Q2 2025 ManpowerGroup Inc Earnings Call

Welcome to Manpower group second quarter, earnings results conference call, you will be put into listen-only mode. Until the question and answer time begins. This call is being recorded if you care to drop off now, please do so.

Speaker Change: I would like to turn the call over to Manpower groups, chair and CEO Mr. Jonas freezing sir, you may begin.

Welcome, and thank you for joining us for our second quarter 2025 conference call.

Speaker Change: Our Chief Financial Officer Jack mcginness is with me today.

Speaker Change: for your convenience, we have included our prepared remarks within the investor relations section of our website at manpowergroup.com

Speaker Change: I will start by going through some of the highlights of the quarter and Jack will go through the second quarter results and guidance for the third quarter of 2025

Speaker Change: I will then share some concluding thoughts. Before we start our Q&A session,

Speaker Change: Jack will Now cover the Safe Harbor language.

Jack Mcginness: An 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, 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.

When we last reported our q1 results in April. We spoke at a time of heightened uncertainty, particularly surrounding trade negotiations, and their potential impact on the global economy. At that point, many organizations were choosing to pause or slow hiring plans as they waited for greater clarity.

Jack Mcginness: Since then we've seen some of this uncertainty begin to ease employers, facing not only macroeconomic complexity. But also continued geopolitical tensions are proving resilient.

Jack Mcginness: What might once have been seen as Black Swan moments are now being absorbed with greater pragmatism and pace.

Jack Mcginness: Our most recent Manpower Group employment Outlook survey of more than 40,000 employers across 42 countries. Also supports this view. The global hiring Outlook is holding steady up, very slightly year-over-year and just 1 Point lower than last quarter.

The picture continues to be mixed globally though, or Latin America and Asia Pacific, labor markets, performing well.

Jack Mcginness: While we see cooling yet, resilient hiring intent in North America.

In Europe, employers, continue to be more cautious, particularly northern Europe, reflecting its greater exposure to economic and geopolitical headwinds.

Jack Mcginness: According to our results, we are pleased to see encouraging signs of stabilization in the US and parts of Europe and the return to revenue growth in our Manpower and Talent Solutions, Brands this quarter

Systemwide Revenue, which includes our expanding franchise Revenue base was 4.9 billion dollars.

Jack Mcginness: Reported Revenue was 4.5 billion dollars down. 3% year-over-year in constant currency.

Our reported Aid off for the quarter was 72 million.

Adjusting for restructuring costs. Evita was 89 million. Representing a decrease of 25% in constant currency year-over-year.

In was 1.6% and adjusted ibida, margin was 2.0%.

Earnings but basic share was a negative 1.44 cents on a reported basis while earnings per diluted share was 78 cents on an adjusted basis, adjusted earnings per share. Decreased 43% year-over-year in constant currency.

Jack Mcginness: The diversity of our vertical mix.

Consumer goods to technology and Industrials is proving to be a strength in the current environment.

Jack Mcginness: Leveraging, our proprietary data, we continuously assess real-time market, dynamics to identify and act on growth opportunities.

Jack Mcginness: We're seeing solid momentum and consumer goods across both, the US and Europe, alongside encouraging signals in Aerospace, and defense. At the same time. We're taking Swift. Targeted actions to protect and optimize performance and sectors experiencing headwinds such as Automotive. Ensuring, we remain focused on profitable growth and long-term resilience

Jack Mcginness: We know client demand is reactive to many factors and we are staying closely connected to our clients. Anticipating their evolving needs and ensuring. We Remain the Strategic Workforce partner of choice as technology transformation accelerates.

We continue to build a strong Enterprise sales pipeline, simplify your organization and manage costs with discipline by prioritizing growth initiatives that will deliver the greatest value.

Jack Mcginness: I will now turn it over to Jack to take you through the results in more detail.

Jack Mcginness: Thanks. Jonas, US dollar reported revenues in the second quarter were impacted by foreign currency translation. And after adjusting for currency, impacts came in at the high end of our accounts and currency guidance range.

Although conditions remain challenging in certain markets, our Revenue Trends demonstrate, we continue to perform well in the market, our revenue from franchise offices are significant and are included within systemwide revenues which equals 4.9 billion for the quarter.

Jack Mcginness: Gross profit margin came in just below. The low end of our guidance range driven by shifts within Staffing.

Jack Mcginness: Compared to the prior year, period.

Jack Mcginness: As adjusted IBA margin was 2% and came in at the high end of our guidance range representing, 50 basis points of decline year-over-year.

Jack Mcginness: For currency translation, drove a favorable impact to the flat. US dollar reported Revenue trend from the constant currency, decrease of 3.5%.

Jack Mcginness: Organic days, adjusted constant, currency Revenue decreased 1% in the quarter, which was favorable to our midpoint guidance of a decrease of 2%.

Jack Mcginness: Turning to the Epps Bridge. Reported losses per share was a 1.44 adjusted EPS was 78 cents and came in 8 cents above our guidance, midpoint

Jack Mcginness: Walking from our guidance, midpoint of 70 cents, our results included a stronger operational, performance of 4 cents.

Jack Mcginness: Slightly lower weighted average shares due to share of purchases in the quarter, which had a positive impact of 1 cent.

Jack Mcginness: A foreign currency impact that was once sent favorable to our guidance.

Jack Mcginness: And interest in other expenses which was 2 cents. Favorable restructuring costs and disposition losses represented, 43 cents.

And non-cash Goodwill and intangible impairment charges represented a $1.79 bringing reported losses per share to 1.44.

Next, let's review our Revenue by business line year-over-year on an organic consequences. The Manpower brand had growth of 1% in the quarter. The experienced brand declined by 9% and the town Solutions brand had growth of 1%.

Within Town Solutions. Our RPO business experienced a slight year-over-year Revenue decrease.

Rmsp business, recorded, strong Revenue, increase compared to the prior Year, all right management experience, the year-over-year mid single digit percentage Revenue. Decline in the quarter is out placement activity continued to slow.

Jack Mcginness: Looking at our gross profit margin in detail. Our gross margin came in at 16.9% for the quarter.

Staffing margin contributed to 30 basis, point reduction due, to mixed shifts towards Enterprise accounts, permanent recruitment was relatively stable at lower levels and contributed to 10 basis point reduction.

Other items resulted in a 10 basis point margin. Decrease,

Jack Mcginness: Moving on to our gross profit by business line.

Jack Mcginness: During the quarter, the Manpower brand comprised 62% of gross profit. Our experienced professional business comprise 22% and town Solutions comprise 16%.

Jack Mcginness: During the quarter, our Consolidated gross profit decreased by 5% on an organic, constant currency basis. Year-over-year representing a slight improvement from the 6% decline in the first quarter.

Our Manpower brand reported flat organic consequences, gross profit year-over-year and improvement from the 2% decrease in the first quarter.

Gross profit. In our experience, brand decreased 14% in organic consequences, year-over-year a step down from the 11% decrease in the first quarter driven by the non-recurrence of healthcare technology projects.

Jack Mcginness: Gross profit and Talent Solutions was flat in organic constant currency year-over-year. Representing an improvement from the first quarter, decrease of 5%,

Jack Mcginness: MSP and RPO experienced similar activity levels from the first quarter while right management gross profit increased slightly.

Reported sg&a expense in the quarter was 789 million.

Jack Mcginness: Sgna as adjusted was down, 3% year-over-year on a constant currency basis and down. 2% on an organic constant currency basis.

Jack Mcginness: The year-over-year sgna decreases, largely consisted of reductions in operational costs of 10 million dollars.

Jack Mcginness: Corporate costs continue to include our back office transformation. Spend and these programs are progressing, well with expected medium and long-term efficiencies

Dispositions represented a decrease of 8 million while currency changes contributed to a 19 million increase.

Jack Mcginness: Adjusted sgna expenses as the percentage of Revenue represented 15.2% in constant currency in the second quarter.

Jack Mcginness: Adjustments represented restructuring and disposition losses of 17 million.

Jack Mcginness: The Goodwill and intangible impairment relates to Switzerland and the UK which experienced further Market declines in recent quarters.

Balancing gross profit Trends with strong cost, actions to enhance ibida. Margin is 1 of our highest priorities and we continue to analyze all aspects of our cost base for additional ongoing efficiency improvements.

The America segment comprised 23% of Consolidated revenue revenue in the quarter was 1.1 billion, representing, an increase of 2% year-over-year on a constant currency basis.

Jack Mcginness: Oup was 36 million and O up Margin was 3.4%.

Jack Mcginness: Comprising, 64% of segments revenues.

Revenue in the US was 674 million during the quarter representing a 3% days, adjusted decrease compared to the prior year.

Jack Mcginness: This represents a decline from the 2% increase in the first quarter as I will explain in the brand commentary.

Jack Mcginness: Oup for our us business was 20 million in the quarter oep. Margin was 2.9% within the US, the Manpower brand comprised 26% of gross profit during the quarter.

Revenue for the Manpower brand in the US increased 9%, on a day's adjusted basis. During the quarter, which represented strong market performance in an improvement from the 7% increase in the first quarter.

Jack Mcginness: The Experience brand in the US comprised 41% of gross profit in the quarter.

Within experience in the US, it skills comprise approximately 90% of revenues.

Jack Mcginness: Experienced us revenues decreased 14%, as expected on a day's adjusted basis. During the quarter down from the 2% decline, in the first quarter based on the non-recurrence of healthcare technology projects, as the healthcare technology project, significantly impacted the US q1, and Q2 Trend the 6-month trend of a decrease of 8% is more indicative of the underlying business activity.

Jack Mcginness: Town Solutions in the US, contributed 33% of gross profit and saw Revenue increase of 13% in the quarter and improvement from the 3%. Increase in the first quarter driven by RPO and right management RPO experience, solid Revenue growth in the US during the quarter.

Jack Mcginness: Both the US MSP and right management businesses executed, well, during the quarter posting strong double digit Revenue increases year-over-year.

Jack Mcginness: In the third quarter of 2025, we expect the overall us business to have a slightly improved. Most single digit percentage Revenue, decline compared to the second quarter.

Jack Mcginness: Southern Europe Revenue comprised, 47% of Consolidated Revenue in the quarter Revenue in southern Europe, was 2.1 billion. Representing a 2% decrease in organic constant currency as adjusted up for the southern Europe. Business was 75 million in the quarter and up Margin was 3.5%.

Restructuring charges of 2 million represented actions in France.

Jack Mcginness: France, Revenue comprised 53% of the southern Europe, segment in the quarter and decreased 6% on a day's adjusted consequence. Currency basis.

Jack Mcginness: As adjusted up for our France, business was 34 million in the quarter.

Jack Mcginness: Adjusted op margin was 3%.

Jack Mcginness: France. Revenue Trends came in slightly better than expected during the second quarter. And we expect stable activity Trends into the third quarter representing a slightly improved rate of Revenue decline,

Jack Mcginness: Revenue in Italy, equalled 476 million in the second quarter reflecting an increase of 4% on a day's adjusted constant currency basis.

Oup, equals 32 million in O up Margin was 6.7%.

Jack Mcginness: Our Italy business is performing well, and we estimate a similar to slightly improved constant. Currency Revenue growth Trend in the third quarter, compared to the second quarter.

Jack Mcginness: our northern Europe segment comprised 18% of Consolidated Revenue in the quarter,

Jack Mcginness: Revenue of 794 million represented a 10% decline in constant currency.

Jack Mcginness: As adjusted oup equal to 6 million dollar loss.

The restructuring charges of 122 million represented actions in the nordics, the Netherlands and Germany.

Jack Mcginness: Our largest market in northern Europe. Segment is the UK which represented 33% of segments revenues in the quarter.

Jack Mcginness: During the quarter UK revenues, decreased 13% on a day's adjusted constant currency basis.

The UK Market continues to be challenging and we expect the rate of Revenue decline to improve into the third quarter, compared to the second quarter.

In Germany revenues, decrease 22% on a day's adjusted consequences in the quarter. Germany Automotive manufacturing Trends continue to be weak.

In the third quarter, we are expecting a slightly improved year-over-year, Revenue decline compared to the second quarter trend.

The nordics continue to experience difficult market conditions with revenues decreasing 9% and days adjusted counts and currency in the quarter.

Jack Mcginness: The asia-pacific, Middle East segment, comprises 12% of total company Revenue.

Jack Mcginness: In the quarter, revenues equals 525, million representing an increase of 8% in organic constant currency.

Adjusted Obi was 27 million and adjusted op margin was 5.1%.

Revenue in Japan grew 7%. On a day's adjusted constant currency basis.

Jack Mcginness: We remain very pleased with the consistent performance of our Japan business and we expect continued strong Revenue growth in the third quarter.

Jack Mcginness: In the second quarter, free cash flow represented an outflow of 207 million compared to an outflow of 150 million in the prior year.

Jack Mcginness: As in the prior year timing of payables impacted the level of outflow in the second quarter how flow is a free cash flow. In the first half of the year are typically followed by strong free cash flow in the second half.

Jack Mcginness: Free cash flow in the first half of 2025 included, outflows for a large tax transition, payment technology, prepayments and the impacts of timing of MSP program payments which typically are not large factors in the second half of the year.

Jack Mcginness: At quarter end Day sales outstanding increased by about a day to 56 days.

Jack Mcginness: During the second quarter, Capital expenditures represented, 18 million. During the second quarter, we repurchased 230,000 shares of stock for 12 million.

Jack Mcginness: As of June 30th, we have 2 million shares remaining for a purchase under the share program approved in August of 2023.

Jack Mcginness: Our balance sheet ended the quarter with cash with 290 million and total debt of 1.29 billion.

Jack Mcginness: Net, debt equals 996 million a quarter end.

Jack Mcginness: Our net debt levels Peak at June 30th and historically, improve in the second, half of the year.

Jack Mcginness: Our debt ratio is at quarter end, reflect total gross debt to trailing 12 months. Adjusted ebit of 3.2 and total debt to Total capitalization at 39%, our debt and credit facility, rangements and related updates are included in the appendix of the presentation.

Jack Mcginness: Next, our view, our outlook for the third quarter of 2025 based on Trends in the second quarter in July activity today. Our forecast anticipates ongoing stability in the majority of our markets and a continuation of existing Trends with that said, we are forecasting earnings per share for the third quarter to be in the range of 77 cents to 87 cents.

The guidance range also includes a favorable foreign currency impact of 3 cents per share and our foreign currency translation. Rate estimates are disclosed at the bottom of the guidance, slide

Jack Mcginness: Our constant currency Revenue. Guidance range is between a flat and 4% decrease.

Jack Mcginness: And at the midpoint is a 2% decrease, considering the impact of a slight increase in business days and dispositions our organic days, adjusted consequences, Revenue increase represents a flat Revenue Trend at the midpoint.

Jack Mcginness: Even in margin for the third quarter is projected to be down 50 basis points at the midpoint compared to the prior year.

We estimate that the effective tax rate for the full year, on an adjusted basis to continue to be 46.5%.

Jack Mcginness: And the third quarter will be slightly higher at 48%.

This incorporates, the previously disclosed French tax change for the 1 year period of 2025.

In addition, as usual, our guidance is not incorporate restructuring charges or additional share repurchases. And we estimate, our weighted average shares to be 47 million.

I will now turn it back to Jonas.

Jonas Freezing: Thank you, Jack.

Jonas Freezing: We know from our clients that companies are navigating the here and now while also

The mid to long term.

Jonas Freezing: Jai continues to merge as a powerful catalyst.

With an eye on productivity gains, as well as the opportunity to unleash human potential, allowing people to focus on more value, added tasks.

Speaker Change: At this stage, most organizations are focused on driving adoption and exploring a possibilities. And outside of some specific areas, we are not seeing any structural impact to labor markets at this time.

Speaker Change: Yet the lag from exploration to impact, has the potential to be shorter than any Tech advancement in history.

Speaker Change: A research underscores this stage of development too. 58% of employers are now investing in AI, but only 206% believe their Workforce is ready to use it.

Speaker Change: More than 200 clients and Prospects. It is clear that the AI rate in his Gap represents a significant opportunity for us, supporting companies to find new talent and augmenting their skills to be AI ready.

Speaker Change: We continue to execute our diversification digitization and Innovation strategy at PACE.

At the core of, this is accelerating the adoption of new technologies to better support the evolving needs of both our clients and candidates all positioning us to drive greater productivity and unlock more profitable. Sustainable growth, in the quarters ahead for over 5 years, we have been investing in and building our digital Core Power Suite.

Speaker Change: Power Suite is our foundational Tech stack, but we believe is unravel on a global scale in the industry and has enabled the pace of our digital transformation and the rapid development and deployment of our AI capability. As an example. The strength of power Suite is enabling the buildout of Sophie AI our Enterprise AI platform.

Speaker Change: Where our AI Solutions are being developed refined and incorporated into our operational workflows to further enhance our capabilities.

Speaker Change: Sophie is already being deployed by our Talent Solutions brand and we are moving quickly to scale so we can continue to take AI, infused products Solutions and insights into the market across our strong, and distinct Brands supporting our clients, wherever they are in their transformation Journey.

Speaker Change: Our commitment to transformation extends beyond the technology. It is embedded in how we operate as a responsible sustainable business and it's being recognized

Speaker Change: In the second quarter, we were proud to receive multiple Global accolades we received Forbes. America's number. 1 rating is The Best Time Staffing. Firm Talent Solutions was again recognized by Everest group, as a global leader in RPO. And we're also named to Times world's most sustainable companies for the 15th consecutive year,

Speaker Change: Congratulations. And thank you to all our teams for these honours which are evidence of the trust placed in Us by our clients candidates and stakeholders around the world.

Operator, please open the line for our Q&A.

Speaker Change: Thank you, if you'd like to ask a question. Please press star 1, 1 1.

Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star 1 again.

Speaker Change: Our first question comes from Jeff silver with BMO Capital markets, your line is open.

Speaker Change: Hey, this is Ryan on for Jeff. You called out in the press release, he remained focused on market, share. Gains was just wondering who you're getting share from and what is your share gain strategy there?

Speaker Change: Thanks Ryan. Yeah, no, we've been very pleased to see the progress in how we are competing with, the very strong Pipeline, and with the, uh, available data, we are now able to Target our fast to Growing industry, verticals in a much more precise way. So we are very quickly able to determine which industry, verticals are moving forward, and are growing, which are lagging a bit. And we talked about that in our prepared remarks and we're very pleased with the outcomes of, you know what, what we're seeing there. We're also able to deploy AI in what we call our sales targeting engine, which is now able to much better identify leads that are highly likely to generate orders and higher Revenue to the tune of 50%, higher Revenue uh than when we do this through human intervention only. So it's really augmenting. Human capabilities with the eye.

Speaker Change: And all of this said, in many of our major markets, we are competing very well uh from a revenue perspective. And you could also see that in our performance in the second quarter, as it relates to where we ended up compared to our initial guide, as we looked ahead into the second quarter.

Speaker Change: Great, thank you. I appreciate that. And then just for my follow-up, you filled a couple businesses and removing them to franchise models during the quarter. I imagine those were relatively small in the broader p&l I was just wondering if you see yourself moving anything else selectively to your franchise model, down the road, or do you think there are any other geographies where it might make sense? Thank you.

Smaller markets. This quarter. We've had some bigger markets in Prior quarters. And, uh, you know, we're constantly looking at both existing markets but also new markets in new parts of the world. Where we think this model could be really beneficial uh, to help us deploy Our Brands and serve our clients. As we look at where the demographic labor market. Growth is the strongest

Speaker Change: Thank you. Our next question comes from manav Tatnuck with Barclays. Your line is open.

Speaker Change: Hi, good morning. This is princy. Thomas on for manav. Uh, thank you for taking my question. Just wanted to see if you could talk about us Trends and moving pieces. What the true underlying organic growth would be and um what you're seeing for Outlook

Uh, sure, princy. Thanks for the question. This is Jack. I'd be happy to talk about the US Trend so you can see on an overall, uh, basis are the US business came in at minus 3% for the quarter, uh, in actually slightly better than what we expected. Uh, when we gave the guide, uh, we did know that a lot of that experience, Healthcare technology Project work, uh, was not going to recur back into the second quarter. So that incorporated that and we still did a bit better. That was the over-perform. I would say was driven by the Manpower brand, which came in at

Speaker Change: Plus 9% and the quarter. So very strong performance. Jonas, talked about our market trends earlier. Manpower us is clearly 1 of the businesses where we do believe we're leading the market. Uh, and I'd say the experis business as expected. You heard me talk about. Um you know the minus 14 in the quarter was really a reflection of the very large go live work. We had in the year ago period. But if you average if you look at the first 6 months overall year-over-year, we're running about minus 8% uh pretty much in line with what you're seeing in the professional uh Staffing industry in the US as it continues to be a bit sluggish. We do anticipate that that's going to improve sequentially into the third quarter a bit as well. So I'd say those those are the main Trends I you know, and in terms of Talent Solutions, we saw a good growth in Talent Solutions in the quarter as well in the US. And so um I'd say you know all you know tell

Speaker Change: Solutions and Manpower really. Both had very good positive growth and Talent Solutions was, was pretty was pretty significant double digit growth, uh, as well on an overall basis in the US.

Speaker Change: Thanks.

Speaker Change: Thanks. Um, and as a follow-up, can you remind us of seasonality expectations for 3 q and for the second half of the Year typically and how that, the, how that Stacks up compared to the first 2 weeks of July?

Speaker Change: Yeah, so I'd say, um, in terms of seasonality from Q2 to Q3, we typically do see, uh, a bit of an improvement in margin in IBA to margin sequentially. And you can see in my guide, we have, uh, margin improving 10 basis points from the 2.0. We just posted to the 2.1 and I'd say that has generally happened in in recent years. Uh, not every year. Uh, if we're, if we're, uh, in a period where we're seeing, um, significant declines, and of course, then maybe that's not the case. But this this year, as we continue to see some momentum and you saw my, uh, organic days, adjusted guide for flat for the third quarter. So with that moving from negative to Flat, uh, we are seeing a little momentum which is helping keep that plus 10 basis points from 2 Q to 3 Q. So I'd say that's 1 thing to consider. Of course we always have holidays uh,

That impact uh uh the August period and some of our European markets but uh nothing's really different this year in that regard. I think the only other thing in terms of seasonality uh and I covered this in my prepared remarks is, when you think about um free cash flow. So we we do see negative free cash flow typically in the first half of the year over the last 4 years, and that's followed by typically very strong free cash flow in the second half of the year. So that would be the other uh, consideration. As you think about seasonality,

Thanks. Thanks Jack.

Speaker Change: Thank you. Our next question comes from Marc Maron with Robert W, beard your line is open.

Marc Maron: Hey, good morning, and thanks for taking my questions. Um, first question has to do, just with

You know, if you're, uh, comments that um, in Europe, you know, employers continue to be more cautious, um, you know, reflecting the greater exposure to economic and geopolitical headwinds. Um, I'm wondering, um, you know, what do you think it will take to to see some improvement, uh, in terms of the revenue Trends in northern Europe, number 1 and

Marc Maron: Number 2. Um, you know, how should we think about the, the profitability and what what are your long-term aspirations for, for your, um, profitability in northern Europe?

Speaker Change: Thanks Mark. Yeah and uh, I think as you correctly point out and we also talked about in the prepared remarks, it's really northern Europe that is having a very tough time. And if you look at the economic, uh, performance of some of the main engines, notably Germany, uh which is in a recessionary environment and you look at many of the other countries that are also struggling with headwinds, although uh you know that that is really what's driving the performance of our industry. And uh the operations that we have in those markets now we believe that this continues to be uh areas where demand eventually will come back and you know to have that happen it will help when the economic uh environment improves.

Speaker Change: And when some of the geopolitical uncertainties that are largely impacting some of those markets heavier than what we've seen in southern Europe, such as energy costs and others. Uh, they start to subside, if they're uh, is a resolution to the war in Ukraine. So those are some of the elements that from an external Factor, we think could help northern Europe improve, but, as you've seen over time and we have taken significant actions to right size our business in northern Europe, and taken some, uh, very significant restructuring. Um, actions to make sure that we are right sizing the business to the demand as we see it today and in the near term longer term, we still feel good about, uh, northern Europe. And the ability for those markets to come back, 1 of the areas that make northern Europe, stick out from a prophet,

Speaker Change: Ability perspective, is that most of these markets are using a benchmark model as part of their legislative environment that we are operating in from a staffing perspective, and that's different from what we have, from a legislative framework in southern Europe. So we continue to, uh, improve our positioning in the short term and preparing for better times in the long term. And in the meantime, we're taking the actions that we need both to

To drive greater pipeline growth, as well as to, uh, make sure that we have the appropriate cost structures for the environment that we're anticipating.

Speaker Change: Does that mean?

Go ahead, Jack know.

Sorry Mark. I was just going to add uh just a little bit more color on in terms of the restructuring we took this quarter. So you've seen us, take significant actions in northern Europe and we took additional actions this quarter, the majority of the restructuring was focused on Northern Europe. We do expect, uh, to start to see an improvement and that profitability Trend as we go forward based on the savings, we're going to be getting from those restructuring actions. So I did want to mention that. I think to your point on uh, the longer term margin. You know, I think the reality is based on uh What uh, yonis mentioned with the regula regulatory model in many of the countries and the large Enterprise Market in the UK is in periods where it's able to, uh, slightly downward pressure. We'll see northern Europe, be below the average, uh, for the company. But with that being said, when northern Europe, grows your northern Europe, definitely has the opportunity to be in line with the company overall.

Speaker Change: Profitability average, and it's about getting them back in position to be in a position for growth for the future. So that's what we continue to work on. And, um, just wanted to add that additional flavor.

Speaker Change: Yeah. Mark. I think it's it's a very good point. You know, my guy does incorporate some sequential Improvement in that in that rate of Decline and, you know, to your point we've seen that from q1 to Q2 pretty big Improvement. Um, from a constant currency perspective coming in at minus 6% and as we said in our prepared, remarks slightly better than we expected. So, um, the way I would characterize it, is it it's largely stabilized. Um, now as we exit the quarter, I think the Run rate we see in our guide for Q3 is stable Trends uh through the third quarter. And with that you know we will walk into a slightly improved rate of decline um but I would agree with your comments um you know regarding the business environment overall and uh as long as it continues to stay uh relatively stable. I think that's the trend we would expect to continue to see going forward.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Our next question comes from Andrew Stein with JP Morgan. Your line is open. Hi. I want to hop back to the Manpower. Brand in the US that saw a 9% data adjusted growth and acceleration from 7, uh, percent in the first quarter, I have a few questions on that 1. Um, the Manpower brand is both light industrial and clerical. Uh, could you just tell us if there was a Divergence between, you know, how light industrial and clerical did, uh, in the in the second quarter. The second question is with the acceleration of the Manpower brand. Do you think that Marketplace, uh, is picking up or do you think that this is just share gains, uh, from Manpower? And if it is share gains, you know, how did that get accomplished?

Speaker Change: Thanks Andrew. Yeah, I'd say that. You know, we we're seeing the um ability to fulfill and create demand to be a little bit stronger on the manufacturing side. You know, I think you could look at PMI in the US and you can see the gradual improvements. We've seen there as well. But uh in terms of the share gains, I think a lot of this is down to our ability to Target the industry verticals and the opportunities in a, much more granular and Accurate Way in real time. A lot of that driven by access to data that we now

Speaker Change: Have in the US as well as globally. Thanks to, uh, the powersuite, um, ability to really predict where demand should be stronger, and that is part of it. I do sense though that the market appears to be improving and market demand is stable to slightly more positive, which we, of course, see as a very positive, uh, indicator of a market that is slowly healing from what has been a long uh, period of uh, tough market headwinds. So, the team is doing a great job. We are taking share, uh, but we also sense that the market is starting to improve.

Speaker Change: Well said, thank you.

Andy Grobler: Thank you. Our next question comes from Andy grobler with BNP, your line is open.

Andy Grobler: Uh, hi, good morning. Um, a couple from me. If I met firstly just going back to to Northern Europe. Where conditions are are clearly very tough. There is this fiscal spending coming in in Germany at some stage. Are you seeing any change in in sentiment or kind of longer term planning from your larger clients in Germany, and then, secondly, on a, a slightly different topic. There's been lots of of changes in, in kind of back office in front office systems, are you still on track for those to to complete and to begin to see improve?

Andy Grobler: Improvements both in in cost uh and and efficiency through 2026. Thank you.

Andy Grobler: Yeah, thanks Andy. I'd say in conversations with client.

That, you know, the that is sort of the sentiment from a German employer perspective. So they amongst all Employers in in Europe are 1 of the most conservative and cautious. Employer base that we speak with because they are fully aware of the difficulties that are cyclical in nature. Structural, in terms of all of the former growth engines of Germany that are now stuttering, be it Automotive, be it, their export engine to China and are expecting to see an improved environment but are not really seeing it in the near term. And of course, that's reflected in how how we are seeing the market evolved as well in our own performance and Jack. Maybe you could give, um, you know, some comments around the progress on our transformation efforts. Yeah, I would be happy to, uh, Andy. Thanks for the question. I, I think the short answer is yes. We are tracking very well. I think particularly on the back office transformation project, uh,

Jack Mcginness: Now, on powersuite back office, we have almost 65% of our revenues going through that platform and uh as we've talked about before, that's really enabling us to make some real progress in our shared service centers and our Global Business Center. So we have 10 countries now moved in more in flight. So, uh, we're definitely tracking to uh, crossing over in the second half of 26 as we've talked about. So we feel really good about the progress. We've been making on the transformation.

And on the front end, the uh, we have now 90% of our revenues running through the powersuite front office, um, with the same Global platform, uh, we have over 40, uh, websites. So 70, 80% of our website, traffic is now also being, uh, managed through 1 Global platform. So we are making excellent progress, overall, with our, uh, core technology stack. And, um, we're very, very excited about what that opportunity could give us, uh, today as well as into the future.

Uh, excellent. Thank you very much.

Speaker Change: Thank you. Our next question, comes from kartik, Mehta with North Coast research. Your line is open,

Kartik Mehta: Good morning, Jack. Let me just take your thoughts on how the quarter trended if you saw any differences. Um, as a quarter progressed,

Speaker Change: uh, thanks kartik.

Speaker Change: The second quarter is always from a trend perspective, influenced by holidays, uh, in the month of uh, May which kind of trends.

Speaker Change: Tends to, uh, make that, uh, a little a little different just when you see the holiday impact from a day's adjusted basis. But with, with that being said,

Speaker Change: Um, when we look at some of our major markets I'd say you know uh us once you adjust for the go live. Uh volatility year-over-year, as I mentioned we had a a lot of go live activity. I'd say we saw kind of steady very steady Trends. And uh, when you know I'd say improving during the course of the quarter for the Manpower business which is really good to see otherwise. I'd say relatively steady, I'd say France. Um, similar I I'd say relatively steady, um, a bit of progress, uh, as we uh, move through the quarter. And as we look at July activity, I think as I mentioned before we, we see stability into the third quarter and then I'd say, you know, the third biggest business for us, uh, Italy, very strong continued progress during the course of the quarter. So um, we saw an improvement in the rate of growth growth as we exited

Speaker Change: And we expected to lead to continue to be very strong in the third quarter. And we believe we are leading the market in Italy today. Based on those growth Trends in the first half of this year,

So I'd say those in terms of the big ones I'd say that that's kind of the trends. We've seen over the course of the quarter.

Unless I know you've talked a lot about Northern Europe and UK, and I'm wondering, is there any structural issue that you're witnessing in the country, um, for temporary staffing as to why maybe the results haven't been as good as they have been in the past, or is this just a reflection of where the economy is and um, they kind and once the economy, improves the business should improve.

Speaker Change: Yeah, thanks kartik. We still believe that. You know, this is largely

To the uh, economic cycle.

Speaker Change: Um, issue from that Regional perspective, this is all to do with a very tough operating environment due to economic and geopolitical headwinds. Uh that is also then impacting the countries that have the bench model and with the Benchmark model just as Jack talked about earlier comes the drawback that when headwinds are hitting those markets in our operations we leverage, much faster and harder in those markets than we do in other parts of the world. Uh so we would expect those markets to come back once the economy turns around. And in the meantime of course we are from our business perspective, taking all the actions that we need to shore up both Top Line in areas where we can see growth as well as manage the costs so that we are bringing them back to profitability. And just as Jack says, with our latest actions here, we are anticipating an improvement in

Speaker Change: in our performance into the third quarter, also in this region,

Speaker Change: Thank you very much. I appreciate it.

Speaker Change: Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open.

Morning.

Hey, Trevor. Uh, we can't really hear you. Uh so um,

Speaker Change: Can you can you try again?

Speaker Change: Sorry honest, hear me now.

Can hear you better now.

Speaker Change: That's better. Okay. Sorry about that.

Um, appreciate you taking the questions. Uh, I I just sit on the uh the German fiscal stimulus of this. But when I have more broadly about Europe um with the the defense and infrastructure spending in it, NATO agreement.

Speaker Change: Um, I think you're direct expense exposure to defense is pretty low but I guess. Um, just wanted to ask for your thoughts on what the flow through could be to, you know, industrial manufacturing other verticals any way to think about. Um you know what that benefit could be like and and how long that could take to some materialize.

Speaker Change: Yeah, thanks Trevor. So overall broadly speaking the investment in Defence and infrastructure into Europe. We feel will have a good effect into the broader economy as well. So not only in those industry verticals but also in to manufacturing where we of course have a very strong presence and actually in defense we have a very strong presence in um in Europe in particular, in France, and in Italy, and Israel and other parts, we are very strongly around.

Represented it is, it is in the low, lower single digits, uh, Revenue numbers as far as our Global exposure is concerned. But for Europe, we see our ability to really benefit from these Investments and have a, uh, material impact to us in Europe. When the funds come through to be, uh, promising and that's what the teams are working on. So, we think these are great industry verticals. Uh, for us, we're positioning, uh, our teams to ensure that we are, we are taking share and continue to be very well represented in those, in those sectors, uh, going forward. But there is a delay in terms of when the funds will actually start to flow through in manufacturing, uh, activity. That will be noticeable. But when we look at how our business for instance in Sweden is seeing an increase in demand. How we're seeing an increase in demand in France we can start to see the beginnings of something, which we think will be

Speaker Change: A great opportunity for our teams.

Speaker Change: Great, thanks for that yonas uh and then for follow asked uh back to the US manufacturing. How are you thinking about the opportunity before reassuring? I guess, you know, 3 months out from the Tariff roll out. Just curious if you're hearing any clients kind of saying that they're, you know, increasing confidence or or maybe starting to, to want to increase manufacturing activity more in the US.

Speaker Change: Uh, positive business environment. So they are many of them thinking about expanding their manufacturing base uh here in the US which of course from our perspective uh could be very beneficial here in the US and from the Manpower business perspective as well. Now the kinds of jobs that are coming back and the volume of jobs is yet to be determined because of course, the jobs that, you know, are being brought in, in many cases are skilled jobs uh that are leveraging automated manufacturing processes. So in terms of the number of jobs that are coming in that that Still Remains to be seen, but generally speaking uh companies are talking about investing in the US and adding manufacturing capacity and we feel that's going to be very beneficial to our Manpower business and to experience business as well as our Talent Solutions business here in the us as well.

Speaker Change: Great, thank you very much. I really appreciate it.

Speaker Change: Thank you. Our next question. Comes from George Tong. With Goldman Sachs. Your line is open.

Speaker Change: All right, thanks. Good morning. You talked about, I talked about taking significant actions, the right size, the business in the UK from a cost perspective are these um costs takeouts focused on Frontline Revenue generators, or the more back office overhead functions.

And George. I, I'd be happy to talk to that and actually it's, uh, it this quarter was really more focused on, uh, France, uh, Netherlands, uh, Germany and the nordics. So really, uh, Netherlands nordics, and Germany, within northern Europe, uh, UK was a focused last quarter as well, but, uh, but to your question regardless, it's been, it's been a mixed candidly. I think there has been parts of the business, uh, where we've needed to write size, producers to the current demand environment. We've been doing that very carefully. Uh, particularly, when it comes to any sales professionals, we've been extremely cautious, uh, but the reality is, we're demand has been down. Um, you know, we have adjusted some recruiter levels and some of those key markets. Um we are doing a lot in terms of uh you know overall back office in those markets as well. Uh you can see that in our national head office

Speaker Change: Uh, so outside of the business, all the real support functions, uh, We've we've uh, done a uh, some very pretty significant cost actions to make those businesses more efficient and you'll see that come through as we talked about in terms of some of the northern Europe Trends overall as we go into the next quarter. Um, but I'd say it continues to be a balance and we've been very careful uh on the producer side.

Got it that's helpful and then with respect to AI you mentioned not seeing any structural impacts to the labor markets at this time. But that the lag uh from from expiration to to impact could be shorter than other Tech advancements. Uh, in the business where would you expect to see impact if there were to be 1 in a percentage of Revenue could be affected?

Speaker Change: Well, right now George what we're doing, as many other companies are doing is exploring really the possibilities of how we can augment human capability and the results so far. Have been very, very encouraging. I mentioned earlier, our sales targeting engine, which we're deploying, uh, across, uh, Europe right now. It improves our accuracy and, uh, determining which prospects are likely to give better, uh, Revenue opportunities and higher likelihood of generating an order that's being very helpful. We've deployed, uh, through our, uh, a uh, Sophie, uh, AI technology, uh, the ability to

Speaker Change: Have a virtual recruiting assistant, that automates the candidate screening short list and ranks the candidates through a chatbot interview providing great user experiences for the candidates, uh, more than half of the candidates are fulfilling their candidate interview requirements, you know, off off off working hours, uh, in, in their own time and we see great productivity improvements there as well to the tune of 2, to 3 times, more effective time used by our uh producers. And then we have our own um, assistant in terms of generating and enhancing job description, candidate, submittals, and things like that. Uh, that is really deployed across the world today and what we're seeing in our point-to-point improvements in recruiter tasks.

Speaker Change: With many other companies whilst we see excellent. Uh, opportunities in specific tasks that recruiters do the impact really to have full effect on productivity needs to come through process transformation and leveraging, agentic Ai and automating, various steps. And I would say we're in early process of that. Now, that we're really seeing some very good progress on the individual tasks, and what the impact can be. The last thing I would say though, George is that we're really starting to see tangible impact in terms of leveraging, our data, and we have a database of tens of billions of data points that we're starting to generate insights for, uh, our clients and our candidates, and our own internal sales and recruitment, uh, team members, so that we can generate much better outcomes for our clients and we're early on in that Journey.

Speaker Change: Journey. But we are very encouraged by the progress that we're seeing and the reaction that we're getting from clients, especially in an environment. That's moving very, very quickly.

Speaker Change: George, I would just add to your point on in terms of impact on revenues and so forth from AI still very, very early days, I think as Jonas has talked about. We do know that coding at very basic levels is more exposed. I think the important thing for us is we do not run a bench, uh, in terms of those skill sets. So the key for us is pivoting our recruiters to recruit the. It skills that are in demand from our clients. And uh, I would say that's not a overly significant part of our revenues um, today uh, to begin with, but as we move forward, I think that is going to be uh, the way we look at recruiting um, for technology skills going forward.

That's helpful and just a quick follow-up there. Uh, would you see the clerical part of your business as potentially exposed? So administrative support or clerical from a white collar perspective and how big of the business is that

Speaker Change: You know, George largely, our view is that the AI will augment human capability and clerical roles, you know, have evolved over decades and you know, become more productive with the help of Technology tools. Like, you know, the time um, you know, the PC, the Advent of the PC from a typewriter and, you know, M Microsoft tools that really improve productivity in terms of Excel and, you know, other other things. So we would see this um, much in the same in the same light. The key from our business perspective is to

Speaker Change: To understand. Where are we today? Where are the skills of the future? What are our clients needs? And then make sure that we pivot in terms of being able to provide and create those skills so that we can help. Uh the companies navigate this rapidly changing environment as well as helping people find meaningful and sustainable employment in the areas that are growing faster. So this is this is what our business is all about. We are now being helped with data and insights and to a degree in scale that we've never seen before. And uh just as we we said in our prepared remarks, this is a very, very promising, Evolution for our business and we think there's some great opportunities for us going forward in this area as well.

Speaker Change: Very helpful. Thank you.

Stephanie Moore: Thank you. Our next question, comes from Stephanie Moore with Jeffrey's. Your line is open.

Stephanie Moore: Yes. Hi, good morning. I was hoping you could talk a bit about how perm activity trended. As actually the quarter progressed, if there were any meaningful changes, um, particularly in the US just given ongoing tariff conversations and then, you know, the same in the same vein, you know, what your expectations are for perm, as you look to the third quarter, thank you.

Thanks Stephanie. Uh, and I'd be happy to take that. So the way I would say is perm, was relatively stable overall on a Consolidated basis. I think if you look

In the US US actually saw um kind of flattish perm on an overall basis uh very very slight growth. Um, so you know that, you know, well that's a sign of stabilization as well, and I'd say in Europe,

Kind of in line with what we expected. Um, we we've seen stable levels and, and that's still walking into a slight year-over-year, decline in many of those markets. But I think the key point is from activity levels, relatively stable. So, a bit of the reset was in q1, slightly lower. And from that level, we've actually seen it be quite stable. And as we look at Q3, we're kind of projecting more of the same. We're not, we're not anticipating that. Uh, it's going to, uh, change dramatically, but we are anticipating stability at these lower levels, um, into the third quarter, and that's what you see in our guide.

Stephanie Moore: Very helpful. Thank you.

Josh Chan: Thank you. Our next question comes from Josh Chan with UBS. Your line is open.

Josh Chan: Hi, good morning, yonas and Jack. Um I guess my first question is on your tone. It it sounds like you feel better about the trajectory of the business. Um I I guess at the same time the the macro Clarity, probably hasn't improved very much, so I'm trying to triangulate, you know, see if you can reconcile those 2 and where you see the trajectory going from here kind of a after this, uh, stabilization period that you call, thank you.

Speaker Change: Well, thanks Josh. And yes, as you can, as you can tell, you know, whenever we can think of a moment and in our guide of a flat organic days, adjusted, uh, Outlook that is a change from what we've had to, uh, guide to for quite some time now. So we are feeling better about this, but mostly it is based on what we are hearing from our clients.

Speaker Change: And we've talked in the past about how important employer confidence is in terms of their hiring intentions. And from our internal data, we can tell that clients are looking through the noise and are more interested in the signals of what is changing. I also believe that they are getting used to an environment of high levels of noise and new noise on a very regular basis but that that doesn't necessarily translate into a a reality

Speaker Change: Ity in the market. So therefore their, uh, confidence into, uh, the future appears to be stabilizing. And, of course, you know stabilization, uh, as long as things, stay the same and no, actual major, uh, changes are occurring. Uh, is, of course, followed by a period of hopefully, uh, some more positive demand environment. And we then look at markets like the US where we're starting to see that occur in, in Manpower. We're driving. A lot of that. Our

Speaker Change: Broadly speaking, we're seeing it in Manpower, we're seeing it in Talent Solutions. We have strong performance in parts of southern Europe like Italy. Uh and and Spain uh we see asia-pacific as well as Latin continuing to have strong environment. It gives us a sense and increased sense of optimism that we could be heading in the right direction. And and to be clear, we're not calling the inflection point. We think that's a Fool's errand. We'll see what the market uh, does. But I think you can tell from what we're hearing from our clients, uh, their level of confidence is improving. And that's the reason and the underlying, uh, foundational element as to why we're believing in the market is stabilizing, in many cases at lower levels, but that's a starting point that's the foundation for uh, future opportunities.

Speaker Change: Of growth, we hope, uh, into the future.

Speaker Change: That's a great caller, thank you. Um, and then my follow-up, um, quickly on free cash flow. Um, I Know Jack that pre-cast will use is usually negative in the first half but I guess could you talk to the magnitude of negativity in this first half and relatedly? Do you expect to recoup some of that in the second half? Or do we expect the second half to be relatively normal so to speak?

Yeah, no. Thanks for the question, Josh. Yeah.

Speaker Change: Over the last 4 years. Uh, and every year, I think, over the last 3 years, it's been somewhere in the range of 150 to what you see here in the current quarter just above 200. So, um, that has been post-pandemic a little bit of the trend that that we have been seeing with larger outflows in the second quarter. Um, I think this year, you know, as we talked about last quarter, the first quarter was influenced a bit by the timing of the MSP, uh, program. You know, we have 1 of the largest MSP programs in the world and that does cost some volatility, um, specifically. And we saw that from Q4 into q1 with all that being said, um, we had very strong free cash flow in the second half of last year. Uh, we would expect similar Dynamics again. This year. I think the MSP program usually works itself out over the course of a year. So we'd expect to see that in the second half uh work itself out as well. So that

Speaker Change: That's the way I would think about free cash flow in the second half.

Speaker Change: Great, thank you both, for the caller and the time.

Thank you. We have time for 1 last question and that question comes from. Toby summer with truist. Your line is open.

Speaker Change: Good morning. This is Tyler. Baron for Toby. Um, could you discuss the implications of a ceasefire or the end of the Russia Ukraine war and any other events in Europe that we that could be sources of upside for you?

Speaker Change: Well, thanks, Tyler. I think it's hard to tell exactly what the consequences would be. But of course, having a war going on in Europe is causing great constan and uncertainty for employers. It is also having negative economic impacts in terms of, uh, the price of the energy and, uh, the ability thus of manufacturing to absorb those those costs.

Speaker Change: So, we think a ceasefire on the European continent and the particular on Ukraine would, would be very beneficial in terms of providing greater confidence for Employers, in terms of how the European economy, uh, can, uh, start to show. So a bit more momentum

Speaker Change: Got it and then just 1 final 1. I'm the reason uh cut the dividend, what would be the conditions that could raise lead to the dividend being raised again? Thanks

Speaker Change: Yeah, uh, on that, I think we, uh, we talked a little bit about this in the past as well, so, you know, the dividend was reset as we as we announced back in May to the current environment. But, uh, we're very proud of our track record of increases in the dividend in a stable, to improving environment. So really that's it. I think, as, as we see the environment improve, um, then you should expect, uh, we would lean in and start to increase the dividend again like we have in the past, uh, and it's really just a matter of time as we, uh, continue to, uh, see that play out. But, you know, as yah said, 1 step at a time, uh, we're guiding to Flat currently. And, uh, if uh, we continue to see positive momentum going forward, you should expect that would be the case, uh, in terms of dividend plans as well.

Thank you.

Speaker Change: Thank you.

Jonas Freezing: Thank you. I'd like to turn the call back over to Jonas freezing for any closing remarks.

Thanks everyone for participating in this earnings call, we hope you continue to enjoy a nice summer wherever you are and look forward to speaking with you again, on our next earnings call. Thanks everyone.

Jonas Freezing: Thank you for your participation. This does conclude the program, you may now disconnect everyone have a great day.