ManpowerGroup

Welcome to Manpower Group First Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode until the Q&A session of today's conference. This call will be recorded. If you have any objections, please disconnect at this time. And now, I will turn the call over to Manpower Group Chairman and CEO Jonas Friesing. Sir, you may begin.

Welcome to the first quarter conference call for 2023. Our Chief Financial Officer, Jack McGinnis, is with me today. For your convenience, we have included our prepared remarks within the investor relations section of our website at manpowergroup.com. I'll start by going through some of the highlights of the quarter, and Jack will go through the first quarter results and guidance for the second quarter of 2023. And I'll then share some concluding thoughts before we start our Q&A session. Jack will now cover the safe harbor language.

Good morning, everyone. This conference call includes forward-looking statements, including statements 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. We assume no obligation to update or revise any forward-looking statements. Slide two of our earnings release presentation further identifies forward-looking statements made in this call and factors that may cause our actual results to differ materially and information regarding reconciliation of non-GAAP measures.

Thanks, Jack. In a previous earnings call, we reported that our organizations remained focused on maintaining and augmenting headcount for essential talent, though we were also seeing softening of demand for staffing services due to the increased economic uncertainty. This softening trend continued into the first quarter of this year, with demand for staffing services slowing further, most notably in the U.S. Europe continued to experience the modest decrease in demand in most major markets during the quarter, following a trend that started early in 2022. After months of remarkably strong U.S. labor market, we're now seeing more companies across various industries recalibrating their workforces after a period of bullish hiring, shifting their focus towards more intentional hiring for specialist skills and in-demand roles, delaying hiring decisions, and reducing their demand for contingent workforce, in line with dynamics we have seen in past economic slowdowns. Although this cautious environment is resulting in lower volumes of staffing activity in the U.S. and Europe, we continue to support our clients by delivering the in-demand specialist resources they need in this environment. They're also playing a big role in replenishing the permanent workforce in critical parts of their businesses. It is important to note that business trends in Asia Pacific, the Middle East, and Latin America continue to be quite robust and helped offset the more challenging environment in the U.S. and Europe, illustrating the advantage of our geographically diversified market presence. I just finished business review meetings on the ground in our Asia and Latin America businesses, and I'll talk more about that later. Turning to our financial results, in the first quarter, the revenue was $4.8 billion, down 2% year-over-year in counts and currencies. Our reported EBITDA for the quarter was $127 million. Adjusting for restructuring costs, EBITDA was $133 million, representing an 11% decrease in constant currency year-over-year. Reported EBITDA margin was 2.7%, and adjusted EBITDA margin was 2.8%. Earnings per diluted share were $1.51 on a reported basis and $1.61 on an adjusted basis. Adjusted earnings per share were down 7% year-over-year in constant currency. Our clients have indicated that despite the slowing environment, core business transformation must continue, underscoring the need for different and more advanced skills. Our own quarterly MAMPA Group Employment Survey data shows employers plan to continue hiring mission-critical talent, given shortages for in-demand roles are at record levels. This demand for talent is evidenced by ongoing strong growth in permanent recruitment in many of our largest markets, including the UK, France, Italy, Japan, Spain, and the Nordics, among others. We'll now pass to Jack to share more details on the financials.

Thanks, Jonas. Revenues in the first quarter came in between the low end and the midpoint of our constant currency guidance range. Gross profit margin came in at the high end of our guidance range. As adjusted, EBITDA was $133 million, representing an 11% decrease in constant currency compared to the prior year period. As adjusted, EBITDA margin was 2.8% and came in at the midpoint of our guidance range. representing 30 basis points of decline year-over-year. Through the strengthening of the dollar, year-over-year foreign currency movements continue to have a significant impact on our results. It's important to note that our businesses operate in local currencies, and as a result, foreign currency translation does not impact cash flow activity within our businesses and is largely an accounting item based on reporting translation into U.S. dollars. Foreign currency translation drove about 5.5 percent swing between the U.S. dollar reported revenue trend and the constant currency related trend. After adjusting for the negative impact of foreign exchange rates, our constant currency revenue decreased 2 percent. Organic days adjusted revenue decreased 4 percent in the quarter compared to our guidance of minus 2.5 percent at the midpoint. Lower revenue trend reflected the deteriorating environment during the first quarter particularly across the U.S. and Europe. Turning to the EPS bridge on slide four, reported earnings per share was $1.51, which included 10 cents related to restructuring costs. Excluding restructuring costs, adjusted EPS was $1.61. Walking from our guidance midpoint, our results included a softer operational performance of 4 cents, a lower effective tax rate, which had a positive impact of 1 cent, Foreign currency impact that was one cent better than our guidance due to the strengthening of the euro and the pound during the quarter, and other expenses, which included increased pension plan-related interest costs, had a negative three cent impact. Next, let's review our revenues by business line. Year over year, on an organic currency basis, the Manpower brand reported a revenue decline of 1%. The experience brand declined by 5 percent, and the talent solutions brand reported a revenue decline of 1 percent. The experience decline was driven by lower volumes from enterprise clients as we anniversary significant growth in the prior year. Within talent solutions, we saw modest year-over-year revenue decline in RPO as we anniversary exceptional levels of permanent hiring across our key markets in the prior year period. Our MSP business saw revenue declines in the quarter as we reduced certain lower margin activity, while Wright Management experienced significant revenue growth on higher outplacement volumes in the quarter compared to low levels in the prior year. Looking at our gross profit margin in detail, our gross margin came in at 18.2 percent. Staffing margin contributed to a 40 basis point increase as Experis and Manpower both experienced staffing margin expansion. Permanent recruitment, including Talent Solutions RPO, contributed 10 basis point GP margin reduction as permanent hiring demand continued at reduced levels from the exceptional activity in the prior year period. Favorable direct cost adjustments, primarily in the U.S., contributed 10 basis points in the quarter. Right management career transition within Talent Solutions contributed 20 basis points of improvement, and other items represented a positive 20 basis points. Moving on to our gross profit by business line, during the quarter, the Manpower brand comprised 56% of gross profit. Our experienced professional business comprised 27%, and talent solutions comprised 17%. During the quarter, our consolidated gross profit increased 1% on an organic constant currency basis year over year. Our Manpower brand reported an organic gross profit increase of 2% in constant currency year over year. Organic gross profit in our experience brand decreased 2 percent in constant currency year-over-year. Organic gross profit in talent solutions increased 1 percent in constant currency year-over-year. This was driven by significant growth in right management. Gross profit in RPO decreased in the mid to high single-digit percentage range in the quarter as we anniversary record levels of permanent hiring activity in the prior year period, while MSP experienced a slight GP decline during the quarter. Reported SG&A expense in the quarter was $745 million. Excluding restructuring costs, SG&A was 3 percent higher year-over-year on an organic constant currency basis, down from the 4 percent growth in the fourth quarter on the same basis. This reflects a balance of cost reductions in areas of slowing demand while we continue to invest in strategic digitization initiatives, as well as growth opportunities, most notably including experience, talent solutions, and specialty skills in manpower. The underlying increases consisted of operational costs of $25 million, incremental costs related to net acquisitions and dispositions of businesses of $3 million, offset by currency changes of $35 million. Adjusted SG&A expenses as a percentage of revenue represented 15.4 percent in constant currency in the first quarter, reflecting lowered operational leverage on the revenue decline. Restructuring costs totaled $7 million. The America segment comprised 24 percent of consolidated revenue. Revenue in the quarter was $1.1 billion, representing a decrease of 6 percent compared to the prior year period on a constant currency basis. Reported OUP was $49 million and includes $1 million of restructuring costs. As adjusted, OUP was $50 million and OUP margin was 4.4 percent. The U.S. is the largest country in the America segment, comprising 68 percent of segment revenues. Revenue in the U.S. was $770 million during the quarter, representing a 13 percent days adjusted decrease compared to the prior year. As adjusted to exclude restructuring costs, OUP for our U.S. business was $32 million in the quarter, representing a decrease of 49 percent. As adjusted, OUP margin was 4.1 percent. Within the U.S., the Manpower brand comprised 25 percent of gross profit during the quarter. Revenue for the Manpower brand in the U.S. decreased 15 percent on a days-adjusted basis during the quarter, representing a decline from the 8 percent decrease in the fourth quarter. Manufacturing PMI in the U.S. continued to decline during the first quarter from the 48 range in December to the 46 range in March. Our U.S. Manpower business experienced a progressive pullback in demand during the course of the quarter. The experience brand in the U.S. comprised 45 percent of gross profit in the quarter. Within experience in the U.S., IT skills comprised approximately 90 percent of revenues. On a day's adjusted basis, experience U.S. revenue decreased 12 percent as we anniversary peak 2022 growth of 33 percent organically in the year-ago period. As referenced earlier, the year-ago period experienced dramatic growth from enterprise clients for which activity levels are lower in the current period. Account solutions in the U.S. contributed 30 percent of gross profit and experienced revenue decline of 15 percent in the quarter. This was driven by a decrease in RPO revenues in the U.S. as permanent hiring programs continued at lower levels in the first quarter as we anniversary the exceptional growth in the prior year. Although RPO activity is lower in the current environment, first quarter RPO revenues were well above pre-pandemic levels. The US MSP business saw revenue decline as we reduced some lower margin activity, while outplacement activity within our right management business drove significant revenue increases. In the second quarter of 2023, we expect a similar to slightly higher rate of year-over-year revenue decline as compared to the first quarter trend in the US. Southern Europe revenue comprised 43 percent of consolidated revenue in the quarter. Revenue in Southern Europe came in at $2.1 billion, representing a 2 percent decrease in organic constant currency. OUP for our Southern Europe business was $90 million during the quarter, representing an OUP margin of 4.4 percent, excluding some minor restructuring. France revenue comprised 57 percent of the Southern Europe segment in the quarter, and revenue equaled $1.2 billion in the quarter and was flat on a days-adjusted organic constant currency basis. OUP for our France business was 45 million in the quarter, representing an organic decrease of 8 percent in constant currency. OUP margin was 3.8 percent. We are estimating the year-over-year constant currency revenue trend in the second quarter for France to be a slight decrease year-over-year. Revenue in Italy equaled 422 million in the quarter, reflecting a decrease of 3 percent on a days-adjusted constant currency basis. OUP equaled 31 million, and OUP margin was 7.3 percent. We estimate in constant currency that Italy will have a flat to slight growth revenue trend year-over-year in the second quarter. Our Northern Europe segment comprised 20 percent of consolidated revenue in the quarter. Revenue of 968 million represented a 3 percent decline in organic constant currency. After excluding restructuring costs, Adjusted OEP was 8 million, and OEP margin was 0.8 percent. Our largest market in the Northern Europe segment is the U.K., which represented 35 percent of segment revenues in the quarter. During the quarter, U.K. revenues decreased 12 percent on a days-adjusted constant currency basis. This reflects a higher rate of decline from the fourth quarter decrease of 6 percent on the same basis. We expect a slightly lower rate of revenue decline in the second quarter compared to the first quarter. In Germany, revenues increased 1 percent in days adjusted constant currency in the quarter, representing two consecutive quarters of improvement driven by our manpower business. Our Germany managed services pro servia business continues to require significant management attention and actions to improve performance. We are in the process of performing a detailed evaluation of the pro servio business and will provide a further update in future periods. Overall, in the second quarter, we are expecting slightly improved year-over-year revenue growth compared to the first quarter trend. The Netherlands is one of our smaller businesses in Northern Europe. The revenue decrease in the first quarter of 7 percent days adjusted constant currency was a slightly higher rate of decline than the fourth quarter trend of minus 5 percent on the same basis. The Asia Pacific Middle East segment comprises 13 percent of total company revenue. In the quarter, revenue grew 7 percent in constant currency to $606 million. As adjusted to exclude restructuring, OUP was $24 million, and OUP margin was 3.9 percent. Restructuring charges of $2.5 million related to our Australia business. Our largest market in the APME segment is Japan, which represented 47 percent of segment revenues in the quarter. Revenue in Japan grew 13 percent in constant currency, or 11 percent on a days-adjusted basis. We remain very pleased with the consistent performance of our Japan business. We expect continued strong revenue growth in the second quarter. I'll now turn to cash flow and balance sheet. In the first quarter, free cash flow equaled $111 million, compared to $52 million in the prior year. At the end of the first quarter, day sales outstanding decreased about half a day to 56 days. During the first quarter, capital expenditures represented 13 million. During the first quarter, we repurchased 369,000 shares of stock for $30 million. As of March 31st, we have 1.6 million shares remaining for repurchase under the share program approved in August of 2021. Our balance sheet ended the quarter with cash of $707 million and total debt of $989 million. Net debt equaled $282 million at quarter end. Our debt ratios at quarter end reflect total adjusted gross debt to trailing 12 months adjusted EBITDA of 1.38 and total debt to total capitalization at 28 percent. Our debt and credit facilities remain unchanged during the quarter. After successfully lengthening our debt duration profile with the Euro note executed in mid-2022, we exit the quarter with a very strong balance sheet. Next, I'll review our outlook for the second quarter of 2023. Based on trends in the first quarter and April activity to date, our forecast is cautious and anticipates that the second quarter will continue to be challenging in the U.S. and Europe. We are forecasting underlying earnings per share for the second quarter to be in the range of $1.58 to $1.68, which includes an unfavorable foreign currency impact of 3 cents per share. We have disclosed our foreign currency translation rate estimates at the bottom of the guidance slide. Our constant currency revenue guidance range is between a decrease of 5 percent and 1 percent, and at the midpoint represents a 3 percent decrease. The impact of net acquisitions and less billing days year-over-year is slight, and the organic days adjusted currency revenue trend is the same 3 percent decrease at the midpoint. This is slightly lower than the 4 percent decrease in the first quarter on the same basis as the comparable growth rate stepped down from Q1 to Q2 last year. We expect our EBITDA margin during the second quarter to be down 100 basis points at the midpoint compared to the prior year. We estimate that the effective tax rate for the second quarter will be 30 percent. As usual, our guidance does not incorporate restructuring charges or additional share purchases, and we estimate our weighted average shares to be 51.3 million. I will now turn it back to Jonas.

Thanks, Jack. Although the environment is becoming more challenging, we're doubling down on our strategic initiatives within the pillars of diversification, digitization, and innovation. strengthen our capabilities, and make progress on shifting our business mix to higher value services supported by a market-leading technology platform strategy in all our brands. We continue to make strong progress on diversifying our business with our higher margin brands' experience and talent solutions, making up 44% of gross profit dollars. This, together with our industry-leading geographic footprint and strong balance sheet, leaves us well prepared to weather economic cycles. Within Talent Solutions, although activity levels in RPO and MSP are down from the peaks in the prior year period, gross profit levels remain well above pre-pandemic levels, where our counter-cyclical right management business is currently experiencing significant gross profit growth. As I mentioned, I recently spent time with clients and our leaders in Asia and Latin America, where the economic outlook in both regions continues to be strong. Business conditions are especially conducive to an increased demand for our temporary staffing services. This is very evident across most of our Latin America businesses, where just last week, I had the pleasure of celebrating the 60th anniversary of a very successful business in Chile. As global supply chains normalize and China reopens, The growth outlook in the APME regions is also very bright. Japan, our largest business in the APME region and fifth largest globally, has been extremely resilient post-pandemic, and our business is continuing a strong track record of revenue and profit growth. In fact, our Japan business has had 34 consecutive quarters of constant currency growth, which is remarkable. Congratulations to the Japanese leadership team, who have been laser focused on the growth sectors based on the data and trends we've been predicting and tracking for many years. Specific to digitization, in Q1, we further expanded our global PowerSuite technology platform with the launch of PowerSuite Next for right management in the U.S., Canada, U.K., and Australia. with all main rights management operations planning to be onboarded by the end of 2023. This B2C platform provides talent, career development, and outplacement services with personalized virtual coaching, curated self-help resources, upskilling, and job matching. Furthermore, we're delighted that right management was named a global leader and star performer in Everest Group's recent outplacement and career transition services peak matrix assessments. scoring highly for investments in internal transitions and redeployment offerings, and the creation of a strategic roadmap for the digital delivery of its services. This year, 2023, we celebrate our 75th anniversary. And throughout our history, we have been at the forefront of innovation, helping businesses and workers adapt to new technologies, economic shifts, and social trends. We've never hesitated to move quickly to take advantage of new opportunities. Our experienced leadership team is poised to pivot to where growth lies, and our breadth of diversified solutions across geographic markets will continue to set us apart and help our clients and candidates win in the changing world of work. Our belief that meaningful and sustainable employment has the power to change the world remains central to all we do. In March, we were recognized as one of the world's most ethical companies by Etisphere for the 14th time, the only firm in the industry to be recognized for more than a decade for playing a critical role in driving positive change in societies and communities around the world. As always, we know that a key driver of our success is a great team that doubles down on our priorities and remains focused on the path forward And I'd like to close by thanking our entire MAMPAR Group employee base for their efforts and contributions. Our DDI strategy and our purpose remains our North Star, and being disciplined in our execution is how we will continue to strengthen our capabilities and lay the foundation to create long-term sustainable value for our shareholders. I'd now like to open the line for Q&A. Operator?

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one. Please unmute your phone and record your name and company clearly when prompted. Your name and company are required to introduce your question. To cancel your request, press star two. Once again, to ask a question, please press star one and record your name and company clearly when prompted. To cancel your request, please press star two. Our first question comes from Markon from Baird. Your line is now open.

Good morning, Jonas and Jack. Two big questions. One, can you just describe the pace of change as the quarter unfolded? To what extent was you know, was March worse than, say, February, you know, particularly in the markets that ended up showing weakness like, you know, the U.S. or the U.K.? That's the first question.

Good morning, Mark. Well, we saw U.S. catch up to the European declines we've seen really over the last five quarters recently. Quite quickly, frankly. So the U.S. had the biggest step down during the quarter, followed closely by the U.K. And most of that quick step down came from our enterprise client segment. So larger businesses in the U.S. and the U.K. pulling back. And that's what we saw evolve during the quarter. But maybe, Jack, you want to give a little bit more color on the specifics.

Yes, sure, I'd be happy to. So specifically on the U.S., we saw a gradual deterioration over the course of the quarter that was building through the end of the quarter. So I'd say if you look at that average rate for the quarter of minus 13, we ended the quarter slightly, slightly higher than that. And as I talked about the guide, we expect a similar trend into the second quarter. It might be a tad bit higher as we take that higher rate. Um, so that was the U S I think the UK, you know, uh, fairly constant throughout the quarter. I think, um, you know, the quarter started a little softer and that just carried through the entire way. So when you look at that average for the UK for the quarter, it was pretty, pretty even throughout the entire quarter. And as we look forward for the UK for next quarter, we see it being really kind of stable to, you know, perhaps, you know, maybe just slightly up or down half a percent as we kind of look at that trend. And I'd say maybe just on, you know, the third biggest market for us would be Italy. And Italy actually, on the flip side, strengthened over the course of the quarter. So we saw Italy actually exit the quarter closer to flattish, which was good. And we take that into our second quarter forecast where we think Italy will likely do a bit better than the trend from the first quarter.

Great. And then with regards to the U.S., obviously you mentioned, you know, Experis and the enterprise clients pulling back from, you know, were really high, you know, comparison periods a year ago. How broad-based was that, you know, that pullback in terms of the Experis business you know, either within the U.S. or even globally, and what are your expectations on a go-forward basis with regards to experience in terms of how that could unfold over the second and potentially even third quarters?

Well, as you mentioned, Mark, the pullback that we're seeing in the U.S. comes after very high growth rates in the prior year period. And it is focused on enterprise clients. Our convenience business for experience is holding up much better. And although seeing some declines, you know, it's substantially lower declines than what we're seeing on the enterprise side. So we feel good about the business in experience in the U.S. And the other market that saw the same step down from an enterprise perspective was the U.K., Excluding those two markets, experience showed good growth everywhere else globally. So we continue to feel extremely good about the opportunities for experience as a brand going forward because we see that clients, although pulling back from their very strong investments in technology around digital transformation, they still are going to be undergoing significant digital efforts which is benefiting and will continue to benefit experience going forward and What we're seeing here in the US in particular and to a lesser degree also in the UK is really businesses pulling back from the very strong spending they had a year ago and We feel good about the prospects of experience and we feel very good about our convenience business as well mark and

I would just add, Mark, just a little more context. Experience overall was only down 2% in GP dollars, as we showed on the GP chart in the slide. So although there's some bigger decreases that we talked about in the U.S. and the U.K., which are enterprise-driven, when you look across the global business, actually it's holding up quite well, a modest decline on an overall basis. And as Jonas said, convenience is performing really well. And that includes the attain acquisition, which is holding up very well. And we're actually seeing good growth in certain pockets, particularly in financial services. So a little additional context.

Great. And then if I can squeeze in one last one, just on the guidance overall, the revenue and gross profit guidance is in line with our expectations. But the EBIT guidance is, you know, materially below. What's the driver in terms of just the, with gross profit holding up, what's the driver with the EBIT falling off? Is it just SG&A deleveraging or are there incremental investments that are occurring?

Yeah, thanks, Mark, for that question. You know, I would say the context is the deleveraging. You know, we are seeing a lower revenue trend on a currency basis into the second quarter. As you said, the good news is GP margin is holding up quite well at 18% at the midpoint. But SG&A, and I should say SG&A is coming down. As we talked about in our prepared remarks, organically SG&A was down about was a 3% growth rate, which was down from the 4% growth rate in the fourth quarter. And you should expect that growth rate to continue to come down as part of our guidance for the second quarter. But with that being said, it's not a broad-based reduction across all parts of our business. As we said, and as you can see from the GP dollar trends, the business is still holding up quite well in various parts. So we're still investing in We're looking at, you know, you should expect that GP dollars will decline in the second quarter from the first quarter trend based on the revenues. But, you know, there's still some very good pockets of investment happening in the businesses. We talked about experience in parts of the business that are still seeing some really good growth in financial services. And we did emphasize we continue to invest in digitization in our technology platforms. So, We think that's a strategic advantage for us. We believe we have a leading technology global platform, and we're doing more than the front office. We're doing back office as well. And so all of that equates to continued steady investment in digitization. And as a result, although the SG&A trend will continue to improve in the second quarter, we're not in an environment where we're taking broad-based dramatic reductions based on the fact that the market's still holding up relatively well in certain areas.

Great. Thank you.

Thank you. Our next question comes from Jeff Filber of BMO Capital Markets. Your line is now open.

Thank you so much. You've given us some color by geography and by client size. I'm wondering if we can get a little bit more color by industry verticals, specifically in the UK and Europe.

As you heard in our prepared remarks, Jeff, we feel very good about our business in Latin America and Asia Pacific. They're continuing to grow. And having just visited Asia as well as Latin America recently, our clients are still looking for talent. The labor markets are tight and the opportunities are plentiful. When it comes to Europe and the U.S., as you heard us talk about in our prepared remarks, you know, Europe started to decline in the first quarter of 2022 and has really been on a path of modest decreases in demand overall. And, you know, that's a continuation of a trend that we see now into the first as well as in our projections into the second quarter as well. The U.S. is the part of the geography that made the biggest step down. And as you've just heard us discuss, a lot of that comes from enterprise clients deciding that the economic outlook is uncertain. They are holding on to their workforces, which is why you see our PERM numbers still looking very strong. And frankly, we're having very good PERM growth in the U.K., France, Italy, Japan, Spain, Nordics, amongst others. But they are pulling back on contingent staffing demand because they are preparing for worsening economic times. So very similar to what we would expect and what we have seen in past economic slowdowns. And that's really the story. So the U.S. caught up to Europe at a faster pace, which is also something we would expect as the U.S. is a much more dynamic labor market. and tends to react quicker to shifts in the economic cycle. I'm sorry, please, go ahead, Jeff.

No, Jeff, since you specifically mentioned the UK, I would just add from an industry vertical perspective, public sector is big in the UK. That's about a third of the business. That's holding up fairly well. But as you know, the U.K. is a big enterprise market, a lot of enterprise clients in the U.K., and that's really the pressure we're seeing. We talked about experience. It is the second biggest experience market, and that's where the pressure has been more on the enterprise side and within the verticals, probably a bit more on the technology side in terms of technology enterprise clients. So I would just add that.

That's helpful. And can we get that kind of color in the U.S. and Europe as well? That was actually my question.

Yeah, I'd say in the U.S., similar. I think where we're seeing the pressure is on the enterprise side as we've talked. And I'd say very similar story for experience. I think on the technology enterprise clients, that's where there's more cautious behavior in terms of demand. I think, you know, as we looked, you know, across financial services, we're seeing very strong trends, and that's in both enterprise and convenience sectors. And I'd say, you know, other verticals that are seeing strength would be on the manufacturing side, food continues to be fairly stable. Auto, we're not big in auto in the U.S. specifically, but auto across Europe in the large markets there are France and Germany and the Nordics is actually coming back. So we're seeing improving trends in auto. we're seeing more pressure consistent with what we said last quarter. It's going to be logistics, transportation, construction. And generally, I'd say enterprise manufacturing that are not auto and not food-related are generally seeing pressure. And that correlates to what Jonas talked about in terms of the PMI trends as well.

Okay. That's really helpful. Thanks so much, Jack.

Thank you. Our next question comes from Kartik Mehta of North Coast Research. Your line is now open.

Thank you. Hey, good morning. Jack, you know, as you indicated, you've done a good job in maintaining the gross margin, gross profit dollars especially. I'm thinking, you know, as we go forward and if the trends continue this way throughout the year, your ability to kind of maintain gross margin and then just to You know, what you think might happen on the SG&A side as you think about if you need to right-size the business at all?

Yeah, thanks, Kartik. I would say on the, you know, the good news is that staffing margins held up quite nicely despite the pullback in demand. And that trend's continuing. And we talked a lot about that last quarter. You can see in the GP margin walk that that continues to be the case. So we feel really good about that, and you can see that in the guide into Q2 from a GP margin. I think as we think about GP margin, you know, one of the factors is going to be PERM, right? So PERM was still, as Jonas talked about, was still very strong outside of some of the U.S. trends. In the U.S., we're really just anniversarying, you know, exceptional growth, but very good. PERM continues to be very strong in a lot of our European markets. in Asian markets, and we see that continuing. And that is the result of a lot of investment we've made in PERM in those markets, and that's paying off for us currently. So I think PERM, as part of the equation, will continue to anniversary some record levels. We actually hit our peak record all time of PERM GP dollars in Q2 of last year. So it's natural to expect PERM to continue to come off a bit in terms of year-over-year trends. But I think it's still a pretty substantial part of the overall GP equation. So as we go forward through the year, I think when we look at the staffing margin, the mix of the clients are going to be part of the equation. We talked about more pressure from enterprise. That means that the convenience side is becoming a little bit bigger piece of the pie, and that's positive for staffing margin. So we'll have to continue to monitor it, but I think the good news is, as Jonas talked about, the labor market overall is still holding up quite well, and that's helping in terms of talent and pricing for talent. And so we feel pretty optimistic about staffing margin, even in an environment that is continuing to see more pressure going forward.

And then on SG&A, just Jack, your thoughts on, I know you talked about that that should continue to grow, decelerate, and I'm wondering as you look at the business and if you need to right-size it or what you think the outlook there could be.

Yeah, no, absolutely. I think, you know, our track record and our playbook is if we do see significant declines, in GP dollars, you should expect we're going to move into more dramatic cost actions. And so, in that case, you know, we move into recovery ratio management. That means for the GP dollar declines, our goal is to offset half of the GP dollar declines with SG&A reductions. Now, with that being said, you know, the context of the current environment is we still grew GP dollars in the first quarter. 1% as we disclosed on the GP chart. And even though we're moving in Q2 into a modest decrease, it's still a pretty balanced environment overall in various parts of the business. So we're not in the dramatic broad-based SG&A reduction territory yet based on the environment. However, if the environment moves in that direction, you should expect we'll do what we always do, and we'll take appropriate actions to preserve margin to the greatest degree possible. So it's really going to depend on how the environment continues to unfold. We are doing it already in parts of the business that have seen more broad pullbacks, but in other parts of the business that are holding up pretty well, we're still investing. So it's going to be a balance, and if we see broader changes, we'll react accordingly.

And just one last question, Yunus. You know, you talked about, I think, meeting with clients in Europe, and I'm wondering your thoughts on France concerning some of the unrest that they've seen and how that might be impacting the business, if at all.

Well, Karthik, the unrest in France and the debate around the pension reforms and all of that that you've seen has actually had very little impact so far on our business in France. You know, the strikes... have an impact in that it makes it difficult for the workers to get to their assignments. But since there haven't been broad-based long-term strikes, but rather day interruptions, the business has been able to manage it very well. And the learnings that we had from the pandemic means that many of our workers for some assignments are able to do their work remotely as well. The French team has managed a difficult environment in a very good way, and it was very encouraging to see as well that France is generally flattish in terms of its trend, following a slightly softening market demand, as you've seen from other data points as well. So the French team is doing a good job, and we've not really seen a major impact on those strikes in the past. and we hope that the debate now with the decision to increase the pension reform is going to calm down the protests that we've seen and that France can continue on its path, all reasonably good growth, although pressured on PMI, but we feel with very good reforms in place and conducive to good growth in the future.

Thank you both. I appreciate it.

Thank you. Our next question comes from the line of Stephanie Yee from JP Morgan. Your line is now open.

Hi, good morning. I'm stepping in for Andrew Steierman. Just a question on France in particular. So in the first quarter, it seemed like France did better than what you were expecting coming into the quarter. And now we're kind of expecting a slight revenue decrease in the second quarter. I was wondering if you can comment on maybe what the March or April trends were in France and any impact or decelerating you're seeing on the wage pricing front.

Stephanie, thanks for the question. Yeah, I would say, you know, France, based on the trends during the quarter, we exited the quarter, you know, close to, flattish to slightly down. on an overall basis, and we take that into the second quarter guidance, anticipating a little more pressure based on what we've been seeing in some of the weeklies here in April. I'd say, you know, the only caveat on the weeklies in April, we do have some mismatch with Easter timing year over year and so forth, which impacts some of the weekly trends we've been seeing. But I would say, you know, it's a fair point, and we're being a bit cautious based on the fact that Although France has held up okay versus our guidance in Q1, we have seen a progressive step down over the last couple quarters. So that's a little bit in terms of what's happening. I think in terms of your second item related to, you know, getting at, you know, bill pay spreads and wage inflation, you know, France is holding up quite well. So when we look at margin and staffing margin, you know, France was part of that improvement year over year. So, you know, we feel good about pricing and the environment, and we feel good in terms of bill pay spreads on an overall basis in France.

Okay. Okay, great. Thank you.

Thank you. Our next question comes from George Tong of Goldman Sachs. Your line is not open.

Hi. Thanks. Good morning. You mentioned that the poll hiring in late decisions in line with the dynamics you've seen in past economic slowdowns. From a macro perspective, can you discuss how this pullback compares with past cycles and what macro assumptions in the U.S. view you're embedding into your 2Q guide?

Hey, George, we couldn't hear you perfectly, but I think you're asking how does this slowdown in demand and softening in the markets affect compared to prior cycles that we've experienced in our now 75-year history. Is that correct?

Yes, that's right.

And it's a great question because as we look at the last slowdowns and recessions, they were very strong. So the great financial recession and the recessions we saw related to the pandemic. Clearly, we don't know what the economic cycle is going to be. But if we do look at our past economic cycles and our current data, this tends to indicate that we are in a garden variety recession. By that, I mean a shallow economic slowdown or recession. And it harks back maybe, it's a little bit of back to the future where employers aware of the need for talent, the tight labor markets, hold on to their workforces to a greater degree than what we've seen in the last two big recessions. And they are very careful in their hiring. They're delaying their hiring decisions, but they're really anticipating, through their behaviors, a shorter and shallower slowdown slash recession. so that they have enough firepower to come back and meet the demands for their products and services when the recession abates and the economic growth starts to accelerate again. So that's how I would characterize our view, and it's exactly why you're hearing Jack discuss our position on our SG&A. We're very careful in terms of our own hiring. We're very focused on productivity, but we keep on investing in the opportunities that we see, whether they be in perm and experience and talent solutions. So we want to make sure that we're positioned for good growth when the market comes back, but we're very cautious at this time because the economic uncertainty is getting higher and some of the headwinds are really coming through in the demand drops that we are seeing. So hopefully that gives you a little bit of our view when we compare this environment to our experience from past economic cycles.

Yes, that's very helpful. Thank you. And on the margin front, you've got down 100 bps per year in the second quarter. which specific areas of the business are you scaling back spending and which areas are you maintaining or increasing investment levels?

George, yeah, I can talk to that. So, you know, I think on the EBITDA down 100 basis points, and maybe a little context for that is the other point to remember is we had dramatic growth a year ago in EBITDA margin from Q1 to Q2. So we went up 70 basis points from Q1 to Q2. Q2 actually was our high watermark and EBITDA margin on an overall basis at 3.8% last year. So we're anniversarying that as part of this. And we have the opposite impact from a year ago where the environment was improving and we were getting better operational leverage. And we have the opposite now where it's, you know, it's, it's declining in certain markets that we've talked about, offset by strength in others, but a different dynamic on an overall basis, which is why the EBITDA margin is coming off to the degree that we're forecasting. So in terms of where we're taking actions on an overall basis, you know, you could see, I'd say our FTE continues to go down. FTE from year end to the end of the first quarter, Our head count is down about 2%. We did talk about in the fourth quarter about the fact that we took head count down sequentially from the third quarter. We continued that again to a greater degree. And you should expect that trend to continue based on the actions we've taken. If we look at our biggest markets where we're taking FTEs down based on the environment and the parts of the business that aren't seeing the correlated demand, that's going to be the U.S., that's going to be the U.K., it's going to be various other markets in Europe. And as you would expect in this environment of negative revenues, you should expect that in the global functions and the corporate parts of the business, we have hiring freezes going on. We're pulling back in discretionary spend. So those are the actions we're taking. And as I mentioned, if the environment continues to decrease further, then you should expect we'll take further actions as well.

Very awesome. Thank you.

Thank you. Our next question comes from Manav Patnaik of Barclays. Your line is now open.

Hi, good morning. How are you? This is actually Roni Kennedy. I'm from Manav. Thank you for taking my question. If I may follow up to the insight provided in response to George's question with macro and a potential garden variety recession. Last quarter, you used a very helpful analogy of saying companies were beginning to tap the brakes. Others had their foot hovering above the brake pedals. How would you categorize that now? And then also as a follow-up to the assessment of it being garden variety, how do you think the quarters will progress? Will there be continual gradual declines? And do you have any thoughts as to when things could potentially turn around? And then lastly, you know, in this weakened environment, how are industry competitive dynamics? You know, is it more intensely competitive, pricing pressures, et cetera?

I'm glad you liked the analogy that we used last time. So I think I would say more companies are tapping the brake. You companies are hitting the brakes hard. We don't really see that to the degree that we've seen in other economic slowdowns. So you have, as you can see, outside of the U.S., you know, you have... companies that are being more cautious based on their outlook. But there is still demand. There is still good convenience. There is still hiring going on based on the tight labor markets and the demand for higher scale talent. So it's still a conducive environment in terms of opportunities. And that's what we're very focused on to make sure that we have the firepower. And as Jack talked about, clearly we were thinking about our SG&A from a defensive perspective in the areas that don't impact the business where we see the opportunities, but at the same time, we're hiring recruiters and we're hiring salespeople because it's important that we maintain our strength in the market. So I think that's sort of our view. And in terms of the progression around the quarter, I let Jack talk about that, but I think overall we're essentially adopting a cautious stance in terms of looking for a slight further softening based on what we've seen at the beginning of the second quarter. Jack, maybe you'd like to provide some more color.

Yeah, I would just say briefly, that is, Ronan, what you're seeing in our projection. You're seeing a slight decrease in constant currency revenues into the second quarter. As we look at, if we go back another quarter, you see us going from that minus 2.5% to 4% on an organic ADR basis. So these movements are relatively modest in terms of the degree of revenue change, and that's reflecting the environment. So parts of the environment are moving forward. more significantly than others. We're seeing that as we talked about, um, you know, at length on the enterprise side, but other parts are holding up nicely and we do have the balance of, uh, some of our European businesses actually continuing to perform quite nicely. And I'd put, definitely put Italy in that camp, despite some modest revenue decline in the quarter. So, um, and we would expect, you know, based on everything we're seeing now, we would expect that trend, that kind of lighter, uh, decrease, uh, to continue.

Thank you. May I confirm the competitive dynamics within the industry and if you know any particular insights by brand and kind of a weaker macro environment?

Generally, I'd say that competitive dynamics remain competitive but rational. So we know that demand for talent that companies are hiring remains strong and labor markets are tight. So the pricing environment, thus, is still healthy. We're seeing good pay bill spreads. And, you know, whilst we're seeing some softening in some skill sets, you know, this is still in the context of a tight labor market where there are many open jobs here in the U.S. as well as in Europe and, frankly, globally as well. And we saw this as well in the employer, Manpower Group Employment Outlook Survey, looking into the second quarter. So employers are still intent on hiring talent. And that's why we feel that the environment is still solid and the competitive environment is always competitive but rational at the same time.

Thank you very much. And if I may, as a quick follow-up, can you just cover kind of working capital management, capital allocation, and even business review such as the pro servia in this weakened environment and, you know, as the cycle, as we progress through the cycle, how we should think about that?

I'll let Jack talk about the capital allocation. You mentioned Preservia. On this note, you've seen in our prepared remarks, we're pleased to see that our German business is making progress in a number of our brands, but we are working on solving our Preservia business as well, and that's really where we're focused. We still have some work to do. in Germany to perform the way we would like, and in particular in Preservia, and that's where our focus is right now. But Jack, maybe you'd like to go on to the capital allocation question.

Yeah, and I'll be brief. I know we have a couple other callers that are trying to get in before we end the call. So capital allocation is fairly straightforward. Ronan, I'd say, you know, it continues, no change in strategy. You saw us do the share repurchases during the course of the quarter. Remember, we are opportunistic, so you'll see us do higher volumes when we perceive there to be a very good value, and we'll continue along those lines. The dividend continues to be, you know, our top priority, and a progressive dividend is our strategy in a decent environment. We would consider this an environment where we would have a progressive dividend. And then in terms of M&A and so forth, really no change. I think As we said, we prefer organic growth, but as we've shown in the past, there is room for strategic M&A, particularly in the higher margin parts of our business. You saw us do that with the Attain acquisition back at the end of 2021. Continue to keep our eyes open. That's really what I'd say on capital allocation. Thanks.

Thank you very much. Appreciate it.

Thank you. Our last question comes from Toby Sommer of Truist Securities. Your line is now open.

Hey, good morning. This is Jasper Bivon for Toby. Just one question for me, because I know we're short on time. So on the tax rate, the first half looks a little bit higher than the prior full year expectation at 29%. I know in some of your markets, the tax rate actually might go higher when your OUP margins are under pressure. So Should we be modeling a slightly higher tax rate in the second half of the year than previously expected?

Yeah, thanks, Jasper, for that question. No, I would say the guidance for the second quarter is 30%, which is a tad higher than the full-year guidance. And we came in a little bit better in the first quarter than we anticipated initially. I would say you're exactly right. One of the components of the tax rate is the country mix, and with the volatility we've been seeing, that's added a little bit more volatility to the rate and the forecast for the rate. But with all that being said, we still feel pretty good about the 29% for the full year. So although Q2 is a little bit higher, there's some timing considerations and things like that. I would continue to use 29% for the back half of the year.

That makes sense. Thanks for taking our question.

Okay. That brings us to the end of our first quarter earnings call. Thanks, everyone, for your participation. And we look forward to speaking with you again when we announce our second quarter earnings. Thanks, everyone. Have a good rest of the week.

Thank you. And that concludes today's conference. Thank you for participating. You may now disconnect.

Thank you. you Thank you. Thank you. Thank you.

Welcome to Manpower Group First Quarter Earnings Results Conference Call.

At this time, all participants are in a listen-only mode until the Q&A session of today's conference. This call will be recorded. If you have any objections, please disconnect at this time. And now, I will turn the call over to Manpower Group Chairman and CEO Jonas Friesing. Sir, you may begin.

Welcome to the first quarter conference call for 2023. Our Chief Financial Officer, Jack McGinnis, is with me today. For your convenience, we have included our prepared remarks within the investor relations section of our website at manpowergroup.com. I'll start by going through some of the highlights of the quarter, and Jack will go through the first quarter results and guidance for the second quarter of 2023. And I'll then share some concluding thoughts before we start our Q&A session. Jack will now cover the safe harbor language.

Good morning, everyone. This conference call includes forward-looking statements, including statements 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. We assume no obligation to update or revise any forward-looking statements. Slide two of our earnings release presentation further identifies forward-looking statements made in this call and factors that may cause our actual results to differ materially and information regarding reconciliation of non-GAAP measures.

Thanks, Jack. In a previous earnings call, we reported that organizations remained focused on maintaining and augmenting headcount for essential talent, though we were also seeing softening of demand for staffing services due to the increased economic uncertainty. This softening trend continued into the first quarter of this year, with demand for staffing services slowing further, most notably in the U.S. Europe continued to experience the modest decrease in demand in most major markets during the quarter, following a trend that started early in 2022. After months of remarkably strong U.S. labor market, we're now seeing more companies across various industries recalibrating their workforces after a period of bullish hiring, shifting their focus towards more intentional hiring for specialist skills and in-demand roles, delaying hiring decisions, and reducing their demand for contingent workforce, in line with dynamics we have seen in past economic slowdowns. Although this cautious environment is resulting in lower volumes of staffing activity in the U.S. and Europe, we continue to support our clients by delivering the in-demand specialist resources they need in this environment and are also playing a big role in replenishing the permanent workforce in critical parts of their businesses. It is important to note that business trends in Asia Pacific, the Middle East, and Latin America continue to be quite robust and helped offset the more challenging environment in the U.S. and Europe, illustrating the advantage of our geographically diversified market presence. I just finished business review meetings on the ground in our Asia and Latin America businesses, and I'll talk more about that later. Turning to our financial results, in the first quarter, the revenue was $4.8 billion, down 2 percent year-over-year in counts and currencies. Our reported EBITDA for the quarter was $127 million. Adjusting for restructuring costs, EBITDA was $133 million, representing an 11% decrease in constant currency year-over-year. Reported EBITDA margin was 2.7%, and adjusted EBITDA margin was 2.8%. Earnings per diluted share were $1.51 on a reported basis and $1.61 on an adjusted basis. Adjusted earnings per share were down 7% year-over-year in constant currency. Our clients have indicated that despite the slowing environment, core business transformation must continue, underscoring the need for different and more advanced skills. Our own quarterly MAMPA Group Employment Survey data shows employers plan to continue hiring mission-critical talent, given shortages for in-demand roles are at record levels. This demand for talent is evidenced by ongoing strong growth in permanent recruitment in many of our largest markets, including the UK, France, Italy, Japan, Spain, and the Nordics, among others. We'll now pass to Jack to share more details on the financials.

Thanks, Jonas. Revenues in the first quarter came in between the low end and the midpoint of our constant currency guidance range. Gross profit margin came in at the high end of our guidance range. As adjusted, EBITDA was $133 million, representing an 11% decrease in constant currency compared to the prior year period. As adjusted, EBITDA margin was 2.8% and came in at the midpoint of our guidance range. representing 30 basis points of decline year-over-year. Through the strengthening of the dollar, year-over-year foreign currency movements continue to have a significant impact on our results. It's important to note that our businesses operate in local currencies, and as a result, foreign currency translation does not impact cash flow activity within our businesses and is largely an accounting item based on reporting translation into U.S. dollars. Foreign currency translation drove about 5.5 percent swing between the U.S. dollar reported revenue trend and the constant currency related trend. After adjusting for the negative impact of foreign exchange rates, our constant currency revenue decreased 2 percent. Organic days adjusted revenue decreased 4 percent in the quarter compared to our guidance of minus 2.5 percent at the midpoint. Lower revenue trend reflected the deteriorating environment during the first quarter particularly across the U.S. and Europe. Turning to the EPS bridge on slide four, reported earnings per share was $1.51, which included 10 cents related to restructuring costs. Excluding restructuring costs, adjusted EPS was $1.61. Walking from our guidance midpoint, our results included a softer operational performance of 4 cents, a lower effective tax rate, which had a positive impact of 1 cent, Foreign currency impact that was one cent better than our guidance due to the strengthening of the euro and the pound during the quarter, and other expenses, which included increased pension plan-related interest costs, had a negative three cent impact. Next, let's review our revenues by business line. Year over year, on an organic currency basis, the Manpower brand reported a revenue decline of 1%. The experience brand declined by 5 percent, and the talent solutions brand reported a revenue decline of 1 percent. The experience decline was driven by lower volumes from enterprise clients as we anniversary significant growth in the prior year. Within talent solutions, we saw modest year-over-year revenue decline in RPO as we anniversary exceptional levels of permanent hiring across our key markets in the prior year period. Our MSP business saw revenue declines in the quarter as we reduced certain lower margin activity, while Wright Management experienced significant revenue growth on higher outplacement volumes in the quarter compared to low levels in the prior year. Looking at our gross profit margin in detail, our gross margin came in at 18.2 percent. Staffing margin contributed to a 40 basis point increase as Experis and Manpower both experienced staffing margin expansion. Permanent recruitment, including Talent Solutions RPO, contributed 10 basis point GP margin reduction as permanent hiring demand continued at reduced levels from the exceptional activity in the prior year period. Favorable direct cost adjustments, primarily in the U.S., contributed 10 basis points in the quarter. Right management career transition within Talent Solutions contributed 20 basis points of improvement, and other items represented a positive 20 basis points. Moving on to our gross profit by business line, during the quarter, the Manpower brand comprised 56% of gross profit. Our experienced professional business comprised 27%, and talent solutions comprised 17%. During the quarter, our consolidated gross profit increased 1% on an organic constant currency basis year over year. Our Manpower brand reported an organic gross profit increase of 2% in constant currency year over year. Organic gross profit in our experience brand decreased 2 percent in constant currency year-over-year. Organic gross profit in talent solutions increased 1 percent in constant currency year-over-year. This was driven by significant growth in right management. Gross profit in RPO decreased in the mid to high single-digit percentage range in the quarter as we anniversary record levels of permanent hiring activity in the prior year period, while MSP experienced a slight GP decline during the quarter. Reported SG&A expense in the quarter was $745 million. Excluding restructuring costs, SG&A was 3 percent higher year-over-year on an organic constant currency basis, down from the 4 percent growth in the fourth quarter on the same basis. This reflects a balance of cost reductions in areas of slowing demand while we continue to invest in strategic digitization initiatives, as well as growth opportunities, most notably including experience, talent solutions, and specialty skills in manpower. The underlying increases consisted of operational costs of $25 million, incremental costs related to net acquisitions and dispositions of businesses of $3 million, offset by currency changes of $35 million. Adjusted SG&A expenses as a percentage of revenue represented 15.4 percent in constant currency in the first quarter, reflecting lowered operational leverage on the revenue decline. Restructuring costs totaled $7 million. The America segment comprised 24 percent of consolidated revenue. Revenue in the quarter was $1.1 billion, representing a decrease of 6 percent compared to the prior year period on a constant currency basis. Reported OUP was $49 million and includes $1 million of restructuring costs. As adjusted, OUP was $50 million and OUP margin was 4.4 percent. The U.S. is the largest country in the America segment, comprising 68 percent of segment revenues. Revenue in the U.S. was $770 million during the quarter, representing a 13 percent days adjusted decrease compared to the prior year. As adjusted to exclude restructuring costs, OUP for our U.S. business was $32 million in the quarter, representing a decrease of 49 percent. As adjusted, OUP margin was 4.1 percent. Within the U.S., the Manpower brand comprised 25 percent of gross profit during the quarter. Revenue for the Manpower brand in the U.S. decreased 15 percent on a days-adjusted basis during the quarter, representing a decline from the 8 percent decrease in the fourth quarter. Manufacturing PMI in the U.S. continued to decline during the first quarter from the 48 range in December to the 46 range in March. Our U.S. Manpower business experienced a progressive pullback in demand during the course of the quarter. The experience brand in the U.S. comprised 45 percent of gross profit in the quarter. Within experience in the U.S., IT skills comprised approximately 90 percent of revenues. On a day's adjusted basis, experience U.S. revenue decreased 12 percent as we anniversary peak 2022 growth of 33 percent organically in the year-ago period. As referenced earlier, the year-ago period experienced dramatic growth from enterprise clients for which activity levels are lower in the current period. Account solutions in the U.S. contributed 30 percent of gross profit and experienced revenue decline of 15 percent in the quarter. This was driven by a decrease in RPO revenues in the U.S. as permanent hiring programs continued at lower levels in the first quarter as we anniversary the exceptional growth in the prior year. Although RPO activity is lower in the current environment, first quarter RPO revenues were well above pre-pandemic levels. The US MSP business saw revenue decline as we reduced some lower margin activity, while outplacement activity within our right management business drove significant revenue increases. In the second quarter of 2023, we expect a similar to slightly higher rate of year-over-year revenue decline as compared to the first quarter trend in the US. Southern Europe revenue comprised 43 percent of consolidated revenue in the quarter. Revenue in Southern Europe came in at $2.1 billion, representing a 2 percent decrease in organic constant currency. OUP for our Southern Europe business was $90 million during the quarter, representing an OUP margin of 4.4 percent, excluding some minor restructuring. France revenue comprised 57 percent of the Southern Europe segment in the quarter, and revenue equaled $1.2 billion in the quarter and was flat on a days-adjusted organic constant currency basis. OUP for our France business was 45 million in the quarter, representing an organic decrease of 8 percent in constant currency. OUP margin was 3.8 percent. We are estimating the year-over-year constant currency revenue trend in the second quarter for France to be a slight decrease year-over-year. Revenue in Italy equaled 422 million in the quarter, reflecting a decrease of 3 percent on a days-adjusted constant currency basis. OUP equaled 31 million, and OUP margin was 7.3 percent. We estimate in constant currency that Italy will have a flat to slight growth revenue trend year-over-year in the second quarter. Our Northern Europe segment comprised 20 percent of consolidated revenue in the quarter. Revenue of 968 million represented a 3 percent decline in organic constant currency. After excluding restructuring costs, Adjusted OEP was 8 million, and OEP margin was 0.8 percent. Our largest market in the Northern Europe segment is the U.K., which represented 35 percent of segment revenues in the quarter. During the quarter, U.K. revenues decreased 12 percent on a days-adjusted constant currency basis. This reflects a higher rate of decline from the fourth quarter decrease of 6 percent on the same basis. We expect a slightly lower rate of revenue decline in the second quarter compared to the first quarter. In Germany, revenues increased 1 percent in days adjusted constant currency in the quarter, representing two consecutive quarters of improvement driven by our manpower business. Our Germany managed services pro servia business continues to require significant management attention and actions to improve performance. We are in the process of performing a detailed evaluation of the pro servia business and will provide a further update in future periods. Overall, in the second quarter, we are expecting slightly improved year-over-year revenue growth compared to the first quarter trend. The Netherlands is one of our smaller businesses in Northern Europe. The revenue decrease in the first quarter of 7 percent days adjusted constant currency was a slightly higher rate of decline than the fourth quarter trend of minus 5 percent on the same basis. The Asia Pacific Middle East segment comprises 13 percent of total company revenue. In the quarter, revenue grew 7 percent in constant currency to $606 million. As adjusted to exclude restructuring, OUP was $24 million, and OUP margin was 3.9 percent. Restructuring charges of $2.5 million related to our Australia business. Our largest market in the APME segment is Japan, which represented 47 percent of segment revenues in the quarter. Revenue in Japan grew 13 percent in constant currency, or 11 percent on a days-adjusted basis. We remain very pleased with the consistent performance of our Japan business. We expect continued strong revenue growth in the second quarter. I'll now turn to cash flow and balance sheet. In the first quarter, free cash flow equaled $111 million, compared to $52 million in the prior year. At the end of the first quarter, day sales outstanding decreased about half a day to 56 days. During the first quarter, capital expenditures represented 13 million. During the first quarter, we repurchased 369,000 shares of stock for $30 million. As of March 31st, we have 1.6 million shares remaining for repurchase under the share program approved in August of 2021. Our balance sheet ended the quarter with cash of $707 million and total debt of $989 million. Net debt equaled $282 million at quarter end. Our debt ratios at quarter end reflect total adjusted gross debt to trailing 12 months adjusted EBITDA of 1.38 and total debt to total capitalization at 28 percent. Our debt and credit facilities remain unchanged during the quarter. After successfully lengthening our debt duration profile with the Euro note executed in mid-2022, we exit the quarter with a very strong balance sheet. Next, I'll review our outlook for the second quarter of 2023. Based on trends in the first quarter and April activity to date, our forecast is cautious and anticipates that the second quarter will continue to be challenging in the U.S. and Europe. We are forecasting underlying earnings per share for the second quarter to be in the range of $1.58 to $1.68, which includes an unfavorable foreign currency impact of 3 cents per share. We have disclosed our foreign currency translation rate estimates at the bottom of the guidance slide. Our constant currency revenue guidance range is between a decrease of 5 percent and 1 percent, and at the midpoint represents a 3 percent decrease. The impact of net acquisitions and less billing days year-over-year is slight, and the organic days adjusted currency revenue trend is the same 3 percent decrease at the midpoint. This is slightly lower than the 4 percent decrease in the first quarter on the same basis as the comparable growth rate stepped down from Q1 to Q2 last year. We expect our EBITDA margin during the second quarter to be down 100 basis points at the midpoint compared to the prior year. We estimate that the effective tax rate for the second quarter will be 30%. As usual, our guidance does not incorporate restructuring charges or additional share purchases, and we estimate our weighted average shares to be 51.3 million. I will now turn it back to Jonas.

Thanks, Jack. Although the environment is becoming more challenging, we're doubling down on our strategic initiatives within the pillars of diversification, digitization, and innovation. strengthen our capabilities and make progress on shifting our business mix to higher value services supported by a market-leading technology platform strategy in all our brands. We continue to make strong progress on diversifying our business with our higher margin brands' experience and talent solutions, making up 44% of gross profit dollars. This, together with our industry-leading geographic footprint and strong balance sheet, leaves us well prepared to weather economic cycles. Within Talent Solutions, although activity levels in RPO and MSP are down from the peaks in the prior year period, gross profit levels remain well above pre-pandemic levels, where our counter-cyclical right management business is currently experiencing significant gross profit growth. As I mentioned, I recently spent time with clients and our leaders in Asia and Latin America, where the economic outlook in both regions continues to be strong. Business conditions are especially conducive to an increased demand for our temporary staffing services. This is very evident across most of our Latin America businesses, where just last week, I had the pleasure of celebrating the 60th anniversary of a very successful business in Chile. As global supply chains normalize and China reopens, The growth outlook in the APME regions is also very bright. Japan, our largest business in the APME region and fifth largest globally, has been extremely resilient post-pandemic, and our business is continuing a strong track record of revenue and profit growth. In fact, our Japan business has had 34 consecutive quarters of constant currency growth, which is remarkable. Congratulations to the Japanese leadership team, who have been laser focused on the growth sectors based on the data and trends we've been predicting and tracking for many years. Specific to digitization, in Q1, we further expanded our global PowerSuite technology platform with the launch of PowerSuite Next for right management in the U.S., Canada, U.K., and Australia. with all main rights management operations planning to be onboarded by the end of 2023. This B2C platform provides talent, career development, and outplacement services with personalized virtual coaching, curated self-help resources, upskilling, and job matching. Furthermore, we're delighted that right management was named a global leader and star performer in Everest Group's recent outplacement and career transition services peak matrix assessments. scoring highly for investments in internal transitions and redeployment offerings, and the creation of a strategic roadmap for the digital delivery of its services. This year, 2023, we celebrate our 75th anniversary. And throughout our history, we have been at the forefront of innovation, helping businesses and workers adapt to new technologies, economic shifts, and social trends. We've never hesitated to move quickly to take advantage of new opportunities. Our experienced leadership team is poised to pivot to where growth lies, and our breadth of diversified solutions across geographic markets will continue to set us apart and help our clients and candidates win in the changing world of work. Our belief that meaningful and sustainable employment has the power to change the world remains central to all we do. In March, we were recognized as one of the world's most ethical companies by Etisphere for the 14th time, the only firm in the industry to be recognized for more than a decade for playing a critical role in driving positive change in societies and communities around the world. As always, we know that a key driver of our success is a great team that doubles down on our priorities and remains focused on the path forward And I'd like to close by thanking our entire Manpower Group employee base for their efforts and contributions. Our DDI strategy and our purpose remains our North Star, and being disciplined in our execution is how we will continue to strengthen our capabilities and lay the foundation to create long-term sustainable value for our shareholders. I'd now like to open the line for Q&A. Operator?

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one. Please unmute your phone and record your name and company clearly when prompted. Your name and company are required to introduce your question. To cancel your request, press star two. Once again, to ask a question, please press star one and record your name and company clearly when prompted. To cancel your request, please press star two. Our first question comes from Mark Marcon from Baird. Your line is now open.

Good morning, Jonas and Jack. Two big questions. One, can you just describe the pace of change as the quarter unfolded To what extent was March worse than, say, February, particularly in the markets that ended up showing weakness like the U.S. or the U.K.? That's the first question.

Good morning, Mark. Well, we saw U.S. catch up to the European declines we've seen really over the last five quarters recently. quite quickly, frankly. So the U.S. had the biggest step down during the quarter, followed closely by the U.K. And most of that quick step down came from our enterprise client segments, so larger businesses in the U.S. and the U.K. pulling back. And that's what we saw evolve during the quarter. But maybe, Jack, you want to give a little bit more color on the specifics.

Yes, sure, I'd be happy to. So specifically on the U.S., we saw a gradual deterioration over the course of the quarter that was building through the end of the quarter. So I'd say if you look at that average rate for the quarter of minus 13, we ended the quarter slightly, slightly higher than that. And as I talked about the guide, we expect a similar trend into the second quarter. It might be a tad bit higher as we take that higher rate. Um, so that was the U S I think the UK, you know, uh, fairly constant throughout the quarter. I think, um, you know, the quarter started a little softer and that just carried through the entire way. So when you look at that average for the UK for the quarter, it was pretty, pretty even throughout the entire quarter. And as we look forward for the UK for next quarter, we see it being really kind of stable to perhaps maybe just slightly up or down half a percent as we kind of look at that trend. And I'd say maybe just on the third biggest market for us would be Italy. And Italy actually, on the flip side, strengthened over the course of the quarter. So we saw Italy actually exit the quarter closer to flattish, which was good. And we take that into our second quarter forecast where we think Italy will likely do a bit better than the trend from the first quarter.

Great. And then with regards to the U.S., obviously you mentioned, you know, Experis and the enterprise clients pulling back from, you know, were really high, you know, comparison periods a year ago. How broad-based was that, you know, that pullback in terms of the Experis business you know, either within the U.S. or even globally, and what are your expectations on a go-forward basis with regards to experience in terms of how that could unfold over the second and potentially even third quarters?

Well, as you mentioned, Mark, the pullback that we're seeing in the U.S. comes after very high growth rates in the prior year period. And it is focused on enterprise clients. Our convenience business for experience is holding up much better. And although seeing some declines, you know, substantially lower declines than what we're seeing on the enterprise side. So we feel good about the business in experience in the U.S. And the other market that saw the same step down from an enterprise perspective was the U.K., Excluding those two markets, Experis showed good growth everywhere else globally. So we continue to feel extremely good about the opportunities for Experis as a brand going forward because we see that clients, although pulling back from their very strong investments in technology around digital transformation, they still are going to be undergoing significant digital efforts which is benefiting and will continue to benefit experience going forward and What we're seeing here in the US in particular and to a lesser degree also in the UK is really businesses pulling back from the very strong spending they had a year ago and We feel good about the prospects of experience and we feel very good about our convenience business as well mark and

I would just add, Mark, just a little more context. Experience overall was only down 2% in GP dollars, as we showed on the GP chart in the slide. So although there's some bigger decreases that we talked about in the U.S. and the U.K., which are enterprise-driven, when you look across the global business, actually it's holding up quite well, a modest decline on an overall basis. And as Jonas said, convenience is performing really well. And that includes the attain acquisition, which is holding up very well. And we're actually seeing good growth in certain pockets, particularly in financial services. So a little additional context.

Great. And then if I can squeeze in one last one, just on the guidance overall, the revenue and gross profit guidance is in line with our expectations. But the EBIT guidance is, you know, materially below. What's the driver in terms of just the, with gross profit holding up, what's the driver with the EBIT falling off? Is it just SG&A deleveraging or are there incremental investments that are occurring?

Yeah, thanks, Mark, for that question. You know, I would say the context is the deleveraging. You know, we are seeing a lower revenue trend on a currency basis into the second quarter. As you said, the good news is GP margin is holding up quite well at 18% at the midpoint. But SG&A, and I should say SG&A is coming down. As we talked about in our prepared remarks, organically SG&A was down was a 3% growth rate, which was down from the 4% growth rate in the fourth quarter. And you should expect that growth rate to continue to come down as part of our guidance for the second quarter. But with that being said, it's not a broad-based reduction across all parts of our business. As we said, and as you can see from the GP dollar trends, the business is still holding up quite well in various parts. So we're still investing in We're looking at, you know, you should expect that GP dollars will decline in the second quarter from the first quarter trend based on the revenues. But, you know, there's still some very good pockets of investment happening in the businesses. We talked about experience in parts of the business that are still seeing some really good growth in financial services. And we did emphasize we continue to invest in digitization in our technology platform. So, We think that's a strategic advantage for us. We believe we have a leading technology global platform, and we're doing more than the front office. We're doing back office as well. And so all of that equates to continued steady investment in digitization. And as a result, although the SG&A trend will continue to improve in the second quarter, we're not in an environment where we're taking broad-based dramatic reductions based on the fact that the market's still holding up relatively well in certain areas.

Great. Thank you.

Thank you. Our next question comes from Jeff Filber of BMO Capital Markets. Your line is now open.

Thank you so much. You've given us some color by geography and by client size. I'm wondering if we can get a little bit more color by industry verticals, specifically in the UK and Europe.

As you heard in our prepared remarks, Jeff, we feel very good about our business in Latin America and Asia Pacific. They're continuing to grow. And having just visited Asia as well as Latin America recently, our clients are still looking for talent. The labor markets are tight and the opportunities are plentiful. When it comes to Europe and the U.S., as you heard us talk about in our prepared remarks, you know, Europe started to decline in the first quarter of 2022 and has really been on a path of modest decreases in demand overall. And, you know, that's a continuation of a trend that we see now into the first as well as in our projections into the second quarter as well. The U.S. is the part of the geography that made the biggest step down. And as you've just heard us discuss, a lot of that comes from enterprise clients, you know, deciding that the economic outlook is uncertain. They are holding on to their workforces, which is why you see our perm numbers still looking very strong. And frankly, you know, we're having very good perm growth in the U.K., France, Italy, Japan, Spain, Nordics, amongst others. But they are pulling back on contingent staffing demand because they are preparing for worsening economic times. So very similar to what we would expect and what we have seen in past economic slowdowns. And that's really the story. So the U.S. caught up to Europe at a faster pace, which is also something we would expect as the U.S. is a much more dynamic labor market. and tends to react quicker to shifts in the economic cycle. I'm sorry, please go ahead, Jeff.

No, Jeff, since you specifically mentioned the U.K., I would just add from an industry vertical perspective, public sector is big in the U.K. That's about a third of the business. That's holding up fairly well. But as you know, the U.K. is a big enterprise market, a lot of enterprise clients in the U.K., and that's really the pressure we're seeing. We talked about experience. It is the second biggest experience market, and that's where the pressure has been more on the enterprise side and within the verticals, probably a bit more on the technology side in terms of technology enterprise clients. So I would just add that.

That's helpful. And can we get that kind of color in the U.S. and Europe as well? That was actually my question.

Yeah, I'd say in the U.S., similar. I think where we're seeing the pressure is on the enterprise side as we've talked. And I'd say very similar story for experience. I think on the technology enterprise clients, that's where there's more cautious behavior in terms of demand. I think, you know, as we looked, you know, across financial services, we're seeing very strong trends, and that's in both enterprise and convenience sectors. And I'd say, you know, other verticals that are seeing strength would be on the manufacturing side, food continues to be fairly stable. Auto, we're not big in auto in the U.S. specifically, but auto across Europe in the large markets there are France and Germany and the Nordics is actually coming back. So we're seeing improving trends in auto. we're seeing more pressure consistent with what we said last quarter. It's going to be logistics, transportation, construction. And generally, I'd say enterprise manufacturing that are not auto and not food-related are generally seeing pressure. And that correlates to what Jonas talked about in terms of the PMI trends as well. Okay.

That's really helpful. Thanks so much, Jack.

Thank you. Our next question comes from Kartik Mehta of North Coast Research. Your line is now open.

Thank you. Hey, good morning. Jack, you know, as you indicated, you've done a good job in maintaining the gross margin, gross profit dollars especially. I'm thinking, you know, as we go forward and if the trends continue this way throughout the year, your ability to kind of maintain gross margin and then just to You know, what you think might happen on the SG&A side as you think about if you need to right-size the business at all?

Yeah, thanks, Kartik. I would say on the, you know, the good news is that staffing margins held up quite nicely despite the pullback in demand. And that trend's continuing. And we talked a lot about that last quarter. You can see in the GP margin walk that that continues to be the case. So we feel really good about that, and you can see that in the guide into Q2 from a GP margin. I think as we think about GP margin, you know, one of the factors is going to be PERM, right? So PERM was still, as Jonas talked about, was still very strong outside of some of the U.S. trends. In the U.S., we're really just anniversarying, you know, exceptional growth, but very good. PERM continues to be very strong in a lot of our European markets. in Asian markets, and we see that continuing. And that is the result of a lot of investment we've made in PERM in those markets, and that's paying off for us currently. So I think PERM, as part of the equation, will continue to anniversary some record levels. We actually hit our peak record all time of PERM GP dollars in Q2 of last year. So it's natural to expect PERM to continue to come off a bit in terms of year-over-year trends. But I think it's still a pretty substantial part of the overall GP equation. So as we go forward through the year, I think, you know, when we look at the staffing margin, you know, the mix of the clients are going to be part of the equation. We talked about more pressure from enterprise. That means that the convenience side is becoming a little bit bigger piece of the pie, and that's positive for staffing margins. So we'll have to continue to monitor it, but I think the good news is, as Jonas talked about, the labor market overall is still holding up quite well, and that's helping in terms of talent and pricing for talent. And so we feel pretty optimistic about staffing margin, even in an environment that is continuing to see more pressure going forward.

And then on SG&A, just Jack, your thoughts on, I know you talked about that that should continue to grow, decelerate, and I'm wondering as you look at the business and if you need to right-size it or what you think the outlook there could be.

Yeah, no, absolutely. I think, you know, our track record and our playbook is if we do see significant declines, and GP dollars, you should expect we're going to move into more dramatic cost actions. And so, in that case, you know, we move into recovery ratio management. That means for the GP dollar declines, our goal is to offset half of the GP dollar declines with SG&A reductions. Now, with that being said, you know, the context of the current environment is we still grew GP dollars in the first quarter. 1% as we disclosed on the GP chart. And even though we're moving in Q2 into a modest decrease, it's still a pretty balanced environment overall in various parts of the business. So we're not in the dramatic broad-based SG&A reduction territory yet based on the environment. However, if the environment moves in that direction, you should expect we'll do what we always do, and we'll take appropriate actions to preserve margin to the greatest degree possible. So it's really going to depend on how the environment continues to unfold. We are doing it already in parts of the business that have seen more broad pullbacks, but in other parts of the business that are holding up pretty well, we're still investing. So it's going to be a balance, and if we see broader changes, we'll react accordingly.

And just one last question, Yunus. You know, you talked about, I think, meeting with clients in Europe, and I'm wondering your thoughts on France concerning some of the unrest that they've seen and how that might be impacting the business, if at all.

Well, Karthik, the unrest in France and the debate around the pension reforms and all of that that you've seen has actually had very little impact so far on our business in France. You know, the strikes... have an impact in that it makes it difficult for the workers to get to their assignments. But since there haven't been broad-based long-term strikes, but rather day interruptions, the business has been able to manage it very well. And the learnings that we had from the pandemic means that many of our workers for some assignments are able to do their work remotely as well. The French team has managed a difficult environment in a very good way, and it was, you know, very encouraging to see as well that, you know, France is generally flattish in terms of its trend following, you know, a slightly softening market demand, as you've seen from other data points as well. So the French team is doing a good job, and we've not really seen a major impact on those strikes in the past. and we hope that the debate now with the decision to increase the pension reform is going to calm down the protests that we've seen and that France can continue on its path, all reasonably good growth, although pressured on PMI, but we feel with very good reforms in place and conducive to good growth in the future.

Thank you both. I appreciate it.

Thank you. Our next question comes from the line of Stephanie Yee from JPMorgan. Your line is now open.

Hi, good morning. I'm stepping in for Andrew Steierman. Just a question on France in particular. So in the first quarter, it seemed like France did better than what you were expecting coming into the quarter. And now we're kind of expecting a slight revenue decrease in the second quarter. I was wondering if you can comment on maybe what the March or April trends were in France and any impact or deceleration you're seeing on the wage pricing front.

Stephanie, thanks for the question. Yeah, I would say, you know, France, based on the trends during the quarter, we exited the quarter, you know, close to, flattish to slightly down in on an overall basis, and we take that into the second quarter guidance, anticipating a little more pressure based on what we've been seeing in some of the weeklies here in April. I'd say, you know, the only caveat on the weeklies in April, we do have some mismatch with Easter timing year over year and so forth, which impacts some of the weekly trends we've been seeing. But I would say, you know, it's a fair point, and we're being a bit cautious based on the fact that Although France has held up okay versus our guidance in Q1, we have seen a progressive step down over the last couple quarters. So that's a little bit in terms of what's happening. I think in terms of your second item related to, you know, getting at, you know, bill pay spreads and wage inflation, you know, France is holding up quite well. So when we look at margin and staffing margin, you know, France was part of that improvement year over year. So, you know, we feel good about pricing and the environment, and we feel good in terms of bill pay spreads on an overall basis in France.

Okay. Okay, great. Thank you.

Thank you. Our next question comes from George Tong of Goldman Sachs. Your line is not open.

Hi. Thanks. Good morning. You mentioned that the poll hiring in late decisions in line with the dynamics you've seen in past economic slowdowns. From a macro perspective, can you discuss how this pullback compares with past cycles and what macro assumptions in the U.S. view you're embedding into your 2Q guide?

Hey, George, we couldn't hear you perfectly, but I think you're asking how does this slowdown in demand and softening in the markets compared to prior cycles that we've experienced in our now 75-year history. Is that correct?

Yes, that's right.

And it's a great question because as we look at the last slowdowns and recessions, they were very strong. So the great financial recession and the recessions we saw related to the pandemic. Clearly, we don't know what the economic cycle is going to be, but if we do look at our past economic cycles and our current data, this tends to indicate that we are in a garden variety recession. By that, I mean a shallow economic slowdown or recession. And it harks back, maybe it's a little bit of back to the future where employers aware of the need for talent, the tight labor markets, hold on to their workforces to a greater degree than what we've seen in the last two big recessions. And they are very careful in their hiring. They're delaying their hiring decisions, but they're really anticipating, through their behaviors, a shorter and shallower slowdown slash recession. so that they have enough firepower to come back and meet the demands for their products and services when the recession abates and the economic growth starts to accelerate again. So that's how I would characterize our view, and it's exactly why you're hearing Jack discuss our position on our SG&A. We're very careful in terms of our own hiring. We're very focused on productivity, but we keep on investing in the opportunities that we see, whether they be in perm and experience and talent solutions. So we want to make sure that we're positioned for good growth when the market comes back, but we're very cautious at this time because the economic uncertainty is getting higher and some of the headwinds are really coming through in the demand drops that we are seeing. So hopefully that gives you a little bit of our view when we compare this environment to our experience from past economic cycles.

Yes, that's very helpful. Thank you. And on the margin front, you've got down 100 bps per year in the second quarter. which specific areas of the business are you scaling back spending and which areas are you maintaining or increasing if that's doubled?

George, yeah, I can talk to that. So, you know, I think on the EBITDA down 100 basis points, and maybe a little context for that is the other point to remember is we had dramatic growth a year ago in EBITDA margin from Q1 to Q2. So we went up 70 basis points from Q1 to Q2. Q2 actually was our high watermark and EBITDA margin on an overall basis at 3.8% last year. So we're anniversarying that as part of this. And we have the opposite impact from a year ago where the environment was improving and we were getting better operational leverage. And we have the opposite now where it's, you know, it's, it's declining in certain markets that we've talked about, offset by strength and others, but a different dynamic on an overall basis, which is why the EBITDA margin is coming off to the degree that we're forecasting. So in terms of where we're taking actions on an overall basis, you know, you could see, I'd say our FTE continues to go down. FTE from year end to the end of the first quarter, Our head count is down about 2 percent. We did talk about in the fourth quarter about the fact that we took head count down sequentially from the third quarter. We continued that again to a greater degree. And you should expect that trend to continue based on the actions we've taken. If we look at our biggest markets where we're taking FTEs down based on the environment and the parts of the business that aren't seeing the correlated demand, that's going to be the U.S., that's going to be the U.K., it's going to be various other markets in Europe. And as you would expect in this environment of negative revenues, you should expect that in the global functions and the corporate parts of the business, we have hiring freezes going on. We're pulling back in discretionary spend. So those are the actions we're taking. And as I mentioned, if the environment continues to decrease further, then you should expect we'll take further actions as well.

Very awesome. Thank you.

Thank you. Our next question comes from Manav Patnaik of Barclays. Your line is now open.

Hi, good morning. How are you? This is actually Roni Kennedy. I'm from Manav. Thank you for taking my question. If I may follow up to the insight provided in response to George's question with macro and a potential garden variety recession. Last quarter, you used a very helpful analogy of saying companies were beginning to tap the brakes. Others had their foot hovering above the brake pedals. How would you categorize that now? And then also as a follow-up to the assessment of it being garden variety, how do you think the quarters will progress? Will there be continual gradual declines? And do you have any thoughts as to when things could potentially turn around? And then lastly, you know, in this weakened environment, how are industry competitive dynamics? You know, is it more intensely competitive, pricing pressures, et cetera?

I'm glad you liked the analogy that we used last time. So I think I would say more companies are tapping the brake. You companies are hitting the brakes hard. We don't really see that to the degree that we've seen in other economic slowdowns. So you have, as you can see, outside of the U.S., you know, you have companies that are being more cautious based on their outlook. But there is still demand. There is still good convenience. There is still hiring going on based on the tight labor markets and the demand for higher scale talent. So it's still a conducive environment in terms of opportunities. And that's what we're very focused on to make sure that we have the firepower. And as Jack talked about, clearly we were thinking about our SG&A from a defensive perspective in the areas that don't impact the business where we see the opportunities. But at the same time, we're hiring recruiters and we're hiring salespeople because it's important that we maintain our strength in the market. So I think that's sort of our view. And in terms of the progression around the quarter, I'll let Jack talk about that. But I think overall, we're essentially adopting a cautious stance in terms of looking for a slight further softening based on what we've seen at the beginning of the second quarter. Jack, maybe you'd like to provide some more color.

Yeah, I would just say briefly, that is, Ronan, what you're seeing in our projection. You're seeing a slight decrease in constant currency revenues into the second quarter. As we look at, if we go back another quarter, you see us going from that minus 2.5% to 4% on an organic ADR basis. So these movements are relatively modest in terms of the degree of revenue change, and that's reflecting the environment. So parts of the environment are moving forward. more significantly than others. We're seeing that as we talked about, um, you know, at length on the enterprise side, but other parts are holding up nicely and we do have the balance of, uh, some of our European businesses actually continuing to perform quite nicely. And I'd put, definitely put Italy in that camp, despite some modest revenue decline in the quarter. So, um, and we would expect, you know, based on everything we're seeing now, we would expect that trend, that kind of lighter, uh, decrease, uh, to continue.

Thank you. May I confirm the competitive dynamics within the industry and if, you know, any particular insights by brand and kind of a weaker macro environment?

Generally, I'd say that competitive dynamics remain competitive but rational. So we know that demand for talent that companies are hiring remains strong and labor markets are tight. So the pricing environment, thus, is still healthy. We're seeing good pay bill spreads. And, you know, whilst we're seeing some softening in some skill sets, you know, this is still in the context of a tight labor market where there are many open jobs here in the U.S. as well as in Europe and, frankly, globally as well. And we saw this as well in the employer Manpower Group Employment Outlook Survey looking into the second quarter. So employers are still intent on hiring talent. And that's why we feel that the environment is still solid and the competitive environment is always competitive but rational at the same time.

Thank you very much. And if I may, as a quick follow-up, can you just cover kind of working capital management, capital allocation, and even business review such as the pro servia in this weakened environment and, you know, as the cycle, as we progress through the cycle, how we should think about that?

I'll let Jack talk about the capital allocation. You mentioned Preservia. On this note, you've seen in our prepared remarks, we're pleased to see that our German business is making progress in a number of our brands, but we are working on solving our Preservia business as well, and that's really where we're focused. We still have some work to do. in Germany to perform the way we would like, and in particular in Preservia, and that's where our focus is right now. But Jack, maybe you'd like to go on to the capital allocation question.

Yeah, and I'll be brief. I know we have a couple other callers that are trying to get in before we end the call. So capital allocation is fairly straightforward. Ronan, I'd say, you know, it continues, no change in strategy. You saw us do the share repurchases during the course of the quarter. Remember, we are opportunistic, so you'll see us do higher volumes when we perceive there to be a very good value, and we'll continue along those lines. The dividend continues to be, you know, our top priority, and a progressive dividend is our strategy in a decent environment. We would consider this an environment where we would have a progressive dividend. And then in terms of M&A and so forth, really no change. I think As we said, we prefer organic growth, but as we've shown in the past, there is room for strategic M&A, particularly in the higher margin parts of our business. You saw us do that with the Attain acquisition back at the end of 2021. Continue to keep our eyes open. That's really what I'd say on capital allocation. Thanks.

Thank you very much. Appreciate it.

Thank you. Our last question comes from Toby Sommer of Truist Securities. Your line is now open.

Hey, good morning. This is Jasper Bibon for Toby. Just one question for me, because I know we're short on time. So on the tax rate, the first half looks a little bit higher than the prior full year expectation at 29%. I know in some of your markets, the tax rate actually might go higher when your OUP margins are under pressure. So Should we be modeling a slightly higher tax rate in the second half of the year than previously expected?

Yeah, thanks, Jasper, for that question. No, I would say the guidance for the second quarter is 30%, which is a tad higher than the full-year guidance. And we came in a little bit better in the first quarter than we anticipated initially. I would say you're exactly right. One of the components of the tax rate is the country mix, and with the volatility we've been seeing, that's added a little bit more volatility to the rate and the forecast for the rate. But with all that being said, we still feel pretty good about the 29% for the full year. So although Q2 is a little bit higher, there's some timing considerations and things like that. I would continue to use 29% for the back half of the year.

That makes sense. Thanks for taking our question.

Okay. That brings us to the end of our first quarter earnings call. Thanks, everyone, for your participation. And we look forward to speaking with you again when we announce our second quarter earnings. Thanks, everyone. Have a good rest of the week.

Thank you. And that concludes today's conference. Thank you for participating. You may now disconnect.