
Speaker Change: But we still think that is going to play out. So employers are cautious now they are still navigating in uncertain environments.
Jonas Prising: The market for IT skills in the U.S. remains strong, but it's not as tight as it was and, of course, not even close to as tight as it was immediately post-pandemic. What we're seeing is continued weakness in the enterprise, so large tech companies are still being cautious in terms of their overall hiring and coming off a post-pandemic hiring boom. But convenience demand looks reasonable.
Speaker Change: High inflation.
Speaker Change: But in terms of wages the labor markets are still so tight that employers understand they are.
Speaker Change: Having to pay those wages, which of course benefits workers that have real wage increases, which in turn continues to drive good consumption in the U S economy, which also then may fuel some additional inflation.
Speaker Change: But above all provides purchasing power to the consumers. So all in all I would say we say we think this is playing out as we would normally expect during a cycle, but with the post pandemic anomaly of a slow motion.
Jonas Prising: It is still weak, but it's stronger than the demand that we see from enterprise tech clients or enterprise clients at large. And just as Jack just mentioned, what we've observed is a stabilization sequentially, which we take as an encouraging first sign. Companies are looking for more specialized skills, and we believe that as the outlook firms up and employers feel better about the economic outlook and see less uncertainty, those trends are going to continue to improve. Okay, thanks, Jonas. That's helpful.
Speaker Change: Move of a cooling labor market.
But the overall trend.
Speaker Change: The evolution of technology is always moving towards a higher skilled workforce.
Speaker Change: The expectations, then of increasing productivity levels of the highest skilled workforce and I think thats a general trend that we've seen over a number of years and now it's not really any different.
Speaker Change: Great and then.
Speaker Change: You've talked about your AI initiatives can you talk just a little bit more about like.
Speaker Change: Whats.
Speaker Change: Now that we have.
Speaker Change: <unk>.
Jonas Prising: And then for a follow-up, just kind of curious about the level of, I guess, competition across some of your major markets. At some of these lower levels of demand, you know, is the competitive environment still generally rational? Are you seeing competitors try to grab share at all by kind of undercutting on pricing?
Speaker Change: Basically a year anniversary in terms of GPT and exploring it.
Speaker Change: When you think out two to three years, how much more efficient can can your operations become.
Speaker Change: Not just in terms of the shared services, but also in the field from a recruiting placement matching perspective.
Speaker Change: Oh that is actually one of the things we are quite excited about because as you know we've been on a multiyear journey of digital transformation and although I'm certainly not an expert in AI.
Jonas Prising: I guess, generally, does it feel like you're gaining, maintaining, or losing share in some of your key markets? Overall, I think we would gauge ourselves as being in markets, and competition remains intense but rational. And I think you can see this come through in our staffing margin and our overall GP margins, which are holding up well despite the headwinds that we're seeing, particularly in Europe and in North America. So it is always a competitive environment, but the underlying reason for that stability and the rational part is that labor markets continue to be strong. There's no doubt that labor markets are cooling both in Europe and in North America, but they're still tight from a historical perspective. And that means it's still not easy to find the talent that you need.
Speaker Change: Turning as much as I can and then what I what I have learned is that you cannot supply.
Speaker Change: Unless you have a modern technology infrastructure and we believe that we have.
Speaker Change: A very.
Speaker Change: Modern technology infrastructure that we've implemented and continue to implement.
Speaker Change: And in this year as well that is able to leverage not only back office and shared services efficiencies using automation for repetitive tasks, but is also providing our recruiters and our <unk>.
Speaker Change: Salespeople with the best tools that they need to do their jobs better as well as providing superior cabinet had experiences to the people that we're recruiting and manpower people recruiting an experienced or in talent solutions. So we think the impact of.
Speaker Change: AI can be quite substantial I would say, it's early days yet despite everything that we read in the papers the actual effects of AI.
Jonas Prising: You may be more judicious, more surgical in your hiring. You may be more cautious in terms of how many people you want to bring on, but employers are still looking for talent. And you can also see, in the talent shortage surveys that we do on a regular basis, that employers are still finding it difficult to find the exact skill sets that they want exactly when they want them. So overall, it's rational, and I think it remains competitive, but we can see pricing stability across all of our markets, and that's reflected in our staffing and overall GP margins. Great. Thank you very much.
Speaker Change: Our yet to manifest themselves in a business environment.
Speaker Change: As an anecdote the.
Speaker Change: Highest level of recruitment of AI skills.
Speaker Change: The counter intuitively, maybe but maybe not is coming from the financial services sector, which of course is a massive use of technology and continuing to make significant investments.
Speaker Change: So AI will give us great opportunities and we think we in particular are extremely well placed because we are the only company or industry that is leveraging global platforms across all of our major geographies. One instance platforms. So once we have AI and <unk>.
Operator: Thank you. Our next question comes from Mark Marcon with Baird. Your line is open.
Speaker Change: Slide to a particular geography, we can quickly transfer those learnings into other geographies because we're all operating in the same system.
John Thomas McGinnis: Hey, good morning, and thanks for taking my questions. A few different questions. One really quick one: this firm has a total percentage of GP, including RPO. Where does that come in, Jack?
Speaker Change: I appreciate the answers thank you.
Speaker Change: Thanks Mark.
Speaker Change: Thank you. Our next question comes from Josh Chan with UBS. Your line is open.
Joshua K. Chan: Hi, good morning.
John Thomas McGinnis: Mark, that came in at 16.8% in the first quarter for us. So I know we've talked about that in the previous quarter where it came down a bit. What you're seeing in the first quarter, Mark, is, seasonally, it's a lower staffing quarter for us just in terms of GP dollars. So PERM actually, sequentially, actually improved very, very slightly from a dollar's perspective. So you're seeing a little bit of a higher mix, working in at that ratio of 16.8%.
Joshua K. Chan: And Jack Thanks for taking my questions.
Joshua K. Chan: You mentioned that there is no restructuring charge in the quarter, which I think it's the first time in Ohio and so on.
Joshua K. Chan: Is that timing related or should we read that to suggest that you're satisfied with your organized in the organizational structure for the first time in a number of quarters. Thank you.
Speaker Change: Thanks, Josh, Yes, I'd be happy to give a little more color on that we were pleased not to have restructuring charges. We look at restructuring charges very seriously and when we do restructuring charges. They have to have a sustainable permanent savings as part of the business case for those actions.
John Thomas McGinnis: Okay, great. And then just a couple of very short numbers questions, just with regard to, And I'm going to ask you, you know, just to kind of go back to the spirit in terms of the trend. To what extent, how much were the IT health care projects, and particularly in the U.S.?
Speaker Change: And following 2023, we talked a lot about that and certainly we've taken.
Speaker Change: Significant actions in 'twenty, three and at this stage.
Speaker Change: Really I think we feel like we've got the right balance.
Speaker Change: I think as we reflect on activity levels, you've heard us talk a lot about stability, we're not seeing further dramatic step downs in any of our major markets and so with that I think we feel like we have made.
John Thomas McGinnis: And, you know, if we stripped that out, how did things look, and would you expect things to still be stable or improving if we stripped out those IT staffing projects? new promising line of business. No, thanks, Mark.
Speaker Change: We made appropriate adjustments based on these current trends and we will continue to monitor that going.
John Thomas McGinnis: I think in the U.S. experience business, yeah, we did call out healthcare IT. We did see a good deal of work in the first quarter. I would attribute that to some of those, you know, those go live works in the hospital system were deferred during 2023. So we did see a spurt of that activity in the first quarter.
Speaker Change: Forward. So if the environment changes significantly then of course, we will take action and we will do what we need to do to preserve margin.
Speaker Change: But we are very very focused on being ready for the upturn and I think we feel that we've made the appropriate.
Speaker Change: Adjustments and I think we've balanced that we're very focused on ensuring we have the right sales capabilities in the markets currently.
John Thomas McGinnis: But what I would say, maybe broader to your point, is I think we are seeing generally relatively stable trends in the U.S. experience business at lower levels, of course, based on what we experienced last year. And to Jonas' point, I think when we look at enterprise tech, it's still very sluggish in terms of demand, but convenience is holding up a bit better. And as we go forward, you know, we start the anniversary. The second quarter of last year was, you know, the biggest decline of the year. And so we will celebrate that.
Speaker Change: That will be the way we continue to look at this going forward. So.
Speaker Change: And I think the other item in terms of what we did bring fence was pro survey of Germany.
Speaker Change: As we said that that actually is going.
Speaker Change: In line with our expectations slightly better actually in the first quarter, a little bit a little bit lower than we anticipated in terms of.
Speaker Change: Those charges and you can see in the second quarter were estimating actually a lower impact on that run off as we go into the second quarter and then it'll be completed so that will be and you can see that in the GP margin trend that I gave as well, but the benefits starting to come through.
John Thomas McGinnis: And that will help a bit on the year-over-year trend as we go into the second quarter. So that's how I would say it at this point. Kind of in line with what Jonas said.
John Thomas McGinnis: No inflection point at this point, but we are seeing stability. Great. And then, Jonas, if I could ask a couple of, you know, kind of bigger picture questions, one with regard to just kind of the U.S., predominantly the manpower business, when we think about what's happened with regard to higher wage rates, particularly in certain states that have come through, and then think about, you know, all the various gig opportunities that are out there that are available to individuals. What are you seeing just in terms of, you know, the quality of the people that you can place? And what is their, what's their productivity level?
Speaker Change: As that business fully exits and so I'd say, that's the way to think about restructuring and some of the one off items that we've talked about.
Speaker Change: Perfect that's encouraging thank you Jack.
Speaker Change: And then I just wanted to ask you about the confidence behind the improving rate of decline in the U S. I guess, how much does that depend on experience recognizing that there were some projects in Q1, perhaps but just wanted to get some color in terms of.
Speaker Change: Your confidence around trends continuing to get better in the U S. Thank you.
Speaker Change: Overall, we think the market is.
Speaker Change: Appears to be stabilizing not only in <unk>, but across all of our brands.
Speaker Change: The same for manpower and talent solutions, but we've seen our <unk> stabilized at a lower level. We've seen are attached in MSP business and talent solutions actually improve a bit and of course right management without placement.
Jonas Prising: How are clients responding to these higher wage rates? What are your thoughts there? So Mark, I think what we're seeing in the manpower business is clearly the headwinds from a manufacturing sector that's had a tough time now, frankly, for a number of years. And we've seen that reflected in PMI. But from a demand perspective, what we see playing out in the U.S. is really still a effect of the pandemic and the post-pandemic period. So the dislocation in the U.S. market during the COVID pandemic was much bigger than it was in any other place across the world.
Speaker Change: <unk> is tracking.
Speaker Change: <unk> well, although not accelerating so that gives us an idea but.
Speaker Change: As an industry and from our perspective looking at where we're positioned.
Speaker Change: If things stay the way they are the trends should remain stable and that's what we've guided to in the second quarter.
Jonas Prising: And so lots of workers left their workplaces, then they came back, and employers were really faced with shortages that they were scrambling to fill. In some cases, such as in the tech sector, they really engaged in a pandemic boom, but every category of employer was struggling really hard to find the talent that they needed to recover and then take advantage of the post-pandemic demand surge for products and services. What we're seeing now, though, is that employers are still holding on to their workforce. They're much more selective in their hiring of temporary staff.
Speaker Change: Great. Thank you Eunice and thank you both for your time stuck in the second quarter.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.
Speaker Change: Hi, This is Anthony on for Manav. Thanks for taking my question Jack and Jonas.
Anthony: I wanted to just see you mentioned in the call that.
Anthony: Continued diversification going on within your services and product offerings.
Anthony: That would help offset softening demand in certain regions and vertical I wanted to just get.
Speaker Change: Thank you John.
Speaker Change: Vertical within regions you are seeing.
Speaker Change: Softening demand.
Speaker Change: Yes.
You broke up a little bit in the question, but I think I got the gist of your question is you've highlighted some areas in your prepared remarks, where you are seeing some strength and that's helping offset some of the broader weakness elsewhere, where it sounds like from a sector perspective, where do we have.
Speaker Change: Weakness and what I'd say there is.
Speaker Change: Trs is earlier comments I'd say manufacturing continues to be <unk>.
Speaker Change: Very sluggish ex automotive in Europe, So automotive in Europe has been solid we've talked about that previously.
Jonas Prising: And as an industry, we're at the leading edge of a cooling labor market. What's unusual about this cycle is the length between the decline in the temporary staffing industry and a more rapid cooling, to a limited degree, we still believe, of the broader labor market. You can just reflect on the very strong labor market numbers we saw at the end of March. But we still think that is going to play out.
Speaker Change: In Germany and holding up.
Speaker Change: In France, as well and in Italy, and some of those markets, but I'd say when you take auto aside manufacturing continues to be very very sluggish. So that's a big one I'd say the other big one that we've talked a lot about is enterprise Tech enterprise Tech continues to be.
Jonas Prising: So employers are cautious now. They are still navigating an uncertain environment, with high inflation. But in terms of wages, the labor markets are still so tight that employers understand they are having to pay those wages, which of course benefits workers that have real wage increases, which in turn continues to drive good consumption in the U.S. economy, which may then may fuel some additional inflation, but above all, it provides purchasing power to consumers.
Speaker Change: Very sluggish very cautious in terms of ongoing demand.
Speaker Change: And not really seeing much of a big inflection point, there and I think maybe the last one I'd just call out is finance.
Speaker Change: Finance the financial sector.
Speaker Change: Does a strength in the first half of 2023, while we've seen really starting in the second half of last year and into the first quarter or is this more cautious buying behavior in the financial sector.
Jonas Prising: So all in all, I would say, we think this is playing out as we would normally expect during a cycle, but with the post-pandemic anomaly of a slow motion move of a cooling labor market. But the overall trend with the evolution of technology is always moving towards a higher skilled workforce, and expectations then of increasing productivity levels of the highest skilled workforce. And I think that's a general trend that we've seen over a number of years and how it's not really any different.
Speaker Change: For staffing services and that continues.
Speaker Change: That's a little color in terms of.
Speaker Change: Where we're seeing some of that offset to some of the areas, where we have seen strength in again on the strength.
Speaker Change: Aerospace has been strong for us, particularly in France.
Speaker Change: Construction in certain markets has actually been.
Jonas Prising: And then, Jonas, you've talked about your AI initiatives. Can you talk just a little bit more about, like, what's, now that we've had, you know, basically a year anniversary in terms of chat GPT, you've been exploring it? When you think out two to three years, how much more efficient can your operations become, not just in terms of the shared services but also in the field from a recruiting placement matching perspective?
Speaker Change: Okay for us as well and as I mentioned earlier healthcare, we did see some good activity in the first quarter. Some project related activity in the first quarter in the U S.
Speaker Change: Got it thank you.
Speaker Change: This kind of thing.
Speaker Change: Demand currently for a scale thing wrong I know you mentioned that it's still early innings.
Speaker Change: So I think that was what kind of demand are you seeing in AI skills right, then I address that just.
Speaker Change: Previously.
Speaker Change: We're seeing an increase in demand for AI skills.
Speaker Change: I would also say that in the Grand scheme of things the volumes are very small interestingly, though what I found.
Jonas Prising: Well, that is actually one of the things we are quite excited about because, as you know, we've been on a multi-year journey of digital transformation. And although I'm certainly not an expert in AI, I'm learning as much as I can. And what I have learned is that you cannot apply AI unless you have a modern technology infrastructure.
Speaker Change: We look at when we when we see that the job ads.
Speaker Change: <unk>.
Speaker Change: Industry is looking.
Speaker Change: For AI skills, the financial services sector is the one but we see posting the most ads and posting the most orders for those for those skill sets, which might be one might think that this comes from the technology sector, but in fact, what we're seeing is that it's coming primarily from the financial services sector.
Jonas Prising: And we believe that we have a very modern technology infrastructure that we implemented and will continue to implement this year as well that is able to leverage not only back office and shared services efficiencies using automation for repetitive tasks, but also provide our recruiters and our salespeople with the best tools that they need to do their jobs better, as well as provide superior candidate experiences to the people that we're recruiting in manpower, people we're recruiting in experience, or in talent solutions. So we think the impact of AI can be quite substantial. I would say it's early days yet, and despite everything that we read in the papers, the actual effects of AI are yet to manifest themselves in a business environment.
Speaker Change: Which of course is running.
Speaker Change: <unk> technology.
Speaker Change: Platforms and they they are looking for the AI skills, but I would I would position that though within the context of from an overall demand perspective, although these are difficult skills defined and they are increasing at a fast rate to the overall size of the demand is still small.
Speaker Change: Yeah.
Speaker Change: Got it thank you.
Speaker Change: Thank you. Our next question comes from Tobey Sommer with tourists Securities. Your line is open.
Speaker Change: Thanks.
Tobey O'Brien Sommer: Wanted to ask you about.
Tobey O'Brien Sommer: Your productivity improvements and investment initiatives in the <unk>.
Tobey O'Brien Sommer: Packed on SG&A percentages demand rebounds, maybe you could think about it in the context of <unk>.
Jonas Prising: As an anecdote, the highest level of recruitment for AI skills, counterintuitively maybe, but maybe not, is coming from the financial services sector, which, of course, is a massive user of technology and continuing to make significant investments. So AI will give us great opportunities, and we think we in particular are extremely well-placed because we are the only company or industry that is leveraging global platforms across all of our major geographies, one- So once we have AI applied to a particular geography, we can quickly transfer those learnings to other geographies because we're all operating in the same system.
Tobey O'Brien Sommer: Would you be able to achieve a different SG&A percentage at the recent peak in revenue in 2021 around $21 billion.
Tobey O'Brien Sommer: Any change in complexion of those.
Tobey O'Brien Sommer: Those two pieces.
Tobey O'Brien Sommer: Again, I'm kicking out several years when demand rebounds, when we get back there.
Speaker Change: Yes, Thanks, Tobey for that question I'd be happy to talk to that so.
Speaker Change: The answer is definitely we would expect to see some really good improvements in our efficiency ratio, so whether youre looking at SG&A as a percentage of GP or revenues, but I'd say GP probably is the most relevant one when you look at pre pandemic.
Operator: I appreciate the answers. Thank you. Thanks, Mark. Thank you. Our next question comes from Josh Chan with UBS. Your line is open. Hi, good morning, Jonas and Jack.
Speaker Change: Nick.
Speaker Change: <unk> of its agency and certainly where we've been in recent years, you've seen the deleveraging play out but based on the work we're doing and to your point, we have and we talked a bit about it in our prepared remarks.
John Thomas McGinnis: Thanks for taking my questions. You mentioned that there was no restructuring charge in the quarter, which I think is the first time in a while. And so, is that timing related, or should we read that to suggest that you're satisfied with your organizational structure for the first time in a number of quarters? Thank you. Thanks, Josh. Yeah, I'd be happy to give a little more color on that. But no, we were pleased not to have restructuring charges.
Speaker Change: We are progressing quite nicely and our transformation programs. So we talked a bit about the shared service center. The global business Center. We are opening up we have opened up in the first quarter in Porto Portugal.
These types of things with our cloud enabled financial structure are going to be driving significant efficiencies in our cost structure going forward and thats on the heels of already significant progress in the front office power suite implementations that will come through in a more meaningful way when volumes return from our recruiter productivity.
John Thomas McGinnis: We look at restructuring charges very seriously, and when we do make restructuring charges, they have to have sustainable permanent savings as part of the business case for those actions. And, you know, following 2023, we talked a lot about that, and certainly, we've taken significant actions in 23. And at this stage, you know, really, I think we feel like we've got the right balance. You know, I think as we reflect on activity levels, you've heard us talk a lot about stability. We're not seeing further dramatic step-downs in any of our major markets.
Speaker Change: Perspective, so when you add those together.
Speaker Change: Would expect.
Speaker Change: A significant improvement in SG&A as a percentage of GP when you see those programs really start to.
Speaker Change: Kick in when volumes return back to previous levels to your point and ongoing efficiencies. So that will drive meaningful improvement in those ratios and youll see that drop down to EBITDA margin as well and we've talked about that in the past so there'll be a bit of a.
John Thomas McGinnis: And so with that, I think we feel like we have made appropriate adjustments based on these current trends, and we'll continue to monitor that going forward. So if the environment changes significantly, then of course, we will take action, and we'll do what we need to do to preserve margin. But we are very, very focused on being ready for the upturn, and I think we feel that we've made the appropriate adjustments. And I think we've balanced that.
Speaker Change: A double impact Youll see the falloff of some of that investment spend as we continue through these programs, but then youll see the efficiencies come through which will be meaningful as well and all of that will help us improve our EBITDA one of the key components of our roadmap to EBITDA margin improvement.
Speaker Change: And youll see that come through in the ratios as those programs continue.
Speaker Change: Thanks.
Speaker Change: I was hoping you could comment on your capital deployment strategy, because we're a couple a couple of years into softening demand and historically when.
John Thomas McGinnis: We're very focused on ensuring we have the right sales capabilities in the markets currently, and that will be the way we continue to look at this going forward. So, you know, and I think the other item in terms of what we did ring-fence was pro-Soviet Germany.
Speaker Change: You kind of as a management team have gotten shines the coast is clear and demand signals are improving you typically do.
Speaker Change: Deploy a little bit more capital at that time in the form of acquisitions is that still the playbook in.
Speaker Change: What areas or criteria may you use to select acquisitions.
Speaker Change: Yes, Tobey I think great question I'd say overall I think the main punchline is our strategy has not changed and you are right. We have been very careful.
John Thomas McGinnis: You know, as we said, that actually is going in line with our expectations, slightly better in the first quarter, a little bit lower than we anticipated in terms of those charges. And you can see in the second quarter, we're estimating actually a lower impact on that runoff as we go into the second quarter. And then it will be completed.
Speaker Change: But where we have made acquisitions.
Speaker Change: Has been on the Resourcing side, and Thats worked out very well for us as we think about the acquisition. We did in 2021 that that is performing very well Jan has talked about the convenience component of <unk>.
John Thomas McGinnis: So that will be, and you can see that in the GP margin trend that I gave as well, the benefits starting to come through as that business fully exits. And so I'd say that's a way to think about restructuring and some of the one-off items that we've talked about.
Speaker Change: In the U S. So performing better than the enterprise.
Speaker Change: Sector. So that continues to be an area for us.
Speaker Change: As we look forward and in the current environment Youre right.
Speaker Change: Current environment has not been very conducive.
Jonas Prising: That's encouraging. And then I just wanted to ask about your confidence behind the improving rate of decline in the US. I guess, how much does that depend on experience, recognizing that, you know, there were some projects in Q1 perhaps, but yeah, just wanted to get some color in terms of your confidence around trends continuing to get better in the US. Thank you.
Speaker Change: Two.
Speaker Change: Acquisitions, candidly and what you've seen us do in the meantime is return excess cash via.
Speaker Change: Our share repurchase program and the dividend continues to be a high priority for us as well so.
Speaker Change: You should expect that that approach to continue and again.
Speaker Change: We are very careful when it comes to acquisition. So we do a very very detailed analysis, we look at many different filters, most importantly, cultural fit and those type of items, but.
Jonas Prising: Overall, we think the market appears to be stabilizing, not only in Xperia but across all of our brands. So the same for Manpower and in Talent Solutions. We've seen RPO stabilize at a lower level, we've seen our tap into MSP business in Talent Solutions actually improve a bit, and, of course, right management without placement is tracking well, although not accelerating. So that gives us an idea that, you know, as an industry and from our perspective looking at where we're positioned, that if things stay the way they are, the trends should remain stable, and that's what we've guided to in the second quarter. Great. Thank you, Jonas, and thank you both for your time. Good luck in the second quarter.
Speaker Change: But I would say that is something that more realistically would be something to think about as the environment starts to improve going forward.
Speaker Change: But I'd say, that's that's kind of where we are currently.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Andrew Steinman with Jpmorgan. Your line is open.
Andrew Charles Steinerman: Hi, Good morning, this is stepping in for Andrew.
Andrew Charles Steinerman: Wanted to ask.
Speaker Change: Not to pay or obviously the U S temporary help in the Pls Hey, Gary had been declining for about 10 years, now which is rather unusual.
Operator: Thanks. Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open. Princy, you broke up a little bit in the question, but I think I got the gist of your question: you've highlighted some areas in your prepared remarks where you're seeing some strength, and that's helping offset some of the broader weakness elsewhere. Where, from a, it sounds like from a sector perspective, do we have weakness? And what I'd say there is... To Jonas' earlier comments, I'd say manufacturing continues to be very sluggish, ex-automotive in Europe. But, the car industry in Europe has been solid.
Andrew Charles Steinerman: I guess, what do you think the shape of the recovery will be for manpower less staffing industry in the U S.
Andrew Charles Steinerman: Unusual dynamic.
Speaker Change: Thanks, Stephanie Yes, no as you say, we agree that 17 consecutive months, a temp worker declines in the U S without a recession or a significantly cooling economy is frankly unprecedented if you add the preceding six months of declining growth that's 23 months.
Speaker Change: A declining.
Speaker Change: Declining growth in our industry in the U S. So as I mentioned earlier, we believe that there is a lag effect that is distorted this time by the pandemic and the post pandemic hiring where employers today are really holding onto their workforces. They are.
John Thomas McGinnis: We've talked about that previously in Germany and holding up in France as well and in Italy and some of those markets. But I'd say when you take the car aside, manufacturing continues to be very, very sluggish. So, that's a big one.
Speaker Change: Sort of being and creating the flexibility by reducing the use of temporary staff increasing as you saw on the BLS numbers.
Speaker Change: Last month the <unk>.
John Thomas McGinnis: I'd say the other big one that we've talked a lot about is enterprise tech. Enterprise tech continues to be very sluggish, very cautious in terms of ongoing demand, and not really seeing much of a big inflection point there. And I think maybe the last one I'd just call out is finance.
Speaker Change: <unk> of part time work. So they are pulling just about every measure that they can to improve the flexibility without touching their permanent payrolls.
Speaker Change: A more significant way.
Speaker Change: Given the strength of the economy and if we assume that there is there is not a full blown recession. It's.
John Thomas McGinnis: The Financial Sector was a strength in the first half of 2023. What we've seen really starting in the second half of last year and into the first quarter is just more cautious buying behavior in the financial sector for staffing services, and that continues. So that's a little color in terms of where we're seeing some of that offset by some of the areas where we have seen strength, and again, on the strength, aerospace has been strong for us, particularly in France, construction in certain markets has actually been okay for us as well, and as I mentioned earlier, healthcare IT, we did see some good activity in the first quarter, some project-related activity in the first quarter in the U.S.
Speaker Change: It is likely that employers will continue to remain cautious until they feel that the uncertainties that they are cautious about clear up to some degree and at that point. We believe we will see a very good return to the us fall that temporary staff cause temporary.
Speaker Change: <unk> is a fantastic way to provide flexibility for any employer across industries, and especially in an uncertain environment and many of those workers regardless.
Speaker Change: Areas skill levels, then also become integrated into the employers payrolls through conversions over time, and we've seen strong conversion levels occur.
Speaker Change: Today, the strength of that rebound and of course, Stephanie it's very difficult to estimate because it's really a question of what's going to happen to the overall economy.
John Thomas McGinnis: I think that was, what kind of demand are you seeing in AI skills? Right, and I addressed that just previously, that we're seeing an increase in demand for AI skills, but I would also say that in the grand scheme of things, the volumes are very small. Interestingly, though, what I found, what we look at when we see the job ads and which industry is looking for AI skills, the financial services sector is the one where we see posting the most ads and posting the most orders for those skill sets, which might be, one might think that this comes from the technology sector, but in fact, what we're seeing is that it's coming primarily from the financial services sector, which of course is running massive technology platforms, and they are looking for the AI skills.
Speaker Change: And what is what is the snapback right now the global growth scenario is highly dependent on U S economic growth, which is one of the highest in the world and of course being the major economy.
Sort of setting the tone for everyone else. So we are pulling along the growth at a global level.
Speaker Change: Right now.
Speaker Change: But we think when the clouds lift and in particular for us from a manpower perspective, the manufacturing sector starts to get some more.
Speaker Change: More traction that the enterprise on the tech side.
Speaker Change: Really start to activate the postponed and delayed technology transformation projects, we think both from a manpower perspective and experience perspective, and then also from a talent solutions perspective that we will see very good evolution.
Speaker Change: All of those services, it's just that right now our industry is bearing the brunt of all of the slowing and you can't really see it in the broader BLS numbers, but essentially we feel this is a cyclical downturn distorted by anomalies created by the pandemic and eventually this will.
Speaker Change: Sort of flatten out and that was therefore pleased to see the stabilization not only in the U S and UK now several more countries are two other big operations, France and Italy.
John Thomas McGinnis: But I would point out that, though, within the context of an overall demand perspective, although these are difficult skills to find, and they're increasing at a fast rate, the overall size of the demand is still small. Thank you. Our next question comes from Tobey Sommer with Truist Securities. Your line is open.
Speaker Change: <unk> will also stabilize into our second quarter and that gives us the platform to to hope for.
Speaker Change: Recovery that will that manifest itself in to increased demand and improved numbers for all of our brands.
John Thomas McGinnis: Thanks. Wanted to ask you about your productivity improvements and investment initiatives and the impact on SG&A percentages, demand rebounds. Maybe think about it in the context of whether you would be able to achieve a different SG&A percentage. at the recent peak in revenue in 2021, around 21 billion, any change in the complexion of those two pieces? Again, I'm thinking, you know, out several years when demand rebounds, and we get back Yes, thanks, Tobey, for that question.
Speaker Change: Okay, Great I really appreciate the perspective, thank you.
Speaker Change: Thanks, Stephanie.
Speaker Change: Thank you. Our next question comes from Stephanie more with Jefferies. Your line is open.
Hi, good morning, Thank you.
Stephanie Lynn Benjamin Moore: Actually it looks like the I forget follow up T. Then the last question.
Stephanie: Maybe kind of digging into that a little bit further so effectively from premier clearly pretty extensive knowledge of past cycles, and often the conversations youre, saying youre, having with customers. So I guess I'm, just trying to kind of to be a little more specific here. So in euro opinion, what needs to happen broadly to delta.
This period, and then stabilize Asia in Q2, the inflection to the positive side. So essentially what youre, saying is we do need to see that unemployment right first and the economy kind of take a step down or could this be different.
John Thomas McGinnis: I'd be happy to talk about that. So the answer is definitely that we would expect to see some really good improvements in our efficiency ratio. So whether you're looking at SG&A as a percentage of GP or revenues, but I'd say GP probably is the most relevant one.
Stephanie: Cycle different from prior I'd Love your thoughts there.
Speaker Change: Well I mean, it's already difference as Stephanie in terms of we've not seen.
John Thomas McGinnis: When you look at pre-pandemic levels of efficiency, and certainly where we've been in recent years, you've seen the deleveraging play out. But based on the work we're doing, and to your point, we have, and we talked a bit about it in our prepared remarks, we are progressing quite nicely in our transformation programs. We talked a bit about the shared service center, the global business center that we're opening up. We opened one in the first quarter in Porto, Portugal.
Speaker Change: The call down that we would normally associate with our industry being on the leading edge and then subsequently followed by the cool down in the broader labor markets, but we would expect that to happen, but at this point.
Speaker Change: Depending on who you ask we don't think that cooling is going to be that.
Speaker Change: That significant but significant enough to create some slack and really to start.
Speaker Change: The growth cycle.
Speaker Change: Moving forward again as far as our industry is.
Speaker Change: As concerns the areas of course that could kick start this evolution is a lowering of interest rates very important.
John Thomas McGinnis: These types of things with our cloud-enabled financial structure are going to be driving significant efficiencies in our cost structure going forward. And that's on the heels of already significant progress in the front office power suite implementations that'll come through in a more meaningful way when volumes return from a recruiter productivity perspective. So when you add those together, we would expect a significant improvement in SG&A as a percentage of GP when you see those programs really start to kick in when volumes return to previous levels, to your point. And ongoing efficiency.
Speaker Change: Cooling of geopolitical tensions equally important this could be another trigger in a number of other events.
Right now frankly, we feel that the Europe is following a more traditional cycle the economy is cooling.
Speaker Change: Likely that the ECB will lower interest rates may be even before the fed lowers interest rates and that will be a good signal that now now comes the time to start to gear up and generate more economic growth in Europe, and we would then hope to see improving <unk> in Europe and since we have such a big part of.
John Thomas McGinnis: So that will drive meaningful improvement in those ratios, and you'll see that drop down to EBITDA margin as well. And we've talked about that in the past. So there'll be a bit of a double impact.
Speaker Change: Our business in Europe, we would see that as a very good.
Speaker Change: As a very good sign so we don't know when.
Speaker Change: We should see and expect either of those to happen either in Europe or in the U S. But we expect that that is how we would happen, but the trigger points or when it turns around I think is really going to come.
John Thomas McGinnis: You'll see the fall off of some of that investment spend as we continue through these programs, but then you'll see the efficiencies come through, which will be meaningful as well. And all of that will help us improve our EBITDA. One of the key components of our roadmap to EBITDA margin improvement, and you'll see that come through in the ratios as those programs continue. Thanks.
Speaker Change: Very closely related to lowering of interest rates.
And inflation levels dropping right now our inflation rates are higher and they're moving in the wrong direction.
Speaker Change: And that needs to cool off further before everything can get going the way, we would expect it to do.
John Thomas McGinnis: I was hoping you could comment on your capital deployment strategy, because we're a couple years into softening demand. And historically, when you kind of, as a management team, have gotten signs that the coast is clear and demand signals are improving, you typically deploy a little bit more capital at that time in the form of acquisitions. Is that still the playbook?
Speaker Change: Yeah.
Speaker Change: Got it thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.
Keen Fai Tong: Alright, thanks, good morning.
And you mentioned trends in France, and Italy were beginning to stabilize which is an improvement from past quarters.
Keen Fai Tong: You touched on the auto sector, but can you elaborate a little bit more on what you're seeing in the labor markets in these countries and what's helping to drive that stabilization.
John Thomas McGinnis: Yeah, Tobey, I think that's a great question. I'd say, overall, I think the main punchline is that our strategy has not changed. And you're right, we have been very careful, but where we have made acquisitions has been on the IT resourcing side, and that's worked out very well for us. As we think about the acquisition we did in 2021, that is performing very well in the U.S., so it is performing better than the enterprise sector. So that continues to be an area for us as we look forward. And, you know, in the current environment. You're right, the current environment has not been very conducive to acquisitions.
Speaker Change: Yeah, the labor markets.
Speaker Change: Both.
Speaker Change: Italy and in France has cooled somewhat.
The Italian economy is actually doing very well overall and a lot of that comes from EU.
Speaker Change: EU funds that are being channeled and deployed across Italy as part of the recovery Act and in Europe and France.
Speaker Change: <unk> seen a cooling of the labor market a cooling of economic growth.
Speaker Change: But I think since we are.
Speaker Change: Industry that is concurrent with economic trends.
Speaker Change: That we've seen the step downs that have occurred over a number of quarters as we look at the economy and the labor markets overall that the trends within our industry should lead to a stabilization.
John Thomas McGinnis: And what you've seen us do in the meantime is return excess cash via, you know, our share repurchase program, and the dividend continues to be a high priority for us as well. So you should expect that approach to continue. And again, you know, we are very careful when it comes to acquisitions, so we do a very, very detailed analysis. We look at many different filters, most importantly cultural fit and those types of items.
Speaker Change: With continued headwinds so let's remember that these are still markets that are well below where they were pre pandemic.
Speaker Change: But that we are starting to see that stabilization as we have seen in the UK in the U S. Now also in the Netherlands in other parts of Europe as well. So it's really been a progression of countries, where our business has reached a point and then it appears.
Speaker Change: To be moving sideways.
Speaker Change: Sequentially after that point, and we expect that to happen in France, and Italy as well.
John Thomas McGinnis: But I would say, you know, that is something that more realistically would be something to think about as the environment starts to improve going forward. But I'd say that's kind of where we are currently. Thank you. Thank you. Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open. Hi, good morning. This is Stephanie Yee stepping in for Andrew.
Speaker Change: Got it that's helpful. And then I wanted to dive further into your productivity initiatives and cost cutting efforts can you talk a little bit more about where you are in your journey to achieve improved productivity and head count.
Speaker Change: I think as you've seen George of course during an environment like this where deleveraging. So productivity is moving down we are adjusting to Jack's point, our SG&A and our head count very being very careful and balanced in our approach because we want to mitigate the near term effects.
Operator: We wanted to ask, so not to pry or, you know, obviously, the US temporary help in the BLS figures has been declining for about two years now, which is rather unusual. I guess, what do you think the shape of the recovery will be for Manpower US and the staffing industry in the US, given this unusual dynamic? Thanks, Stephanie.
Speaker Change: Of the headwinds that we're seeing in particular in Europe and in North America, but at the same time retained enough resources to make sure that when the rebound happens that we're extremely well positioned to take advantage of that and it's that and at that point that we're going to.
Speaker Change: See the productivity improvements.
Jonas Prising: Yeah, no, as you say, we agree that 17 consecutive months of temporary worker declines in the U.S. without a recession or a significantly cooling economy is, frankly, unprecedented. And if you add the preceding six months of declining growth, that's 23 months of declining growth in our industry in the U.S. So, as I mentioned earlier, we believe that there is a lag effect that is distorted this time by the pandemic and post-pandemic hiring, where employers today are really holding on to their workforces.
Speaker Change: On our on our business flow through to the bottom line and you can see.
Speaker Change: Some improvement of course occurring in terms of our bottom line between the first quarter in the second quarter as Jack mentioned, our first quarter as the <unk> is a weak quarter due to the start of the year the resetting of taxes in a number of countries, we move into the second quarter. It improves.
Speaker Change: But the real improvement of course is going to come when our volumes in associates and consultants for experience starts to move up and we can leverage the investments we've made in technology as well as regaining the productivity we lost during <unk>.
Jonas Prising: They are absorbing and creating flexibility by reducing the use of temporary staff, increasing, as you saw in the DLS numbers of last month, the use of part-time work. So, they are pulling just about every measure that they can to improve flexibility without touching the permanent payrolls in a more significant way.
Speaker Change: During this cyclical downturn.
Speaker Change: Yeah.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thanks George.
Speaker Change: Thank you and our last question comes from Heather <unk> with Bank of America. Your line is open.
Speaker Change: Hi, This is Michael on for Heather Walski I'm wondering if you could give any additional color into the pricing environment. I think you called out the staffing had thought pricing you've seen but im wondering if you could give any additional commentary.
Jonas Prising: But given the strength of the economy and assuming that there is not a full-blown recession, it's likely that employers will continue to remain cautious until they feel that the uncertainties that they are cautious about clear up to some degree. And at that point, we believe we'll see a very good return to the use of temporary staff. Because temporary staff is a fantastic way to provide flexibility for any employer across industries and especially in an uncertain environment.
Speaker Change: Yes.
Speaker Change: I would say really there isn't a whole lot of additional color to give I think the the <unk>.
Speaker Change: Headline really is pricing has been stable.
Speaker Change: It's been holding up I think one of the previous questions was.
Speaker Change: Really asking along the same lines despite.
Speaker Change: Volume is being at lower levels.
Speaker Change: There really hasnt been much of an impact on pricing and I think that story remains the same and I think that really is the takeaway and although our staffing margin has come down year over year, that's really just mix.
Jonas Prising: And many of those workers, at various skill levels, then also become integrated into the employer's payrolls through conversions over time. And we've seen strong conversion levels occur today. The strength of that rebound, of course, Stephanie, is very difficult to estimate because it's really a question of what's going to happen to the overall economy and what the snapback will be. Right now, the global growth scenario is highly dependent on U.S. economic growth, which is one of the highest in the world, and of course, being the major economy, it's sort of setting the tone for everyone else.
Speaker Change: Just mix of the businesses is having that effect on an underlying basis pricing remains strong and we think the market is quite rational.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you there are no further questions. Please proceed with any closing remarks.
Speaker Change: Excellent. Thank you very much.
Speaker Change: For attending our Q1 earnings call and we look forward to speaking with you again.
Speaker Change: In July for our second quarter earnings call until then thanks, very much and we look forward to speaking with you against it.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
Jonas Prising: So, we are pulling along the growth at a global level right now. But we think when the clouds lift, and, in particular, for us, from a manpower perspective, the manufacturing sector starts to get some more traction, enterprises on the tech side really start to activate the postponed and delayed technology transformation projects. We think, both from a manpower and experience perspective, and then also from a talent solutions perspective, that we'll see a very good evolution of those services.
Speaker Change: [music].
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Jonas Prising: It's just that right now, our industry is bearing the brunt of the slowing, and you can't really see it in the broader BLS numbers. But essentially, we feel this is a cyclical downturn distorted by anomalies created by the pandemic, and eventually, this will sort of flatten out, and we're therefore pleased to see the stabilization, not only in the U.S. and U.K. but Our two other big operations, France and Italy, we estimate will also stabilize into our second quarter, and that gives us the platform to hope for a recovery that will then manifest itself into increased demand and improved numbers for all of our brands. Okay, great.
Speaker Change: Okay.
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Operator: I really appreciate the perspective. Thank you. Thanks, Stephanie. Thank you. Our next question comes from Stephanie Moore with Jeffrey. Your line is open. Hi, good morning.
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Operator: Thank you. Um, actually, this might be a good follow-up to even the last question. I may be kind of digging into that a little bit further.
Jonas Prising: So effectively, you know, from your clearly, you know, pretty extensive knowledge of past cycles and also the conversations you're seeing, you know, you're having with customers. So I guess I'm just trying to kind of be a little bit more specific here. So in your opinion, you know, what needs to happen broadly to go from this period of, and that is, at least stabilization to the inflection to the positive side. So that's actually what you're saying is we do need to see that unemployment rise first and the economy kind of take a step down. Or could this be different, you know, this cycle different from the previous one?
Jonas Prising: Love your thoughts there. Well, I think it's already different, Stephanie, in terms of we haven't seen the cooldown that we would normally associate with our industry being on the leading edge and then subsequently followed by, you know, the cooldown in the broader labor markets. But we'd expect that to happen, but at this point, depending on who you ask, we don't think that cooling is going to be that significant, but significant enough to create some slack and really start the growth cycle from moving forward again as far as our industry goes. The areas, of course, that could kickstart this evolution are a lowering of interest rates, very important. Cooling of geopolitical tensions is equally important. This could be another trigger and a number of other events.
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Jonas Prising: Right now, frankly, we feel that Europe is following a more traditional cycle. The economy is cooling, and it's likely that the ECB will lower interest rates, maybe even before the Fed lowers interest rates.
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Jonas Prising: That would be a good signal that now is the time to start to gear up and generate more economic growth in Europe. We would then hope to see improving PMIs across Europe. Since we have such a big part of our business in Europe, we would see that as a very good sign. We don't know when we should expect and expect either of those things to happen, either in Europe or in the U.S., but we expect that that is how it would happen.
Speaker Change: Okay.
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Jonas Prising: The trigger point for when the economy turns around, I think, is really going to come very closely related to the lowering of interest rates and inflation levels dropping. Right now, our inflation rates are higher, and they're moving in the wrong direction. That needs to cool off further before everything can get going the way we would expect it to do.
Speaker Change: Yes.
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Operator: Got it. Thank you so much. Thank you. Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open. Hi, thanks. Good morning.
Jonas Prising: You mentioned trends in France and Italy were beginning to stabilize, which is an improvement from past quarters. You touched on the auto sector, but can you elaborate a little bit more on what you're seeing in the labor markets in these countries and what's helping to drive that stabilization? The labor markets in both Italy and France have cooled somewhat. However, the Italian economy is actually doing very well overall, and a lot of that comes from EU funds that are being channeled and deployed across Italy as part of the European Recovery Act.
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Jonas Prising: And France has seen a cooling of the labor market, a cooling of economic growth. But I think since we are an industry that is concurrent with economic trends, that we've seen the step-downs that have occurred over a number of quarters as we look at the economy and the labor markets overall, the trends within our industry should lead to stabilization. We've continued headwinds, so let's remember that these are still markets that are well below where they were pre-pandemic, but we are starting to see that stabilization, as we have seen in the UK, in the US, now also in the Netherlands, and in other parts of Europe as well.
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Jonas Prising: So it's really been a progression of countries where our business has reached a point and then appears to be moving sideways sequentially after that point, and we expect that to happen in France and Italy as well.
Speaker Change: Okay.
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Jonas Prising: And then I wanted to dive further into your productivity initiatives and cost-cutting efforts. Can you talk a little bit more about where you are on your journey to achieve improved productivity and the right size headcount? I think, as you've seen, George, of course, during an environment like this, we're deleveraging, so productivity is moving down. We are adjusting, to Jack's point, our SG&A and our headcount, being very careful and balanced in our approach, because we want to mitigate the near-term effects of the headwinds that we're seeing, in particular, in Europe and in North America, but at the same time, retain enough resources to make sure that when the rebound happens, we're extremely well-positioned to take advantage of that, and at that point, we're Our first quarter was a weak quarter due to the start of the year and the resetting of taxes in a number of countries.
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Jonas Prising: As we move into the second quarter, it improves, but the real improvement, of course, is going to come when our volumes and associates and consultants for experience start to move up, and we can leverage the investments we've made in technology, as well as regaining the productivity we lost during the cyclical downturn. Very helpful. Thank you. Thanks, George.
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Operator: Thank you. And our last question comes from Heather Balsky with Bank of America. Your line is open. Hi, this is Emily Margo on behalf of Heather Balsky.
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Operator: I'm wondering if you could give any additional color on the pricing environment. I believe you called out the staffing had the solid pricing you've seen, but I'm wondering if you could give any additional color there. Yeah, I would, I would say, really, there isn't a whole lot of additional color to give.
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John Thomas McGinnis: I think the headline really is that pricing has been stable. It's been holding up. I think one of the previous questions was really asking along the same lines, despite volumes being at lower levels, there really hasn't been much of an impact on pricing. And I think that that story remains the same. I think that really is the takeaway. And although our staffing margin has come down year over year, that's really just the makeup of the businesses that is having that effect.
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John Thomas McGinnis: On an underlying basis, pricing remains strong, and we think the market's quite rational. Thank you. [inaudible] Thank you. There are no further questions. Please proceed with any closing remarks. Excellent. Thank you very much for attending our Q1 earnings call, and we look forward to speaking with you again in July for our second quarter earnings call. Until then, thanks very much, and we look forward to speaking with you again soon. Thank you for your participation.
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John Thomas McGinnis: This does conclude the program and you may now disconnect. Everyone, have a great day. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
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