MANPOWERGROUP THIRD QUARTER 2026 EARNINGS CALL - MANPOWERGROUP INC

Financial Performance:

• Reported Q3 2026 revenue was $4.8 billion (constant currency growth: 6%; system-wide revenue including franchises: $5.3 billion).
• Adjusted EBITDA reached $107 million, up 14% year-over-year (constant currency), with an adjusted margin of 2.2% (10 bps expansion).
• Gross profit margin stood at 15.9% for the quarter; adjusted SG&A was $685 million (down 2% constant currency), representing 13.7% of revenue.
• Adjusted EPS was $1.01 (midpoint of guidance), driven by better operational performance offset by slightly higher share counts.
• Free cash flow showed a $17 million outflow due to timing of MSP payments; excluding this, inflow was $75 million.
• Balance sheet health: $233 million cash, $1.1 billion total debt, net debt of $870 million; debt-to-EBITDA ratio at 2.6x.

Guidance and Future Outlook:

• Q4 2026 revenue guidance: constant currency growth of 3–7% (midpoint 5%); organic days-adjusted constant currency growth estimated at 4%.
• Projected Q4 adjusted EPS range: $1.03–$1.13, with an effective tax rate of 44%.
• Management expects EBITDA margin to expand by 20 bps year-over-year in Q4, accelerating from the 10 bps run-rate in the first three quarters.
• Confirmed target of $200 million in permanent cost savings to be achieved by 2028 remains on track.
• Outlook assumes stable staffing margins and no significant negative impact from foreign currency translation.

Business Segments and Product Lines:

• Manpower Brand: Drove growth with 7% organic constant currency revenue increase; U.S. Manpower grew 15% (9th consecutive quarter of double-digit growth), gaining market share in logistics, food manufacturing, and automation.
• Experis (Technology/Talent): Trend improved globally; U.S. Experis revenue turned positive (+4%), driven by AI implementation, data governance, and cloud optimization demands in financial services, healthcare, and energy.
• Talent Solutions: Revenue up 1% (improved from flat Q2); RPO crossed into slight growth, MSP showed solid growth, while Right Management declined due to reduced outplacement activity.
• Geographic Highlights: U.S. revenue up 9%; Germany and UK grew double-digits in Northern Europe; Italy grew 5%; France dipped 2% but showed September/October recovery trends.
• AI Integration: AI-enabled talent screening now reaches 70% of revenue, improving fill rates and time-to-hire; deepened partnerships with AWS, SAP, Microsoft, and SoundHound AI.

Market and Competitive Landscape:

• Market share gains observed in the U.S. Manpower brand through new logos and wallet expansion.
• Commercial staffing demand is stabilizing and broadening; professional staffing and permanent recruitment trends are improving, particularly in the U.S.
• European recovery is broadening, led by strong performance in the UK, Germany, Italy, and Poland, offsetting volatility in France.
• Clients increasingly seek integrated "human-plus-AI" outcomes, giving Manpower a competitive edge via ecosystem partnerships and scale.

Risks and Challenges:

• France Market Volatility: Political uncertainty, upcoming elections, and a slightly weaker Q3 performance in France pose short-term risks, though Q4 trends are improving.
• Right Management: Declining outplacement volumes due to reduced restructuring activity temporarily pressured gross margins.
• Macroeconomic Factors: Potential impacts from interest rates, fuel prices, and industrial sentiment in key markets like France, though current employer confidence remains stable.
• Economic Policy: Uncertainty regarding potential business surtaxes or budget adjustments in France.

Management Commentary and Tone:

• Leadership Transition: CEO Jonas Priesing announced he will become Executive Chair, with President & CSO Becky Frankiewicz becoming CEO effective January 1, 2027; tone was confident and celebratory regarding the succession.
• Strategic Confidence: Management described 2026 as an "inflection point," citing broadening momentum across brands and geographies as evidence of successful transformation.
• Commitment to Transformation: Full commitment expressed to the April 2026 strategy, including the $200M cost savings and margin expansion targets.
• Tone: Optimistic, emphasizing agility, digital-first strategy, and the convergence of talent and technology.

Analyst Questions and Answers:

• France Recovery: Analysts questioned France's trajectory; management noted political volatility but highlighted September/October improvement and PMI recovery, guiding for a slightly better Q4 trend.
• Share Repurchases: Management indicated no immediate plans for buybacks to prioritize strengthening the balance sheet, though they may resume if momentum continues.
• Growth Sustainability: Confirmed that current 6% growth is not a ceiling; acceleration is expected as professional staffing (Experis) and permanent recruitment (Talent Solutions) gain full traction.
• Margin Expansion Drivers: Q4 margin expansion driven by stable staffing margins, seasonal GP improvements (holiday impacts), and continued SG&A discipline from front/back-office transformations.
• Capital Allocation: While dividends are maintained, capital allocation focus remains on balance sheet strength before resuming share buybacks.

Other Key Points:

• No share repurchases occurred in Q3; capex was $9 million.
• The "human-plus-AI" strategy is yielding commercial traction, contributing to pipeline growth and higher-margin deals.
• Front-office transformation (sales and recruitment redesign) is being scaled from the U.S. to the UK and rest of the world.
• Latin America continues to deliver strong growth, contributing significantly to the Americas segment performance.