Randstad Nv Unsp/Adr

to the Ronstadt Q2 2025 results conference call and audio webcast. For the first part of the call, the participants will be in listen-only mode. Afterwards, there will be a question and answer session. If you wish to ask a question, please press pound key five on your telephone keypad. Please note that you are limited to one question and one follow-up question. I will now hand over the word to Mr. Sander van der Noordende, CEO. Mr. van der Noordende, please go ahead.

Thank you very much, Elba, for that kind introduction, and good morning, everybody. I'm here with George and our investor relations team to share our Q2 results. The market environment in the second quarter was again influenced by geopolitical and economic uncertainty, which, frankly, we and many of our clients see as the new normal. Against this backdrop, I'm pleased with the performance we delivered and the strategic progress we made. We achieved revenues of 5.8 billion euros, an EBITDA of 171 million euros with a margin of 3.0%. We continue to benefit from our focus on operational excellence, and most importantly, we are seeing the benefits of our strategy coming through in our performance. We've seen a mixed picture across our markets with different trends and dynamics at play. We continue to deliver good, profitable growth in Italy and Spain. We had growth returning in APEC, where India and Japan are doing particularly well. We saw sequential improvement in North America with year-over-year growth in our operational and digital business. Northwest Europe continues to face weakness in hiring confidence, affecting permanent recruiting and our professional businesses the most. Looking ahead, we expect economic uncertainty to stay at current levels. In that context, client confidence will still be a challenge and we might see more demand for temporary work and soft activity on the permanent hiring side. Of course, we are managing the business with the operational discipline you expect from us. And we are staying extremely close to our clients in talent. In the meantime, we are building a better and stronger Randstad for the future. As said in our capital markets event, we've been focused on executing our partner for talent strategy. Specialization at scale is now a fact at Randstad. And this is important because specialization is key for our differentiation and our competitiveness in the market. Clients want to talk to someone who understands their business. Talent wants to talk to someone who knows about their field. And our people get the opportunity to focus their career on a specialization and do an even better job than they did before. And we know that this works. In RPO, for example, we see strong demand across our markets as more clients turn to us to be their dedicated partner for talent. We continue to win new clients, but equally important, we see more interested in recruiters on demand and existing clients. In digital, we see increased amount for AI skills, especially for Gen AI and the Gen Tech AI capabilities. In the US, we are ramping up AI-related projects in financial services, healthcare, consumer goods, and technology. And we provide these AI roles from our Global Delivery Center in India. Think about machine learning engineers, data scientists, and cloud engineers. We're also becoming more and more digital first. In Q2, more than 700,000 shifts were directly selected by the talent on our digital marketplaces, a double-digit increase over Q1. We continue to build scale and specialization in our talent and delivery centers, resulting in higher productivity and fulfillment. Focus works. So in summary, great progress and exciting work to be done. We're becoming more specialized and more digital with a better experience for clients and talent. All in all, we're absolutely on the right track. George, over to you.

Thank you, Sander, and good morning, everyone. So I'll bring back a little bit from last year around this time. We talked about this from Q1 to Q2 about the return of seasonality. And this year, we even see a step up. So from Q1 to Q2, we saw more coronavirus return in seasonality, more employees working, more people at work compared to last year and at the group level. And therefore, our organic revenue declined by 2.3%, so not an inflation yet, but still an improvement of 2% versus Q1, even against slightly tougher comparables. Second, we'll go through the results in more detail, but importantly, at the consolidated level, once again, like in Q1, our gross profit and OPEX were aligned, allowing us to protect relative profitability despite the lower top line. And like we discussed in the last CME, we see the impact of our strategic progress. We see it in specialization and growth segments. We see it in Q2 with a step up in productivity in GPP fields, so basically being able to increase our productivity in the field and how we do it. And lastly, we see the impact of structural cost savings with a strong focus on indirect costs. Let's see how this all pans out in our results, and starting with page 8 with North America. We saw good progress this quarter, like Sandra just highlighted. In the U.S., in particular, our operational business grew 1% and continues to perform ahead of the market. We are becoming more efficient, like we discussed before, and we are having less FTEs serving more employees working, again, this quarter. Digital, also building on Q1, grew 2% this quarter, as we see client wins and demand increasing, like Sander just highlighted. The professional solutions and permanent hiring do remain subdued, as hiring confidence somehow still remains low, declining by 16% and 24%, respectively. In Canada, we also saw good underlying improvement, and as you can see in the chart, a return to growth already this quarter. The EBITDA margin for North America, therefore, came in at 4.1%, up 70 basis points year over year, showcasing productivity gains. Now, moving on to Northern Europe on slide nine. In Northern Europe, we do continue to see mixed trends. Temp proves to be more resilient as agility is a client with sentiment on the perm side more still uncertain. From a sector perspective, we see sequential improvement in industrial pockets supporting our operational business, but at the same time, automotive continues to be subdued. In the Netherlands, and zooming in now in the Netherlands, growth sequentially improved from minus 5% to minus 5% from the previous minus 7% in Q1. Adaptability was good, despite, let's say, the adverse, and we've discussed it before. It's a quarter impacted heavily by holidays, working days, and long weekends. But adaptability, by and large, was good. Operational was minus 3% for the quarter, improving again versus Q1, as we see the impact already of several client wins over the last few months. Professional, though, is facing a challenging environment as the broader market is slowing down. We see this also reflecting, obviously, in the subdued permanent hiring. On the other hand, remember, our healthcare acquisition software helps to a certain extent or to a large extent to offset a large part of the headwinds we face in the broader professional talent solution specialization. Moving on to the east, Germany. So Germany saw more sequential improvements as the decline rate is to minus 7%, but still mostly on easy comparables. As here, the labor market environment remains unchanged. Digital at minus 5%, while operational still down 8%, where automotive obviously remains challenging. This quarter, again, remember, working days and holidays significantly impacted profitability due to the nature of the contracts. In Belgium, we see a slightly kind still, but still very good adaptability. Operational is growing 1%, reflecting underlying industrial improvement in Belgium. But like other non-European countries, professional remains challenging. Remember, here we're number one and quite exposed to all the different specializations. As we mentioned during our capital market event, we saw this quarter the first self-service ships through the digital marketplace. And we are quite excited and pleased to see the initial adoption of our digital marketplace. Moving on to the broader northern European subregions, we are back to growth. Poland, 17% already on top of strong growth last year, and Switzerland, 9%, leading the pack, while Nordics and the mission remain subdued. Growth is also profitable, as we expanded margin by 40 basis points year over year. And moving on now to the segments Southern Europe, UK, and Latam on slide 10. Let me start with France. So in France, we can almost say that we see similar trends as we saw and just discussed in Northern Europe. Somehow an easing of decline rates, a better Q2 than Q1, after a slow start of the year. This improvement was mostly notable in the operational business, now down 3% versus 6% in Q1. Our on-site business is growth and is doing particularly well here. Professional, though, slowed to minus 80%, and also firm, again, 20% down still year over year. Digital, while still slightly negative, as sequential improved, mainly on the bank of our strong aerospace industry. The even time margin was 4.1%, and Trusted did a good job and showed solid control and adaptability. Now, Italy, again, now on top of growth, Q2 last year was a very strong growth for a quarter for Italy, continues to see good growth, and is still doing well for many quarters in a row. Operation was up 2%, and our investments in growth segments, such as IT and healthcare, are paying off, as professionals also grew 3%. Profitability remains strong, and we continue to invest in our business and excited for the times to come. Iberia also grew 4%, here primarily driven by Spain, as we continue to see good momentum growing at 6%. This is mainly driven by strong performance in its operational and enterprise talent solutions. Again, here we remain investing in growth segments with many opportunities to grow further. Furthermore, in broader in the region, revenue and profit performance were mixed across other southern European countries, UK and Latin. The UK labor market continues to soften, and we were down 15%. On the other hand, in Latin America, again on top of solid growth last year, we continue to grow 7% with all our countries showing growth. Moving on to Asia-Pacific. The Asia-Pacific region continues to do well and is now, as a region, back to growth with good profitability. Japan demonstrated solid growth, 6%, combined with strong profitability, a good example of the impact of leaning in on specialization. Remember, Japan, as we discussed before, is one of the countries that operates talent centers at scale already, well embedded in our ways of working our talent service models, supporting solid growth in our operational business. Digital continues also to do well. We continue to invest, and we are ideally positioned to support clients and talent in a very Canada-scarce market. Moving south, Australia and New Zealand also improved, another market that is accelerating the rollout of our digital marketplace, with over, in this quarter, 200,000 ships, in the quarter alone, roaming through the marketplace already. India grew double-digit, and we continue to invest in the right growth segments here. Overall, the EBITDA margin for the region was 4.3% in the second quarter, showing strong operational discipline while, remember, continuing to invest in growth. And that concludes the performance for our key geographies. So let me now walk you through our financial performance on slide 13. First, let me start from a specialization point of view. Sandra alluded to it in the beginning. And conclude that with the exception of professional, all specializations made a significant step up. with operational typically early cyclical, and enterprise close already to last year levels this quarter. Once again, this quarter, our gross profit, and you can see, and OPEX were aligned. We'll talk more about that later. And that way, the quarter EBITDA margin was 3%, similar profitability margins last year, despite low revenue and adverse effects on PECs. Underlying EBITDA was at 471 million euros. And let me unpack a little bit the items until net income. Starting with integration costs and one-offs. In this quarter, this amounted to $35 million, mainly related to reorganizations in Germany, the Netherlands, and France. In the line amortization and impairment of intangible assets, nothing really relevant. It's just a regular accounting treatment of the purchase price allocation of our acquisition of SORCAC. Net finance costs, though, include this quarter the write-off of all the remaining value of the seller notes of our loans towards CareerBuilder and Monster Joint Venture to the extent of 32 million euros. The effective tax rate for the first six months was 30%, impacted in general by the low taxable income following a change in profit mix and lower earnings. Our 25 guidance is a notch higher, therefore, to somewhere between 29% and 31%, mainly reflecting this current country mix. Adjusted net income was 84 million. With that, let's continue and look now in more detail at our gross margin breach on slide 14. Gross margin came in line with our expectations, albeit at the lower end, driven by FX, in particular, and subdued PERM. Now, first of all, remember, like for like, we need to remove 60 basis points of the impact from the divestment of monster in HR solutions. So year on year, and starting with the left, our temp margin is down 40 basis points. And here, geographic and client mix continue to have a very large impact. This is where the market is today. Penetration rates are stable in many markets, seasonality is returning, and large clients are up high single digits. And we expect this trend to continue. In addition, idle time linked to light quarter and holidays impacted especially, as I mentioned before, northern Europe. Sander mentioned, I also mentioned it before, uncertainty continues to weigh on PERM, and agility solutions are doing better, but the permanent side is not. So to the extent that today, even compared to Q1, we lost sequentially 5 million euros in fees alone. This weighs on the margin, and it had an impact of approximately 10 basis points versus original expectations. Contrary, though, to the subdued transactional firm, RPO, so companies, again, outsourcing their recruitment processes, continues to do well, and we're actually growing 8%. We're finding new ways to revenue in RPO, either it's being in mid-market, in new clients, and new activities. Therefore, HRS, the overall HRS, excluding Monster, has a positive 30 basis points impact. which now brings me to the OPEX bridge on slide 15. And remember, this one is sequential in how we compare versus Q1. Our underlying operating expenses came in at €923 million, broadly stable sequentially, as effects offset seasonality and timing in the year of strategic investments. Total cost decreased 4% year over year, or €35 million less, and directly aligning with a 4% organic gross profit decline. As discussed at the CME, we're making strides in building a stronger, more resilient, and profitable Randstad. This quarter, we've seen both a 1% increase in field productivity compared to last year, as we continue to implement new service models, and our indirect costs have continued to decrease structurally year over year, while still protecting our strategic investments. Similar to Q1, we have successfully maintained our EBITDA margin year over year, resulting in an organic recovery ratio of over 60%. We also encourage one-offs, primarily in Northern Europe and France. We discussed it before. We continue to roll out structural optimization cost savings. This will either ensure we have a minimum level of profitability in every market we operate, or we'll continue to free up resources simply from better ways of working and rolling out our strategy. Now, leading it back to our CME and T1 publication, with these additional efforts in one-off century structures in the first half of the year, we are now on track to deliver north of the €100 million net structural savings for 2025. And with that in mind, let's move on to slide 16, which contains our cash flow and balance sheet remarks. Our free cash flow for the quarter was positive €82 million, reflecting good working capital management. DSO was 55.7 days, still up sequentially, and here again, the very same client mix that we discussed before on margin puts also upward pressure, with most of the impact accounted by a few large clients. Our leverage ratio is 1.8, and remember, it typically peaks in Q2, according to seasonality of earnings, cash flow, and dividend payments. And that brings me to the outlook on slide 17. And then we start with the current momentum. So volumes in early July, so on these first two weeks, are in line with June. If we then look at our gross margin, in Q1 and Q2, we saw a gross margin down approximately 90 basis points year over year. And remember, this includes 60 basis points from monster deconsolidation. Therefore, looking ahead to Q3, we expect broadly a similar decline with minor puts and takes, as most of the results will be consolidated as of mid-September last year, and FX will continue to play a role. If we look at operating expenses, we expect them to be modestly lower on the back of the continued cost savings and the typical seasonal dip in OCAGs we have from Q2 to Q3 from the treatment of holidays. Balancing this, we expect a step up in profitability in the second half of the year, broadly in line with the regular intra-year pattern. So to summarize, let me wrap it up. Q2, we see a step up, not an inflection. And we keep doing what we do. We will continue to, one, focus on profitable growth by having better propositions and focusing on structural growth segments. Two, continue to be laser-focused in delivering better, more scalable talent service models, and with that, free up productivity and scalability on the field. And three, we'll strive to keep improving and reduce our indirect costs. In short, we continue to progress in our growth algorithm by rolling out our agenda to deliver experience at scale in line with our partner for talent strategy. And that concludes our prepared remarks, and we look forward to taking our questions. Elva, please.

Ladies and gentlemen, we are now ready to take your questions. Please introduce yourself before asking your question. Again, I want to remind you, if you wish to ask a question, please press pound key five on your telephone keypad. We kindly remind you that you are limited to one question and one follow-up. First analyst can go ahead. Your line is now open.

Hi, good morning. This is Andy Grobler from BNP Paribas. Just to start on the US, if I may. It's a good progress in the business. Can you just talk through how the trends in terms of large clients and SME have gone through the quarter and what you're hearing back from those clients in terms of their confidence at this point?

yeah let's say andy thank you very much for that question i i think As I said, there's still uncertainty in the market, but that's, as we also say, it's the new normal, so clients are still experiencing that. I don't think they're ready for big decisions, whether it's investments in infrastructure, technology, or people, they take it one step at a time. Having said that, we've made some very good progress, especially in our digital business with some of the big banks and the retailers where we have had nice in activity. We have had some good new wins in our RPO business, which is primarily focused on North America, of course with some of the tech companies, with some of the banks as well. So all in all, I would say the mood music is ticking up slightly, but I wouldn't go a whole lot further than that, Andy.

Thanks. And just a follow-up, again, on North America. If you look at the number of placements per member of corporate staff, it grew very sharply during the quarter, up 18%. The rest of the world was a bit more modest. Is that a level of growth, kind of the shape of things to come as you continue to roll out your digital platform?

Andy, you're breaking up. What grew through the quarter? Sorry, just to make sure we address your question. Placements.

Sorry, the number of placements per member of corporate staff.

Absolutely, yes. I alluded to that. So as we continue to roll out, well, in the case of the United States, already the digital marketplace, that's the only way we operate in operational, but combined with talent centers and delivery centers, We continue to see the benefits of that, not only from a better proposition, but also given to self-service, given everything we can do to accelerate and have immediate propositions, and increase in productivity from the field. So on the back already of a few quarters, this quarter more pronounced, we see indeed the ability to generate more placements with less FTE. And that will basically continue to be how we monitor the productivity and the gains we have in our field.

Great. Thank you very much.

Thanks, Randy.

We are ready for our next question. Please go ahead.

Good morning. Speaking from Jefferies. Could you comment on the June exit rate at the group level and if you could flag any countries benefiting from a particularly good exit rate? Thank you.

Yeah, so normally, so, Simon, we don't necessarily disclose the exit rate for a country, but let me just help you a little bit. So, one is, if you look at most of the numbers we publish as well on IndieTel, the step-up from Q1 to Q2 is broad-based. So, practically in every country we have return on seasonality and a step-up, let's say, in the number of employees at work. So, the growth rates are broad-based and improvements on average are around 2%. If we look at, let's say, the exit rates of the quarter, obviously we left Q1 with approximately minus 4%. We said, on average, April was in line with March in Q1. So things have improved throughout the quarter. It's a very difficult quarter to have an exact number because you have a lot of public holidays and long weekends, so it's very difficult to say. But we are quite comfortable when we say July started in the same fashion as we exit June and the quarter.

Okay, and a quick follow-up to this. Assuming this improving trend continues, do you expect at some point in Q3 to return to flat organic growth on a year-on-year basis?

Let's say country by country, but that's one of the things. Indeed, we see a step up. I also started by saying seasonality was more pronounced this year even than it was last year. The only other of, let's say, a point that we have to offset is, of course, we are now starting to face more different comparables. Give or take between Q2 last year to Q3 last year, we were 1% to 1.5%, let's say, improvements. So, yes, on one hand, you have an improving trend, and we've been seeing that throughout the last six months. That will face, on the other hand, a slightly headwind from comparables. The net impact, I'll leave it to you, but indeed, that's the two things combined.

Thank you.

We are ready for our next question. Please go ahead.

Hi, good morning.

Suhasini Varanasi, your line is now unmuted. Please go ahead.

Hi, can you hear me? This is Suhasini from Goldman Sachs.

Hi, Suhasini. Good morning.

Hey, good morning. Thank you very much for taking my question. I just wanted to get some more color on the U.S. please. The temp staffing data obviously tells you one thing, but your top line trends say something else. So can you maybe help us unpack what was maybe self-help, maybe the digital aspect that has helped you versus what the underlying market conditions are?

Thank you.

So I mentioned as well, if you didn't want to say more about specific client trends or something, but let's say if we look at the largest segments, I think it's probably easy to start there. What we see is primarily with let's say penetration rates stabilizing overall. We see clearly an uptick on large clients. So a lot of the agility needs and the entry, let's say the seasonality, agility demands from our clients. And that is particularly expressed in our large client segments. So we're doing particularly well there. It is clearly also supported by the rolling out of our digital marketplace. So in many clients, suppliers, if we have a better proposition, if we are able to have immediate talent availability, we can do well in terms of fulfillment rate, we can do well to basically be the first one to have talent available for our clients. Overall, that segment in particular is enabling us to support growth above market.

And you can add our digital North America, digital business. U.S. digital has shown some nice growth in the quarter as well. So it's a story of operational and digital, I would say.

Thank you. That's very clear. And just a quick one on the outlook on growth margins and SG&A. When you say slightly lower growth margins and modestly lower SG&A, can you just help us quantify that impact? Thank you.

Yeah, so both, let's say on both, if you typically look at normal years, so let's forget COVID and let's say all that ups and downs. But if you look at normal years, we typically have a seasonal dip in terms of margin. Let me start with the margins for Sydney. from Q2 to Q3. There's a few reasons you remember. We have more student business. We have certain more hospitality business. There's also bench in some countries. So typically our margin goes down from Q2 to Q3. Normally around 20, 30 by these points. At the same time, we had, let's say, this quarter, and we expect still to face it into three, given how things are entering in a, let's say, unfavorable effects impact on the gross margin. So, Brian line, let's say, the current trends year over year, we expect to continue. Also, because these larger lines, I mentioned before, they have, let's say, a lower market level, larger, they are growing in 19 digits, that has an impact in our margin. It's the market as it is today, larger clients, seasonality returning, and we're able to grow in them. Now, the opposite, almost the mirroring effect of this is in OPEX. So, normally as well, our OPEX from Q2 to Q3 takes a step down, typically because of holidays and the treatment of that. Also, we've been continuing to do cost service, so this will continue to materialize throughout the year. And remember, when we talk about large clients increasing in the mix, right, so we find growth in large clients more than we find growth in SME, that also comes at the different, let's say, cost-effective talent service models. So we are also able, in the mix of our operating expenses, to be able to do it more efficiently. And last but not least, again, the mirroring effect, FX will be supported. So, let's say, less OPEX in Q3 to be expected just because of FX. Now, you put all of this together, I think probably the best way to look at this is and set the tone for Q1 and Q2. Normally we see an uptick, and last year it was 10 to 15 million in profitability. So we have on one hand cross-margin going down. We have on the other hand OPEX also going down. So the net impact of that from a profitability perspective is 10 to 15 million. We've been striving to not lose ground in profitability versus last year, so we'll do everything we can to, again, in the second half of the year, have an uptick in profitability and profit in line with what we did last year.

Thank you very much.

We are ready for our next question. Please go ahead.

Your line is now unmuted.

Please go ahead.

Hello. Go ahead. Good morning. Hello, yeah, morning. So, yeah, just a question on the professional weakness that you're calling, which seems to be the only specialization which has deteriorated a bit sequentially. Can you give us a little bit more flavor there? You're flagging the uncertainty, but keen to understand if this is something that you've seen in, previous cycles as well. Is it something that you would consider normal, given the context and your experience and historical precedent? And if there is any other potential impact, and I'm thinking they are more structural versus the cyclicality that we are discussing, that we've discussed so far in the call.

Good question. I think it's fairly straightforward. In times of uncertainty, If you need people to run your business or to deliver packages or whatever, because you have business, you take them. If you're looking to hire that marketing expert, that HR person, and things are not so certain, you say, well, maybe I'll give it a quarter or two until we hire that person, until we have a bit more certainty under our belt for where this market is going. I think that is the challenge in professional, with a notable exception, by the way, for digital. Because our digital business, specifically in North America, has seen a nice uptick, especially in retail and financial services. So I think it's as simple as that.

Understood. And one additional question, if I may, just making sure I got that right on the gross margin guide for Q3. So you're saying that you expect a similar decline year-on-year, so about the minus 90 bps versus Q3 last year, which I'm just making sure I'm using the right base. So that was 19.5%, right?

Yes. So indeed, we've been having 90 now. Remember, this includes the 60 bps. uh from the consolidation of monster now we deconsolidated uh around half 14 15 september last year so there is a slight let's say improvement in that respect now you also have to take puts and takes we need to see how the mix evolves in terms of effects in terms of perm the impact of effects but in general the same delta year over year with a slight benefit from having the consolidated monster already at the end of the half of september

We are now ready for our next question, please go ahead.

Hi, good morning, this is Simon from Capital Chevreux. I have a question on operating working capital. It showed quite an improvement compared to last year. Can you please give me a bit of color on what drove the reduction this quarter compared to last year and what we can expect for the rest of the year?

Yeah, so there is, I mean, first of all, when we look at operating working capital, and I mentioned it, let's say when it's surprised good, when it's, let's say, less good in terms of what expectations are in. I'm not a fan of looking at it on a quarter specifically, so ideally zooming out helps. A few things. So, I mean, we mentioned it, our DSO remains impacted, let's say, by a larger development on the larger clients. At the same time, we're doing a lot of work on our own improvements in terms of time to invoice and overviews. Our overviews are at the lowest historically ever, so there's a lot of good work in our teams in that respect. This quarter in particular, and I'll suggest we look at the first six months, you have an impact from liability. So that's just basically a reflection on timing and proactive working capital management. So just making sure that we manage as well as we can our working capital. But I suggest we look at the first half and not just a quarter in particular.

Okay. Thank you. Thank you.

As a reminder, you can ask a question by pressing key pound five on your telephone keypad. Please introduce yourself when asking a question. Thank you very much. We will now take our next question. Your line is now open. Please go ahead.

Thank you very much, Elba. If there are no further questions at this time, I think we're going to wrap up the call by saying a big, big thank you once again to our more than 600,000 talent. And, of course, to Ransap team members for all the hard work, for executing our strategy and running the business with rigor and discipline. We appreciate it a lot. And see you all next quarter.