MANPOWERGROUP THIRD QUARTER 2026 EARNINGS CALL - MANPOWERGROUP INC

Explicit Guidance:

• Q4 2026 Revenue: Constant currency growth of 3% to 7% (midpoint: 5%); Organic days-adjusted constant currency growth estimated at 4% midpoint (adjusted for business days and dispositions).
• Q4 2026 Margins: Gross profit margin estimated at 15.9% (midpoint); EBITDA margin expansion projected at +20 basis points year-over-year (midpoint), improving upon the 10 bps run rate of the first three quarters.
• Q4 2026 EPS: Range of $1.03 to $1.13; Weighted average shares estimated at 48.3 million.
• Q4 2026 Tax Rate: Effective tax rate estimated at 44%.
• Long-term Cost Savings: Target to deliver $200 million in permanent annual cost savings by 2028.

Business-Segment Outlook:

• Manpower Brand: Expected to maintain momentum; U.S. segment forecast to deliver solid mid-single-digit growth in Q4 2026 after nine consecutive quarters of growth.
• Experis: U.S. market crossing to growth (4% in Q3); global trends improving driven by financial services, healthcare, and energy sectors investing in AI, cloud, and data governance.
• Talent Solutions: RPO and MSP showing sequential revenue improvements; Right Management (outplacements) declining due to slowing layoff activity, expected to continue as a headwind to gross margin but manageable as commercial staffing recovers.
• Geographic Recovery: Europe showing broadening improvement (UK, Germany, Italy, Spain, Poland, Norway); France expected to see a slightly improved year-over-year revenue trend in Q4 2026 based on September/early October trends, despite political uncertainty.
• Asia-Pacific: Japan expected to maintain similar 3% growth levels in Q4 2026.

Market and Competitive Outlook:

• Demand Trends: Shift toward "human-first, digital-always" approach; increasing client demand for outcomes rather than activity, specifically in automation, reshoring, and specialized technical talent.
• Pricing & Margins: Stable underlying staffing margins expected through Q4; gross margin trends improving as permanent recruitment softness (e.g., France) stabilizes and mix shifts toward higher-value opportunities.
• Competitive Position: Manpower brand gaining share in the U.S. via new logos and wallet expansion; leveraging scale and global footprint to win profitable share in high-demand verticals.
• Structural Changes: Right management decline viewed as a positive signal of broader labor market recovery (reduced restructuring activity) rather than a negative business metric.

Macro / Industry Outlook:

• Economic Sentiment: Management views 2026 as an "inflection point" for the business as demand stabilizes; employer confidence remains solid in France and the U.S. despite market volatility.
• Regulatory/Tax: Monitoring French budget discussions and potential large business surtax changes; considered premature to predict impact until parliament review concludes.
• Currency: Q4 guidance assumes neutral foreign currency impact.
• Industry Drivers: Industrial PMI recovery in France (above 50 since August) and broader manufacturing stabilization supporting demand; AI adoption driving infrastructure spending.

Strategic Initiatives:

• Leadership Transition: Becky Frankiewicz appointed CEO effective January 1, 2027, replacing Jonas Priesing who becomes Executive Chair.
• Transformation Program: On track to deliver $200M cost savings by 2028; expanding front-office transformation from U.S. to UK to scale globally; focus on redesigning sales/recruitment processes to lower cost-to-serve.
• AI & Partnerships: AI-enabled talent screening now reaches 70% of revenue; deepening partnerships with AWS, SAP, Microsoft, SoundHound AI, and IBM Watson X Orchestrate to accelerate client cloud and AI transformations.
• Digital Capabilities: Expanding human-plus-AI strategy to improve fill rates, time-to-hire, and client value.

Risks and Headwinds to Outlook:

• France Volatility: Political uncertainty and elections in France remain a risk; however, management expects trends to improve into Q4.
• Right Management: Continued decline in outplacement volumes expected to pressure gross margin in the short term.
• Seasonality: Q4 seasonality remains a factor, particularly regarding manufacturing shutdowns in December, though a stable environment is projected this year.
• Cost vs. Growth: Risk of failing to convert revenue growth into margin expansion if cost discipline is not maintained; transformation costs are excluded from underlying guidance.
• Macroeconomic Uncertainty: Potential changes in interest rates, diesel prices, or industrial sentiment in key markets (France, U.S.) could impact PMI and client confidence.

Management Tone on the Future:

• Confidence Level: High confidence in 2026 as an inflection point and the company's positioning for long-term growth.
• Strategic Commitment: CEO nominee Becky Frankiewicz reaffirmed full commitment to the transformation plan, including 100+ basis points of margin improvement and significant cost savings.
• Capital Allocation: Priority remains on strengthening the balance sheet (net debt stable) before resuming share repurchases; no immediate repurchases expected.
• Narrative: Transition described as "seamless" and "thoughtful," emphasizing continuity, internal talent development, and a clear path to "profitable growth" and "greater operating leverage."

Miscellaneous:

• Q4 2027 Earnings Call: Jonas Priesing confirmed this will be his last earnings call before the leadership transition concludes in January 2027.
• Cash Flow: Free cash flow negatively impacted by MSP payment timing in Q3; expected to be strongly positive in Q4.