Randstad Nv Unsp/Adr

Hello and welcome to Randstad First Quarter Results 2023 Conference Call. My name is Priscilla and I'll be your coordinator for today's event. Please note this call is being recorded and your lines will be on listen only. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Mr. Sender Van Noordende, the CEO, to begin today's conference. Please go ahead, sir.

Thank you very much, Priscilla, for that kind introduction. And good morning, everybody. I'm here with George and Bisra and Akshay from Investor Relations. And I'm pleased to share our Q1 results with you. I would say overall, I'm pleased with the resilient performance that we delivered in the first quarter in a challenging macroeconomic environment across our markets. We have adapted well to this operating environment. Revenue growth for the quarter was minus 4.2%. Our enterprise solutions grew by 5%, in-house business grew by 1%, professionals was down 1%, and staffing was down 8% in the quarter. Growth profit was down 2%, and we delivered a strong gross margin of 21%, with around 19% of gross profit generated by PERM and RPO combined. The improvement in our gross margin this quarter reflects a sustained focus on pricing, as well as the mix of our different services. EBITDA came in at 266 million euros for the quarter with a solid EBITDA margin of 4.1%, demonstrating cost management across our business. We continue to benefit from our strong market position. We have deep customer relationship and are committed to building the best talent delivery engine in the market with an excellent team in place to deliver on this. Our strong balance sheet enables us to capture the growth opportunities available to us while, of course, we remain disciplined and able to adapt our operations as needed. The trends we have experienced in the first quarter have continued into early April and we remain cautious. The prevailing trend of labor market scarcity, however, remains across our markets. And I'm pleased to say that our positioning as partner for talent clearly resonates with our clients and talent as they are looking to navigate this new world of work. Our sources of differentiation, specialization, equity, and our delivery models are more and more visible in the Randstad brand. And that, coupled with our experienced teams and long track record of delivery and execution in all environments, gives us confidence as we look ahead. Performance and progress will continue to be the name of the game, meaning that we are laser-focused on delivering a strong performance whilst further enhancing our differentiation and productivity. And we will, of course, keep you updated as we continue on our journey. Let me now hand over to George to present the results in more detail.

Thank you, Sander, and good morning, everybody. In the past weeks, I've had the pleasure of meeting many of you, and I would like to thank you first and foremost for the warm welcome For those who I have not yet met, I am George Vasquez. I am honored and proud to become Randstad CFO. I've had a chance now to be with Randstad for 12 years, and over the past five years, I was head controller, group controller, and head of strategy. Work is, in short, one of the most important activities in people's lives. We see ourselves as a catalyst, let's say, for a better world of work. That is why many of us join and stay at Randstad. It is part of who we are, our identity. As CFO, therefore, short introduction, my role is ultimately about ensuring continuity at all times. And if I have to choose three focus areas to prioritize, will be always about safeguarding a sound financial position through solid risk management, continued optimization of EVA. EVA is here at Randstad, our northern star for decision making. And ultimately, exactly in that context, making sure to prioritize our investments towards profitable organic growth. But now let's move on to Q1 and our results. Sander summarized it well already. We would always prefer growth in these numbers, but overall, in the context of very high growth in Q1 2022 and Q1 2021, after eight consecutive quarters of growth, we are pleased with adaptability. We are pleased with the predictability of our teams and our results today. So let us discuss the segment performance in more detail, starting with North America. First, regarding the layout, you'll see some changes here. So as you know, we have changed our primary external segmentation. We've discussed this to reflect the new team structure we have in place. So in this context, in addition to the traditional reporting of our key geographies, we now also aggregate the following five regional segments, and I'll just list them for clarity. North America, Northern Europe, Southern Europe, UK, and LATAM, Asia Pacific, and global businesses, these five. As you also see, in addition to the Verve team on the right-hand side of the slide, you'll also find a new chart per region. Ransat steers always for profitable growth and adaptability. Therefore, on each page, you'll find this chart with a quick summary of revenue growth for the current and previous quarters and EBITDA margin performance. You'll also find that both for the region as well in this example for the key countries that make up the region, U.S. and Canada. Now, zooming in. Revenue in North America was down 10%, particularly PERM down 22%. The U.S. has always been a more dynamic labor market, adjusting quicker to both positive and negative market trends. U.S. staffing and in-house declined by 15%, driven overall by a softening demand in manufacturing, transportation, and distribution sectors, along overall as well with other admin support profiles. The challenging market conditions were also visible in our technology business, with U.S. professional revenue down 4% year over year. And remember, technology does make up the most significant part of our professional position in North America. Our OPEX was down year on year and also sequentially from Q4 and versus Q1 last year. We have a very experienced team that has delivered consistently throughout the years, and we are confident we are working on the right balance between profitable growth and adaptability. We are adapting our operations and have continued to do so throughout the quarter. The EBITDA margin was solid at the 4.7% in the quarter. Now let's look at Northern Europe on slide eight. Northern European countries did see a mixed revenue growth trends with good profitability and adaptability. And you'll see overall, despite lower revenue, as you can see in the graph, on the back of a very hot 2022 also here in Europe, We protected absolute profit and actually even increased profit margins. In the Netherlands, revenue was down 11%, our whole market, and was particularly impacted by exactly a very red-hot COVID-related economy or getting out of COVID-related economy in the first quarter, the first half of 2020. Perm, still at an historical record high level, grew again 1%. EBITDA margin came in strongly at 6.4%, well above the group average, So good profitability was adapting to a more regular year. Let's look at Germany. Germany delivered a solid quarter. Revenue was also up 1%. Firm grew 39%, and our focus continued to pay off. Staffing and in-house was up, with double-digit growth coming from automotive. Still doing very well. Manufacturing was only slightly down in the quarter. I think overall, our German business continued its journey to sound profitability, and we're very pleased, reaching a record high first quarter. This is reflected in the EBITDA margin for the quarter, which came in at 3.2%, 190 basis points up compared to last year. Again, next door, Belgium, reported a revenue decline of 8%. Staffing and in-house in Belgium revenue was down 10%, impacted also by a more challenging macroeconomic environment. as well as a very red hot Q1 2022. However, remind ourselves, Belgium is one of our long-established market-leading businesses and has always shown very good adaptability. EBITDA margin came in at a solid 4.7%. Other northern European countries, last column, reflected mixed trends. Let me break it down to you. The Nordics was down 1%, Switzerland was up 2%, and Poland was down 10% year over year. Overall, EBITDA margin came in at 3.3% for these countries. Again, summarizing Northern Europe, overall, a resilient performance in the region. And now let's look at the Southern Brother, moving on to the segments, Southern Europe, UK, and Latam. Again here, solid performance. Robust operations, mixed revenue growth trend that we will talk about in a minute, but we actually delivered extra margin and extra profits. France's revenue was slightly down year over year, a striking example, though, of portfolio focus and delivery. France ended the quarter with EBITDA margin 5.6%. We delivered a record first quarter again in margin and profits. PERM, as an example of diversification, continued to do well with 9% growth, and professionals delivered solid growth of 10%, predominantly driven by healthcare business and technologies. However, staff in and in-house were down 6% year over year. In Italy, revenue was down 3% over extreme successful growth in 2022 and 2021. We've talked about it many times before. PERM, still on a very high end, delivered solid growth of 8%, and in-house also held up steadily. Now, this partly offsets decline in staffing, which was driven by the overall economic slowdown. On the other hand, Italy ended up the quarter with a strong EBITDA margin of 7.2%, again, excellent profitability over the last years, reflecting the balance between high returns and investing in growth. Going more south now, Spain saw its revenues decline by 8% in the first quarter, with a decrease in our staffing and in-house businesses. Again, diversification, we do continue to see growth in PERM, professionals, and outsourcing, and we're capturing it. Iberia EBITDA margin and profit actually increased to the strongest Q1 ever. This reflects a changing mix and excellent field steering discipline in Spain and Portugal. Across the southern European countries, UK and Latin America, revenue and profit performance reflected our efforts always to find growth in profitable pockets. In Latin America, revenue was up 13%, and Argentina and Brazil stayed in good growth momentum. As a result, EBITDA margin for this subregion came in at 2.9%. Let's go east, moving on to Asia Pacific on slide 10. Asia Pacific continued to perform well with 4% profitable growth year on year. This is a region where we still find and we still see a lot of opportunity for Randstad. Japan showed structurally good performances with 3% growth and some profitability and still with significant opportunity in the second largest staffing market in the world. Australia and New Zealand delivered again good growth at 5% with our recently acquired team in finite growing profitably and at a significantly higher pace. india grew by eight percent as it continues to focus not on your growth but on improving the quality of our portfolio overall the ebitda margin for aipac was a solid 4.8 percent accretive to the group in the first quarter and that brings me to the last region global businesses on slide 11. as you can see global businesses segment grew by two percent um a strong demand for our outplacement career mobility services RiseSmart or RiseSmart.com more than offset a decline in our RPO business also of 2%. Monster revenue was down 14% in line with the job market trends and affected overall by a slowdown in demand. Here again, we started to adapt our Monster business as we've discussed before in the fourth quarter of last year, and that process continued in Q1. EBITDA margin for global businesses increased now to 0.7% in the fourth quarter. And that concludes the performance of our key geographies. Let's now walk through the group financial performance on slide 13. Moving to the P&L, slide 13 summarizes much of what we already covered. After eight quarters of significant growth and competitive growth, we have seen a slowdown in revenue, yet consistently shown adaptability. It is therefore a transition quarter in that context, from growth in Q4 to decline in Q1. We are approaching from a position of strength, with greater scale, a more diversified portfolio, and the operational usual of agility. EBITDA for the quarter was due to 266 million euros, and the EBITDA margin was 4.1%. Remember, from a seasonality perspective, Q1 is typically our lowest quarter. Integration, moving down, integration and one-off costs were 37 million euros this quarter. Many reflect, on one hand, integration costs from our recent acquisitions, And on the other hand, necessary adjustments of operational structures across key geographies, including U.S. and Monster. Although these costs are extraordinary, I want to make clear we strive to keep them minimal. As a reminder and as a policy, we record here structures with a payback time of less than one year. Moving on, last year we acquired Finite, which has also increased our acquisition-related intangibles position. And we now have a higher periodic amortization of these acquired intangibles going forward. It is a pure accounting movement. Net finance costs in Q1 were 14 million euros, primarily reflecting higher interest expenses. Again, as a reminder, last year we had a net cash position at the end of Q1. This year we have a low net debt position. The underlying effective tax rate, unsurprisingly, amounted to 24.1% for the first quarter, and for 2023 we expect ETR to be between 24% and 26%. And with that, let's turn the page to our gross margin bridge. The gross margin bridge effectively puts it all together, what we already said before. The gross margin, you can see from the lighter blue to the darker blue, improved a further 50 basis points to 21.0 for the quarter. Our temp margin increased by 40 basis points, the first column in the bar, mainly reflecting mix and our discipline in value-based pricing. The bar in the middle shows a decline of 10 basis points as PERM revenue fell by 8%, as mentioned before, which is purely a mixed effect. Lastly, HR solutions again includes enterprise solutions, headed 20 basis points to the gross margin increase. This includes the strong performance of our outplacement and career mobility services. Just in terms of materiality, remember PERM and RPO jointly represented 19% of the group gross profit in the quarter. Which brings me now to the OPEX bridge on slide 15, gross margin and OPEX working together. OPEX overall came in at 1,102,000,000 euros, 25 million up sequentially, excluding the impact of foreign exchange and M&A. You can find that on the bridge sequentially in the graph. The biggest driver of OPEX is by far personnel expenses, slightly up sequentially. Absolute OPEX levels reflected, on one hand, the impact of mix in our revenue base and showed increased adaptability throughout the quarter. Though different businesses have higher or lower gross margins and come in with slightly different OPEX ratio requirements, our conversion per business line is healthy, reasonably similar, and clearly communicated throughout the company. OPEX goes with gross margin, gross margin goes with OPEX. The average headcount number you can see decreased by 1,840 FTEs. Another important point, the March exit rate for FTEs was well below the Q1 average. Personal expenses this quarter reflect seller inflation and dues were more or less up a flattish sequentially. With that in mind, let's now move on to our cash flow and balance sheet on slide 16. Our free cash flow for the quarter came in at 169 million euros. Rather standard, it is a function of the counter-psychical movement of working capital that offsets decline in EBITDA. The ESL was at 53 days, one point days up year on year, primarily driven by mix and stabilizing over the years. Our balance sheet shows a net deposition of 145 million euros and a leverage, very healthy leverage, a ratio of 0.1%, 0.1, excuse me, excluding lease liabilities and down from the levels of Q4. Also here, we are in a position of strength, low leverage in our balance sheet. Importantly, as scheduled and announced, we also paid the regular ordinary dividend of 285 euros per share at the beginning of April, totaling about 522 million euros. This is not yet reflected in Q1 net cash position, but of course it will affect our position in the second quarter. As a reminder, Q1 is typically the softest quarter of the year. Q2 will include the outflow of dividends and payment of holiday allowances as well as other costs. So typically at the end of Q2, we have a higher debt than at the end of Q1. And then that improves again in the second half of the year. Lastly, today we will start the share buyback program as announced in February. The share buyback problem will be executed in several trenches. We are not reinventing the wheel, keeping it quite simple. We will repurchase up to a maximum of 1.55 million shares in Randstad in the period between today and July 24. This is equivalent to a first trench of 80 million euros based on yesterday's closing share price. These shares will subsequently be cancelled and we'll be providing weekly updates on the progress. That brings me now to the last chart, the outlook on slide 17. Let me start first with the activity momentum. The macroeconomic environment remains challenging across our markets, translating into lower client hiring activities. This trend continued into early April, whereby the year-on-year growth rate of our employees working aligned with the Q1 2023, or this quarter, year-on-year growth rate. We expect both Q2 gross margin and OPEX to be broadly non-sequentially. We do remain cautious, we do remain vigilant, and we are mindful of the volatility we are operating in. In that context, we continue to work with scenario planning to ensure adaptability and predictability. We respond to actual data every week in our branches, in our apps, in our offices, in our websites, and then we aim at protecting and converting EBITDA. Our mix will evolve always with different businesses. Diversification is paying off, but again, each has specific conversion disciplines, allowing us to constantly adapt. Gross margin goes with OPEX, OPEX goes with gross margin. And there will be a negative as well, 0.4 working days impact in Q2 2023. As closing remarks, it was a solid quarter from growth to decline, and today's results reflect the actions taken this quarter and throughout 2022. In the same way, the next quarter will also result from the actions taken already in Q1 and previous quarters. We have successfully built scale and a more diversified portfolio, giving us today more resilience over the long term compared to pre-pandemic times. We are in a position of strength. At Randstad, predictability, good returns provide a basis and capacity to grow that we then turn into further growth and further profitability. It is a delicate balance that we need to strike every day. I talked about identity in the beginning. This quarter's results are a great proof of that identity and give us confidence now for the first half of 2023. And that concludes our prepared remarks and we look forward to taking your questions. Operator?

Thank you, sir. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. We'll pause for a moment to allow everyone an opportunity to signal for questions. We'll take our first questions from Hans Klugers from Kepler Show Rock. Please go ahead, sir. Your line is open.

Yes, good morning, ladies and gentlemen. Two questions from my side. First of all, on the margin development in both Southern Europe and Northern Europe. solid performance there. But can we give some better feeling on what's the key drivers? If I look at, let's say, at the trend, I understand that the gross margin, the feeling that the gross margin clearly improving, that is the main driver of the improvement in margin, in the EBITDA margin, both in Northern and Europe and Southern Europe. Is that the case? Could you maybe give some flavor what the key drivers are for that margin improvement? And secondly, on SG&A, your guide for, let's say, stable SG&A going into Q2. But if you could give maybe some feeling, yeah, how you see, let's say, SG&A developing through the year, assuming stable revenues. Let's say that you clearly see some delay in really reducing cost also in this inflationary environment. So assuming, let's say, stable revenues, how do you see then

sdna developing through the year you give maybe some guys on that they uh take them yeah hans thank you so on uh on on margins specifically on northern europe and southern europe i'll say um i mean diversification is is is paying off so we have a more diversified company at the moment and you can see Let's say our staffing revenue is going down as an example, but at the same time our professionals' revenue is holding up. We also mentioned specifically for those countries that we're still finding firm opportunity and we're growing. So overall, I'll say the mix is supporting us. But more importantly as well, and we've discussed this in previous calls, We've embarked on quite of a structural pricing discipline over the last years, and we do manage very carefully gross margin and temp margin, and in that respect, I think that's the result you are seeing. On SG&A, I'll say overall, I mean, our SG&A will always move. We have a track record for that. We have predictability. We'll always move. with our margin. I mean, at the moment, what we see is the first two weeks of April. You heard, it's still the same level of activity. We are operating in that assumption, but we are revisiting it every week, and we will adapt our OPEX going forward accordingly.

And maybe a follow-up on Northern Europe and Southern Europe. Is it correct to assume that your gross margin has increased slightly more than your improvement in your EBITDA margin in the respective regions? Is that a logical assumption?

No, I mean, it's a mixed bag. I mean, it's very big regions. I'll say overall, the teams know very well the adaptability and the predictability we want to reach. You will also see there's been FTE adjustments in almost every single geography. So they all can in hand on margin and OPEX. Okay, thanks.

Thank you. We'll move on to our next participant, Anvesh Agarwal from Morgan Stanley. Please go ahead, sir. Your line is open.

I got three, really. First, can you give a bit more color on the German performance? I mean, it was relatively solid versus the rest of Europe, but it did weaken quite a bit sequentially. probably contrary to at least what I was expecting. So maybe if you can tell us what sort of going back there. Then just on the SG&A, given the wage inflation, is it more difficult to manage this time around? I mean, we would have expected the SG&A to be down sequentially given where the volumes are, but it did move up despite FTEs being down. So really, what sort of wage inflation you're running at? And do you expect the wage inflation in your own core space to continue throughout the year? And finally, just to clarify, did you give the pricing growth number at the beginning of the call? Was it 4%? Did I hear it correct?

For the group, yeah, 4.2%. Yeah, 4.2% for the group.

No, the pricing component of the organic growth. Can you split the price in volume if you can?

We typically don't disclose that unvesh, so we prefer not to break it down now.

Okay, no problem.

So, John's comments. Yes, so on Germany. Well, first of all, our German team has really stepped it up over the last four quarters in terms of running a sound business. If you look at the market, it's holding steady. Unemployment rates are low, and there's still talent scarcity. I mean, obviously, automotive has been a tailwind for us in the past quarter, where Automotive companies are working their backlogs of orders that they still have. So demand was a solid perm demand and I would say resilient temp demand. So they have been on the improvement process and that they will continue to go there.

Yeah, on wage inflation, Anves, I mean, look, we are a large multinational operating in many countries. I'll say we are exposed to the same data that you also see everywhere. Wage inflation in particular in the U.S. overall, the data we have has been coming down since Q4. So Q4 was approximately 5%. Now the latest data point we have is around 4.4%. But I'll say Europe is slightly different. Every country has its own collective labor agreements and regulations. But I'll say overall, I mean, we're managing wage inflation both on our OPEX and on our gross margin. We absorb it both on one side of the P&L and on the other side. And again, both work hand-in-hand at Ramstad. So we're quite comfortable in our ability to price it and how we're doing it and absorb it on our OPEX. Thank you.

Yeah, fine. Thank you.

Thank you. We will move on to our next participant, Oscar Val from JP Morgan. Please go ahead, sir. Your line is open.

Yes, good morning, Sandra and Jorge. Three questions from my side. The first one, going back on temp gross margin, so up 40 in Q1. Can you just comment on how you expect that to behave over the rest of the year? Are you lapping easier comps and what makes this driving that? Are you seeing any changes in competition and pricing on the temp side? Then the second question is on restructuring and one-offs, 37 million in Q1. Do you have any guidance for the rest of the year? Are you working on new programs? And then the final question is on the Rise Smart business, the outplacement business. Could you just comment on how material that is in size and how much that is growing and if that's going to continue to grow next quarter? Thank you.

So let me start with that last one, Oscar. Thank you very much. RiceMart is one of the offerings in our enterprise business, and we don't disclose any information on the specific offerings there. So that's what it is for now. But it is definitely helping us because, obviously, it's a great business that sort of helps clients coach their talent as well as find new opportunities for people that are leaving organizations.

Yeah, so Oscar, it's good to talk to you. So on the margin, look, Gunstart is a very diversified company. The results you saw today are the results of different trends geographically, different concept trends. So it is literally impossible to have a view on the margin, of course. the underlying structural trends are there. We're carefully managing margin. We're carefully managing pricing. I think what is important ultimately is to conclude, and we talked about it on the remarks earlier, for each concept, we have clear expectations on OPEX requirements and conversion. So depending on how the margin evolves, so will OPEX, and that's basically how we're managing Q2, Q3, Q4, and now we're managing the predictability of Ransat over the last years. So that is a track record. Then on restructure one-offs guidance, I mean, by definition, they are one-offs. So by definition, it's hard to predict anything. Integration costs associated with M&A, they might come back if we find it logical vis-a-vis the business plan and the good business plans we had for these acquisitions. Others, literally, we always try to use as much as we can natural turnover, reallocating people from units where we don't find demand to other units in places where we find demand. And if not, then we will incur them again with a payback less of 12 months. We can't predict how long. Great.

Thank you very much. Thank you. Thanks, Oscar.

Thank you. We will move on to our next participant, Sohasini Varanasi from Goldman Sachs. Please go ahead. Your line is open.

Hi. Good morning. Thank you for taking my question. Just one from me, please. You've indicated that the March exit rate on FTEs is below the 1Q average. Is it possible to give some color on how much lower it is by the end of March? Was it maybe under 4% down versus the 1Q average? Thank you.

So, Asini, we don't like this closing debt, but let me give you some color. It is obviously down enough to feel comfortable as we enter Q2, but again, as we enter Q2, based on the first visibility we have, would we see that things either change on the way up or the way down, and we will adjust accordingly. But it's indeed well below. the exit rate of Q1.

Yeah, so maybe an important comment to mention there is obviously we have been very much focused on adjusting our workforce. At the same time, we are also seeing left and right opportunities that would justify increasing our workforce here and there so that we capture the revenues that are out there in the market. So it's finding that right balance between volume and value. I think that is the name of the game. and having the team that sort of is associated with the level of volume and value that we can capture in the marketplace. That is the fine-tuning that we're doing day in, day out here. So we remain absolutely focused on doing that.

Thank you.

Thank you, Swasini.

Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star 1. We'll move on to our next participant, Rory McKenzie from UBS. Please go ahead. Your line is open.

Morning, all. It's just two questions from me, please. Firstly, can you comment on how large technology is as a group overall and what the organic revenue trends were in that vertical globally? And then secondly, just to follow up on this, I guess, volume versus value. If your own wage inflation is running at 5% or so, it's safe to assume that the price mix component of your revenue growth is probably at least that. And so organic volumes are maybe down nearly 10% in Q1. That's one of the bigger volume declines in staffing we've seen since kind of 2009, really. So how are you thinking about trying to protect and position the business for what's quite a sharp pullback in volume terms, even if actual revenues are being protected with the inflation running through the business? Thank you.

Yeah, good question. Let me start with the second, Rory. I mean, obviously, let me put things in perspective a little bit. We, in 2022 and the end of 2021, we were red hot and we had a lot of pent up demand from COVID. So we were sort of at a very high level in terms of volume. So what we have done is we stay very close to our clients and we have to make the decisions that we have to make in adjusting our workforce up or down, depending on what we see in the market. We've done a very good job. We've had a great ride over the past six quarters, so the business is more diversified than ever with a higher proportion of in-house professionals, PERM, and RPO in the mix. That has been the establishment over the last quarters. Now, the economic environment is more challenging, so we have to adjust accordingly. And that's what we've done. And when I talk about the balance between volume and value, that is all about making sure we get the volume, but we also get it at the right price. And George has already mentioned it a couple of times. Pricing is a discipline that we have perfected over the past years, and it is something that's very high on our agenda. So that's the name of the game. Managing volume and value is what we will continue to do going forward. On our technology business, I'm looking here at Bizarra if we actually disclose, now she's nodding no, if we disclose those numbers. I'm afraid I can't help you there, but it's a significant chunk of our business, as you can imagine, in various markets in North America, here in Western Europe where we have OC, in Belgium, Germany, and France. We acquired the finite business in Australia, so it is a significant portion of our business indeed.

Rory, let me give you some color on the other questions. First of all, on the volume question, I would argue as well, please do look, of course, We're talking about a Q1 comparison versus last year where we were growing 15%, so red hot from many perspectives. And at the same time, yes, indeed, we do see a 10% decline. So now linking back to your first question on the breakdown, 10%, you can find that on the page 22, by the way, of the presentation. Now, what I would also argue is At the same time, we are a much more diversified company. We have different concepts. We have different services if you look at our, let's say, broad portfolio. So it's in that context that I would always look at this 10% decline plus the right odds. Now, in terms of adaptability, you asked the question volume versus value. I would call it more growth versus profitability. I mean, just putting things into some numbers, even based on Q1, Northern Europe, Southern Europe, they represent 70, or even APAC, let's say together, 80% of our EBITDA. That is actually going down in revenue a little bit, indeed from a very red hot level, but delivering and profitability. U.S. is adjusting, so it's not yet as we'd like. But, again, I mean, sometimes our adaptability might not be picture perfect, but if we look at it over time enough, you will always find back to our principles of adaptability, incremental conversion and recovery. So, overall, we are quite pleased. And I would even say it's not volume versus value or growth versus profit. None of them is negotiable. It's both. Thank you.

Thank you. That was very helpful. I guess one follow-up, I think. is the kind of question that we're struggling with is that you've with this inflation running through both the revenue and your uh opex yeah it seems clear that you were a net beneficiary you earned a net positive margin on inflation on the way up over the past two years are you still aiming to be a net beneficiary in terms of that inflation on any down cycle we go through

Yeah, look, the same discipline.

I mean, the underlying biggest driver of our OPEX will always be personal expenses, or at least it is personal expenses, and FT. We are adjusting. The discipline between gross margin absorption of inflation and OPEX inflation, we pride ourselves on it. We have a track record. We've shown it again over the last years. Nothing to say, suggest otherwise going forward.

Perfect. That's very helpful. Thank you both very much. Thank you.

Thank you. It appears there is no further questions at this time, dear host. I'd like to turn – oh, sorry. We have one more participant. That is Conrad Zoma from OdoBHF. Please go ahead. Your line is open.

It had to be you, Conrad, that last one. Hi, Conrad.

I thought you did it in alphabetical order. That's why I waited until you did it. no sorry just just one final question and we've talked about it already quite a bit but just to make sure because I think you did very well in terms of margin preservation in the quarter particularly on gross but also EBITDA margin but obviously now that the top line is actually in quite rapid decline are you happy with the time gap and the development in your OPEX versus your top line, because your head count was still up year on year, although it was down sequentially. But if your top line continues to decelerate, I think you might need to step up in reducing your OPEX as well. Are you happy with the progress that you've made so far?

I would say, Conrad, we're very pleased with the progress we've made so far, and I'll tell you why. The adjustments always lack a little bit what's happening in the market, and I would say what's happening in the market is not always very clear. I'll give you just one example. In our North American business, in the beginning of the year, we had some weeks that were very strong. We had some weeks that were weaker. Then we had another strong week again. So it felt like the market was looking for a direction. And once the market has a direction, that's when we can start adjusting, if you will. So there's always a bit of a lag, but I think Ransom can pride itself in the fact that the lag is actually relatively short. So I think we're doing a very good job there. And that's what we will continue to do. So we'll continue to adjust to what the market is bringing us, both up and down, because we did have a big meeting here last week with our top management in the various regions, and there are opportunities out there that require investment to capture them. So if we see those and we have the confidence that there are good opportunities, we will go after them, because ultimately that's the name of the game here. We need to capture as much demand as possible, of course, in a profitable way.

Thanks, Amr. That's very clear. Thank you. Thank you, Conrad.

Thank you. Dear speakers, are we okay to take another question?

Yes, absolutely. If there is one, yes.

All right. We will move on with Mark Zwartenberg from ING. Please go ahead. Your line is open.

Yeah, good morning, gentlemen. I'm sticking to the alphabetical order. I couldn't get through to the fixed line, so I use my mobile. But now... A final question maybe on the trend. You're looking at April being in line with Q1, but at the same time the March exit rate was a bit below the Q1 average. But we also see ad markers still weakening quite sharply through the quarter, and some data points also point to some softening in April. How can you explain that April is actually looking a bit better than March? Is that just a comparison-based thing, or... Is it explained by some certain end markets that do see some recovery? Can you maybe give a bit more color why that trend has bended off a bit?

Mark, thank you. Let me start and if you want to give some color afterwards. First of all, but just just correct so March exit rate we did not talk about and we did not say was lower so the March exit rate in terms of FTE I mean Sander just mentioned we've been adjusting through the quarter Conrad made the question about are we happy or not so we continue the adjustment for the quarter the FTE exit rate was lower but we did not necessarily talk about growth or because we did not mention at the same time Looking ahead, look, we don't speculate, and you know that, so we've always preferred to work on predictability. What I can say is early April temp volumes were down at a similar pace, so 10% as we've communicated. Yeah, we see what you see as well, so it is extremely difficult to predict more than that, but we remain cautious. And we're learning literally every week, as I mentioned before, with all the data that we can collect. I mean, field steering, you know how embedded it is in our organization. Perhaps, if anything now, we are also operating in a much more scenario planning basis. So what will happen if, what will we do with that, what will happen if this? But ultimately, with the portfolio we have, with diversification we have now, and different trends around the world, we prefer not to speculate and just work on what we see.

Yeah, and let me say, to add some color, Not to speculation, of course, but what do I hear from clients? I was just talking last week to the CEO of a MedTech company, and what do we hear there? We hear uncertainty in the economy. We hear uncertainty on what the Fed is going to do. We hear PMIs are going up. We see inflation coming down. So there are some positive signs there, but uncertainty is still the key word. The second key word is, is talent scarcity. And that means, for instance, in MedTech, you know, hospitals have a shortage of doctors and nurses. They don't do the operations, the surgeries. So that has an impact on demand in the MedTech environment. So the two main things driving the market is uncertainty on where the economy is going and talent scarcity. Those are the things you should always keep in mind, Conrad.

That was actually my second question. If you look to the PERM development in the U.S. with also scarcity, if you look at the job vacancies, although coming down, it was at record levels, but still now PERM is coming down on a weakening market trend. But if you look to Europe, particularly northern Europe, PERM is still very strong. At the same time, we see a bit of the same elements. PMI is slowing. There's a Maybe the backlog's being trimmed now. But still, what could we learn from that scarcity not being an argument currently in the US in terms of PERM and PERM still being strong? Aren't you afraid that the PERM in Europe is then also coming down sharply following a bit the US trends?

We'll see what happens. But PERM in the US, and your question is spot on, we looked at that in a lot of detail last week. Yes, it's coming down, but if you look historically, it is actually at pretty high levels still. So that tells us that these vacancies that have been open for a long time are still being filled. And that is also still happening, I would say, in Europe. So in that respect, companies are now taking the opportunity to fill positions that have been open for a the primary dynamic that we're seeing.

And maybe a final one, if I may, Sander, on RPO. It was only down a couple of percentage points. So you invested there, you onboarded some new clients. But if you maybe step away a bit from the onboarding and the organic growth you're seeing, what is the trend at a client? Because it's fully in business, I assume. So do you see anything changing there in the trend? Because it might be more vulnerable for cyclical boundaries.

Also, our RPO clients are hiring less. That's very clear. At the same time, when I talk to clients, again, I spoke to a few CHROs in the tech and in the pharma industry, and they are saying, well, listen, this is all very painful. We need to be very smart on how we come back with all this later because we need to organize more for flexibility. That's one thing. They're talking to us saying how can we build back better, so to speak. The other thing is clients that were not open to outsourcing any of their business, any part of their recruitment processes are now open to do that, to have more flexibility, but also frankly to have lower cost because obviously our teams in India can do a phenomenal job in helping those clients. So the pipeline of our RPO business is as strong as it was last year. with a lot more bigger deals, which of course are the ones that we like and that we are very well positioned for.

Okay, that's very helpful. Well, thanks for all the callers, and thanks for taking the questions. You're very welcome. Thank you.

Thank you. Dear speaker, CWS has no further questions at this time. I'd like to turn the conference back to you for any additional closing remarks. Thank you.

Thank you very much, Priscilla, for facilitating the call. And I would like to wrap up the call by saying a big thank you to all 650,000 renters, talents, and employees for all the hard work for our clients over the past quarter because that's ultimately what matters. Thanks a lot. Thank you, everyone.

Thank you for joining today's call. You may now disconnect.