Earnings Call: Q3 2021

Oct 19, 2021

Welcome to the ManpowerGroup Third Quarter Earnings Results Conference Call. And now I will turn the call over to ManpowerGroup Chairman and CEO, Jonas Priesing. Sir, you may begin. Participants are ready to begin. Welcome to the Q3 conference call for 2021. Our Chief Financial Officer, Jack McGinnis, is on the call with me today. And for your convenience, We have included our prepared remarks within the Investor Relations section of our website at manpargroup.com. Will be joining us today. I will start by going through some of the highlights of the quarter, then Jack will go through the Q3 results and guidance for the Q4, and I'll then share some concluding thoughts Before we start, Jack will now cover the Safe Harbor language. Good morning, everyone. This conference call includes forward looking statements, including statements regarding the impact of the COVID-nineteen pandemic, 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 2 of our earnings release presentation further identifies forward looking statements made in this call Thanks, Jack. Following our announcement and special investor call in late August, we are very pleased to recently announce the successful and timely completion participants are participating in the same period. Itain was one of the largest privately held IT resourcing and services provider in North America and since October 1, is now operating as part of our Experis business. In addition to expanding our IT services in the financial and healthcare sectors, This acquisition also improves our geographic diversification in the U. S. And increases our strength in the digital work the marketplace and business transformation practice areas. I will talk more about the good progress of the diversification component of our DDI strategy. Participants will be participating in the Q3, diversification, digitization and innovation a little later in this call. Turning to our financial results. In the 3rd quarter, revenue was $5,100,000,000 up 11% year over year in constant currency. Participants are participating in the Q1 of 2019. Our operating profit for the quarter was $151,000,000 Excluding Mexico Restructuring and Atayn acquisition transaction costs, all participants Operating profit was $162,000,000 Operating profit was up significantly year over year as the pandemic had can financial impact in the prior year. Reported operating margin was 2.9%, and after excluding Mexico restructuring and acquisition costs, Operating profit margin was 3.2%. Reported earnings per diluted share was $1.77 participants And $1.93 after excluding Mexico restructuring and acquisition costs, and both were significantly above the prior year. Participants are ready to take questions. The global economic recovery continued in the Q3 as vaccine rollouts progress in many countries and pandemic related restrictions ease, We continue to see very strong hiring demand. This strong demand is again evident in our Q4 ManpowerGroup Employment Outlook Survey And in 14 of the 43 countries, employers are reporting hiring intentions at the highest levels in more than 10 years. That said, during the Q3, we have also seen some leveling off in the rate of recovery in some markets. Concerns about the Delta variant contribute to parts of the workforce not coming back into the labor market and exacerbating The impact related to supply chain challenges caused by the pandemic have also become a more visible factor impacting many manufacturers As we discussed on our Q2 earnings call, we view supply chain challenges and the impact of the Delta variant as are transitory factors, and we remain optimistic and confident in the demand outlook once the effects of the pandemic normalize. Participants are participating in the economic global recovery. With our operational and strategic workforce solutions and services, we help them meet the strong demand for their goods and services today and into the future. Participants Thanks, Jonas. Revenues in the Q3 came in just below our constant currency guidance range, driven by a slowdown in the rate of improvement in France participating in the supply chain disruptions, notably in the automotive sector and Delta variant disruptions. Gross profit margin came in well above our guidance range. Participants are participating in the Q3 of 2019. As adjusted operating profit was $162,000,000 representing a significant increase from the prior year period, which was heavily impacted by the pandemic. As adjusted operating profit margin was 3.2%, which was at the top end of our guidance. Breaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 1%, participants are in the range of $1,000,000,000. Our constant currency revenue increased 11%. Due to the impact of net dispositions and slightly fewer billing days, the organic days are on an organic day's adjusted constant currency basis, which is slightly lower than the 2nd quarter trend on the same basis due to the impact of new regulations in Mexico participants are participating in the exiting of a low margin arrangement in Australia. Turning to the EPS bridge on Slide 4, earnings per share was 1 point in the range of $0.77 which included $0.07 related to Mexico restructuring costs and $0.09 related to acquisition transaction costs. Excluding these costs, adjusted EPS was $1.93 which exceeded the midpoint of our guidance range. Participants are in the range of $0.02 slightly lower than expected foreign currency exchange rates, participants are in the line with our expectations. Looking at our gross profit margin in detail, our gross margin came in at 16.6%. Underlying staffing margin contributed 20 basis participants are in the same store. A lower mix of Right Management Career Transition Business this year drove 30 basis points of GP margin reduction. Other and accrual adjustments included a 10 basis point margin improvement from our Experis Managed Service business in Europe participants are in a 10 basis point improvement from consulting and MSP services, partially offset by a 10 basis point reduction participants are in the current year as favorable direct cost adjustments in Latin America were less than the prior year favorable adjustments in France. Participants are ready to begin. Next, let's review our gross profit by business line. During the quarter, the Manpower brand comprised 63% of gross profit. Our Experis Professional business comprised 22% and Talent Solutions comprised 15%. During the quarter, our Manpower brand reported an organic constant currency gross profit year over year growth of 15%. Compared to pre pandemic levels, this represented a decrease of 4% from the Q3 of 2019 on an organic constant currency basis. Gross profit in our Experis brand increased 24% on an organic constant currency basis year over year during the quarter. This represented a flat trend from the Q3 of 2019 on an organic constant currency basis. Talent Solutions includes our global market leading RPO, MSP and Right Management offerings. Organic gross profit increased 16% in This represented an increase of 14% from the Q3 of 2019 on an organic constant currency basis. Our RPO business posted high double digit GP growth during the quarter on significant hiring activity. Our MSP business, which has grown through the entire pandemic, continued to experience double digit growth in gross profit in the quarter. As the recovery strengthens, our right management business continues to see significant runoff in outplacement activity, primarily in the U. S. Participants experienced a reduction in gross profit of 42% year over year. Our SG and A expense in the quarter was $703,000,000 and represented a 6 percent increase on a reported basis from the prior year. Excluding Mexico restructuring charges and acquisition costs in the current year And restructuring charges and a loss from dispositions in the prior year, SG and A was 13% higher on a constant currency basis. This compares to an increase in gross profit of 17% in constant currency and reflects investment in incremental recruiters and sales talent participants are currently experiencing a significant amount of activity, as well as ongoing technology initiatives. The underlying increases consisted of operational costs are in the range of $78,000,000 and currency changes of $6,000,000 SG and A expenses as a percentage of revenue, after excluding restructuring and acquisition costs, represented 13.4% in the 3rd quarter. The Americas segment comprised 19% of consolidated revenue. Revenue in the quarter was $1,000,000,000 an increase of 8% in constant currency. OUP was $41,000,000 Excluding Mexico restructuring costs and Atane acquisition costs, OUP was $52,000,000 and OUP margin was 5.2%. Participants are in the U. S. Is the largest country in the Americas segment, comprising 65% of segment revenues. Revenue in the U. S. Was 6 $45,000,000 representing an 11% increase compared to the prior year. Excluding Attain acquisition costs in the current year OUP margin was 5.3%. Within the U. S, the Manpower brand comprised 33% of gross profit during the quarter. Revenue for the Manpower brand in the U. S. Increased 9% during the quarter. While the U. S. Manpower business continues to recover, participants The labor shortage experienced in the Q2 continued into the Q3 through the summer months. The Experis brand in the U. S. Comprised 33% of gross Within Experis in the U. S, IT skills comprise approximately 80% of revenues. Experis U. S. Revenues grew 17% during the quarter, and we anticipate continued strong double digit organic growth in the 4th quarter. We are encouraged by the current trends in our U. S. Experis business and the recent acquisition of Attain, which significantly increases our presence in the convenience market for IT participants are in the U. S. And contributed 34% of gross profit and experienced revenue growth of 9% in the quarter. This was driven by RPO, which experienced record revenue levels as hiring programs continue to strengthen. The U. S. MSP business continued to performed well and experienced double digit revenue growth in the quarter. Career transition activity continued to run off as the economy strengthens, participants are in the range of $1,000,000 which contributed to revenue reductions in Right Management in the U. S. In the 4th quarter, on an organic basis, We expect ongoing underlying improvement in revenue growth for the U. S. In the range of 1% to 5% year over year. This represents a 1% decline compared to 2019 levels using the midpoint of our guidance. Separately, we estimate Ateyng revenues within the range of $175,000,000 to $185,000,000 in the 4th quarter. Our Mexico operation experienced a revenue decline of 46% in constant currency in the quarter. The decline was driven by the new labor legislation, The actual reduction in demand from our clients from the regulation was more severe than originally anticipated. The restructuring actions we have taken in the Q3 have quickly rightsized this business for the impact of new regulations. Although this will result in significant revenue reductions over the next few quarters, we believe the mix shift towards more specialized staffing will improve the margin profile of our Mexican business over time. We also believe there may be additional revenue opportunities over time as clients adjust their workforce strategies. We estimate that 4th quarter revenues in Mexico will decrease by approximately 55% to 60% year over year. Mexico represented 2.8 percent of our 2020 revenues. Revenue in Canada increased 15% in constant currency during the quarter. Participants. Southern Europe revenue comprised 46% of consolidated revenue in the quarter. Revenue in Southern Europe came in at 2,400,000,000 Growing 12% in constant currency. OUP equaled $111,000,000 and OUP margin was 4.6%. France revenue comprised 55% of the Southern Europe segment in the quarter and increased 8% in constant currency. Compared to the same period in 2019, France revenues were down 10%. Automotive supply chain constraints And the Delta variant slowed the rate of recovery in the Q3 for our French business. OUP was $62,000,000 in the quarter and OUP margin was 4.7%. As we begin the Q4, we are estimating a year over year constant currency increase in revenues for France in the range of 2% to 6%. Comparing estimated 4th quarter revenues to pre crisis levels in constant currency, this represents an 8% decline compared to 2019 levels in the 4th percent in days adjusted constant currency. Through the Q3, revenues in Italy continued to exceed 2019 levels. OUP equaled $31,000,000 and OUP margin was 6.7%. We estimate that Italy will continue to perform very well in the constant currency from the prior year and revenue in Switzerland increased 21% in days adjusted constant currency. Our Northern Europe segment comprised 23% of consolidated revenue in the quarter. Revenue increased 19% in constant currency to $1,200,000,000 Driven by all major markets. OUP represented $17,000,000 and OUP margin was 1.4%. Participants are in the U. K, which represented 37% of segment revenues in the quarter. During the quarter, U. K. Revenues grew 26% in constant currency. We expect continued growth in the 4% to 8 percent constant currency range year over year in the 4th quarter. In Germany, revenues increased 13% in days adjusted constant currency in the 3rd quarter. We expect to see ongoing revenue improvement in Germany in the 4th quarter. In the Nordics, revenues grew 19% in constant currency. Revenue in the Netherlands increased 5% in constant currency. Belgium experienced days adjusted revenue growth of 10% in constant currency during the quarter. Participants are ready to take questions. The Asia Pacific Middle East segment comprises 12% of total company revenue. In the quarter, revenue grew 4% in currency to $611,000,000 OUP was $23,000,000 and OUP margin was 3.7%. Revenue in Japan grew 13% in constant currency, which represents an improvement from the 10% growth rate in the 2nd quarter. Our Japan business continues to lead the market in revenue growth and we expect ongoing high single digit revenue growth in the 4th quarter. Revenues in Australia were down 29% in constant currency, reflecting the exit of a low margin client arrangement during the 2nd quarter. Participants are ready to take questions. I'll now turn to cash flow and balance sheet. During the 1st 9 months of the year, free cash flow equaled $343,000,000 compared to 6.80 $5,000,000 in the prior year, reflecting significant accounts receivable declines in the prior year period. Our 3rd quarter free cash flow of $172,000,000 Exceeded the prior year free cash flow of $108,000,000 representing strong current period cash collections. At quarter end, day sales outstanding was flat year over year at 58 days. Capital expenditures represented $40,000,000 for the 9 month period participants are participating in the Q3. During the Q3, we did not have any share repurchases. Our year to date purchases stand at 1,500,000 shares of stock for conducting a call for $150,000,000 As of September 30, we have 1,900,000 shares remaining for repurchase under the 2019 share program participants are in the range of $4,000,000 shares remaining under the share program approved in August of 2021. Our balance sheet was strong at quarter end with cash On October 1, we utilized $800,000,000 of cash to fund the acquisition of Atain. Our debt ratios at quarter end reflect Total gross debt to trailing 12 months adjusted EBITDA of 1.63% and total debt to total capitalization at 30%. Participants are in the line with our financial results. Our debt and credit facilities did not change in the quarter. Although our revolving credit facility for $600,000,000 remained unused at September 30, We did draw $150,000,000 on October 1 in conjunction with the funding of the Attain acquisition. As we previously indicated, we intend to pay this down over the participants are participating in the U. S. And the emergence of adverse trends impacting our clients in any of our largest markets. On that basis, we are forecasting earnings per share in the 4th quarter will be in the range of $1.99 to $2.07 which includes an unfavorable foreign currency impact of $0.04 per share participants are participating in the process of $0.13 impact from Atane. This does not include the impact of acquisition transaction costs of approximately 9,000,000 or integration costs of $4,000,000 to $6,000,000 which will be broken out separately from ongoing operations. Participants are in the range of $1,000,000,000. Our constant currency revenue guidance growth range is between 5% and 9%. And after adjusting for Ateyn, Our organic constant currency growth range is estimated between 2% 6%. The midpoint of our constant currency guidance is 7%. A minor decrease in billing days in the 4th quarter and the impact of net acquisitions driven by Attain impact the growth rate, Resulting in an outlook for organic days adjusted revenue growth of 4% at the midpoint. This would represent a 4th quarter organic constant currency decline in the range of minus 2% to minus 4% accounting for the Ateent acquisition will be finalized in the months ahead. We currently estimate that intangible asset amortization will be approximately $24,000,000 annually. Participants are in the line with us. Since amortization will be more significant going forward, we are also disclosing operating profit before amortization or EBITDA to help assess underlying financial performance. We estimate that EBITDA margin during the Q4 will be up 30 basis points at the midpoint 20 basis points at the midpoint compared to the prior year, with Atehn contributing 10 basis points of the improvement. We estimate that the effective tax rate in the 4th quarter will be 32%. As usual, our guidance does not incorporate restructuring charges Thank you, Jack. The acceleration of digitization and investment in technology by companies during the pandemic participants are requiring new skills and capabilities for the future. While hiring intentions are at some of the highest levels we have seen in years, It is unlikely employers will be able to fulfill all these intentions as a result of the labor market shortages for many skills. Our most recent global talent shortage survey found that shortages are at a 15 year high for the 2nd consecutive quarter, with 69% of employers stating they cannot find the talent they need. In response, organizations are looking ahead, focusing on strengthening workforce participants are in the range of $1,000,000 and re skilling, up skilling and building the capabilities to ensure their existing and future workforce has the skills to remain competitive. We believe this is an opportunity for us. And through our diversification strategy, we are sourcing the talent they are looking for through the offerings in our Manpower, Experis and Talent Solutions brands. We're also investing in innovation to create the talent pools with skills and capabilities at scale. Our successful Manpower MyPath program has impacted over 129,000 lives to date and is a great example of this. Through MyPath, participants are building the talent pool of the future and providing clients access to our high potential associates. Another recent example of innovation is our Experis Career Accelerator, launched at the Global VivaTek Conference in Paris earlier this year and now active in 6 markets. Experis Career Accelerator is our AI driven platform developed in partnership with FutureFit AI, Using machine learning and dynamic data to scan the market, it can match our experience consultants to IT learning pathways and in demand roles. Participants are in the line with our team. We are attracting, developing, upskilling our consulting by providing curated learning and technical training content from the world's leading tech clients Machine learning is also helping us grow our own people's expertise, so they're even better at assessing and predicting performance to provide a better job match than either humans or machines could do on their own. That's an example of how we continue to innovate in our brands are ready to invest in our capability to both find and create the best talent pipeline in the market for the benefit of the organizations we work with And for the benefit of the individuals for whom we provide sustainable and meaningful careers and employment. This investment In our people skills is also reflected in our recent internal annual people survey, where we are pleased to see higher employee engagement levels year over year, Despite the challenges experienced by many of them during the pandemic, we are proud and very grateful participants are ready for the strong culture of organization, and we see this as a competitive advantage with opportunities for even further improvement, are positioning us very well for future growth. I'd now like to open the call for Q and A. Operator? Participants are now ready to begin the question and answer session. Our first question is coming from the line of Andrew Steinerman from JPMorgan Chase. Your line is open. Hi, Jonas. It's Andrew. You're very clear, your final comment to how Manpower will continue to help companies during this ongoing and really medium term skill shortage, sort of regardless of the near term. But my question really is about the near term, and it's about U. S. Labor supply. Do you feel the U. S. Labor supply at the lower wage levels will improve near term? And if so, why and when? Participants are ready. Good morning, Andrew. And the answer is yes. We do feel that the labor supply will improve. Now when you say near participants It's of course very hard to judge what near term is, but we clearly feel that these are transitory effects of the pandemic. And you can see that the lack of talent that we see across industries is really reflected on hesitations around The COVID-nineteen and the Delta variant surges that we've seen, the childcare, school issues, so people can't get back to the workforce And in some cases, choose not to get back because they are still in the phase of being able to use some of the government support programs that were participants are being recorded during the pandemic. Having said that, we're pleased to see that from September onwards, we've seen actually an improvement participants are in the middle of October, where the improvement in associates participants have been gradual and that we take that as a promising sign, but the labor market is slowly coming back to a normalized supply And how much is that assumed in the Q4 guide for the U. S. About U. S. Labor supply? Participants. Yes. So we assume a gradual improvement during the Q4, Andrew. So I'd say on the manpower side, Gradual improvement to Jonas' point. So we have been encouraged by the step up in recent weeks. We have estimated that continuing through the Q4. I think the other part of the U. S. Business that we addressed in our prepared remarks was the Experis business and very, very strong growth in the 3rd quarter and we anticipate very good double digit growth into the 4th quarter as well. Participants will participate very good double digit growth into the 4th quarter as well. That's really encouraging. Thank you. Participants Thanks, Andrew. Thank you. Our next question is from the line of Jeff Silber of BMO Capital Markets. Your line is open. Participants. Thank you so much. As a follow-up to Andrew's question, I wanted to talk about wage inflation. I know it may differ in every country, but generally, Can you talk about what the wage inflation trends have been and how easy or difficult has that been to pass through to your clients? Good morning, Jeff. Yes, as you've seen that we've been able to increase and improve our gross profit margins quite significantly on the staffing side. And as such, we've been able to provide the value of our capabilities of finding the people to our clients. And wage inflation has been strong, in particular, strong in the U. S, less so in Europe, although it is robust participants are there as well, and we've been able to pass those wage inflation trends on to our customers. And as we've mentioned in prior calls, wage inflation generally for us is a good thing because we are able to price that in and to pass it on to our customers. And I would just add to that, Jeff. One of the best indicators is what's happening on the staffing margin side in terms of our ability pass that through. And so you saw in our overall bridge, we said that underlying staffing margin was up 20 basis points. But to give you a little flavor of what we're seeing in participants Our largest markets, so the U. S. Was up significantly year over year. The U. K. Was up on staffing margin, Germany was up, as we saw the anniversary of some of the bench utilization issues, Sweden was up as well. So it is we're seeing some good broad based Improvement on the staffing margin side and that indicates that we are able to pass that wage inflation through to our clients. All right. That's great to hear. You had also mentioned in your prepared remarks about increase in investments in recruiters and sales talent. Are there any specific countries where you're Those investments relative to others and is that sort of, I guess, front running expected to continue demand in those countries? Participants. Overall, Jeff, we feel good about the global recovery. And we're clear that Some of the recovery in a number of markets is delayed due to these effects of the COVID-nineteen pandemic effect well positioned to be in the market, but we feel very good about the global recovery. And as such, our investments in recruiters participants are going to continue to be strong into 2022, and we want to be ready and take advantage of those growth opportunities. All participants Clearly, we feel very good about the major markets, be they the U. S, France, Italy, the UK, As well as Japan, so those are the biggest markets where we feel good. But I would say generally speaking, we are confident and optimistic are looking ahead and that's why we're making sure that we have the talent in place to take advantage of those opportunities. All right. That's great to hear. Thanks so much. Participants. Thank you. Our next question is from the line of Hamzah Mazari of Jefferies. Your line is open. Good morning. My question is just on the supply chain issues. I know you mentioned automotive in France. Participants Any other areas that you would call out in terms of your customers seeing supply chain issues? And I know you mentioned it's transitory. Any thoughts as to when that normalizes for you? Thanks, Hamzah. It's Hard to tell, of course, when the supply chain issues will sort themselves out. In terms of chip shortages, clearly, that's impacting Automotive Manufacturers, but also a lot of other industries. And I think the main issue around this is that the The pandemic caused a surge of demand and that's why we're seeing the supply chain issues. So overall, all participants It's a positive indicator of economic growth. It's just that the supply chains got overloaded with the participants Big surge in demand. So this will take some time to work itself through and I'm sure it will be different for different industries as well as different Product, but over time, we expect this to normalize and that's exactly what we're preparing all on what we've been saying in this trend. So you can see that on overall about 5% of our revenues. And as we've talked about in the past, some of the markets where all participants Auto is a bigger percentage, of course, Germany, but France, as we've mentioned in our prepared remarks. But I'd say, if you look at the other manufacturing verticals and some of the bigger ones like pharma participants And you can see construction broken out separately. We haven't seen those same issues from a supply chain at this stage. Participants I'd say predominantly focused on the automotive sector, and we continue to watch it. Very helpful. And just my follow-up question is just, If you're seeing any changes in the competitive dynamic out there, and the only reason I ask is it looks like 1 of your European peers has much higher growth relative to yourself and your other European peer. I guess you have 2. And so I'm just curious if there's anything to read into there or you're not really seeing any changes in the competitive dynamic out there? We're not really seeing any changes in the competitive dynamic. It's all related to the business mix, both geographically as well as within industries Or in industries within a country, but overall competition as always in our industry is intense, but rational participants No, we're not seeing any major changes. The only thing I would add to that is, I would look at the mix from some of our competitors and that could be a driver, all participants Specifically logistics, some competitors may be a bit over weighted compared to us On logistics side, that could explain some of the near term differences. But with that being said, Albert? What we're very focused on is GP margin opportunities. So we're very careful regarding how much low margin work we want to take on as well. Participants Got it. Thank you. Very helpful. Thank you. Thanks Hamzah. Thank you. Our next question is from the line of Kevin McVeigh of Credit Suisse. Your line is open. Participants. Kevin? Jonas, I'm sorry, I was on mute. I apologize for that. Hey, thanks so much for the question. Is there any way to think about what level of wage would help draw some of the kind of Supply constraints that you're seeing from a labor perspective or is it more just the runoff of the benefits? Because obviously there's been a lot of debate around rising wages in the U. S, things like that. Jonas, is there any way to think about what level of wage you think helps free up some of that incremental Labor supply. Kevin, I think it really depends on Albert? Where you are in the world and where you are in the U. S. And it's very local in terms of what other competing industries are you trying to attract talent I'll return to the call. So I don't think it's very practical to think about a certain wage level. If you recall, for instance, the are in the same period. The idea that $15 of the minimum wage was needing to be legislated and you look at where pay rates are today, Fast forward just 2 years or 3 years from that discussion, you can see that the market has adjusted. I think the transparency around wages is participants Very high. So workers know exactly what they're being paid today and what opportunities they have nearby that would And that's why you see this increase in quit rates because workers are looking at the opportunities. They know the labor market is good and they're changing participants are in the range of jobs and getting paid higher wages somewhere else. Now we know that some of this is driven by the supply or the talent shortages that we are seeing in many labor markets and we expect that this effect and this surge in wage increases as well will be a Increases more than what we've seen over the last quarters. And as we mentioned in our prepared remarks, we fully anticipate The best pandemic effect over time and with the runoff of the unemployment benefits in many states will make It's easier, but there are still going to be the concerns around childcare, elder care and people's own health that will delay this somewhat. But over time, we think that the millions of people that are still on the sidelines will come back into the workforce and help ease the shortages that we're seeing right now. Participants Very helpful. And then just real quick, Jack. I don't think you bought any stock in the quarter. Was that because of Attain or just anything else, any thoughts on capital allocation? No, that's exactly why, Kevin. Because of the Attain acquisition, we pulled back on share repurchases in anticipation of the acquisition. And as we said at that time, we did tap the revolver for about $150,000,000 Our priority from a capital allocation perspective will be to pay down that incremental debt. We feel really good about that. We said we plan on doing that over the next 12 months. And I did say that we do plan on covering dilution through share repurchases in early 2022. All participants But beyond that, I think our focus will be on paying down the incremental debt. And then I think you should assume that we'll resume a more traditional capital allocation question is from the line of Mark Marcon of Baird. Your line is open. Good morning, Jonas and Jack. Wanted to talk a little bit more about IT Services. Obviously, Experis looks like it's doing a lot better, which is very encouraging. Wondering if you can just talk a little bit, are in the $175,000,000 to $185,000,000 Can you give us the gross and operating margins associated with that? And then how should we think about that over the course of the year? And what is the plan for integrating Attain within Experis? How will those meld together? How will that improve your competitive position within the growing IT services market? Participants. Thanks, Mark. This is Jack. I'll start with that one and then I'll let Jonas talk a little bit in terms of the Experis brand overall. But In terms of giving you a little bit more color, so that guide for Attain revenues, basically $180,000,000 at the midpoint. As we said before, their GP margin is in the range of between 20% 25%. And basically that equates to an EBITDA of about $17,000,000 We did update the amortization impact, So that's lower than we originally anticipated, which is good. So all of that equates to an operating profit of about $11,000,000 So that would put that participants It's in line with what we announced at the deal announcement of about 9.5% approaching 10% EBITDA margin on an overall basis. So that's kind of the rundown in the numbers. We feel really good about the business. It's early days, just a few weeks, but we've had some great integration meetings so far with the business and we're off to a great start. I'll let Jonas comment a open it. Yes. Thanks, Jack. And Mark, it's been good to see the improvement with Experis, our Experis business globally over a number of participants are seeing it has a very good impact on improving our mix in terms of staffing margin. And as it regards the U. S. Business, I had the opportunity just last week to meet the new combined leadership team of our One Experis team and it's participants are really exciting to see as we talked about in our special call, investor call a number of weeks ago. We feel very good About how the Attain acquisition fits in with our overall experience strategy, how there is very limited overlap, both In terms of clients, how Itane brings great strength in a number of industry segments as well as in our practices. And of course also that they are very strong on convenience. And as you know, that is one of the areas that we are now also On our organic experience business seeing some very strong progress just as we did before the pandemic and that's what's coming through Into the numbers. So we feel very good about the acquisition so far and the combined Experis participants are in the U. S. And frankly, globally as well. Great. And then just a numbers question. With regards to the 4th quarter guide, What's the impact, the incremental impact with regards to Mexico relative to if it had just performed in a constant manner without any sort of legislative change. What would you ballpark that at? Yes. Mark, I'd say, we did say that we see the revenue trend year over year down about 55% to 60 percent. I think as we mentioned earlier, Mexico is a lower margin country for us. So The impact on the bottom line is not as significant as it is on the top line for us. So I'd say it's manageable, I'd say in the participants are low digit 1,000,000 of dollars, so quite manageable on an overall basis. So not that significant of a headwind from an operating profit thank you. Our next question is from the line of Tobey Sommer of Churice. Your line is open. Participants. Thanks. Thought I'd ask a question about your MSP and RPO businesses. Albert? Is there an opportunity for you to deploy capital and acquire businesses to Further that growth, and could you comment about what you're hearing from clients that's driving double digit growth In those lines of businesses and kind of what you expect growth to look like in the future over time? Thanks. Participants. Thanks, Tobey. Well, as you've seen, we continue a really strong run with our Talend Solutions business and within RPO and MSP continued strength. And MSP, of course, if you recall, participants Actually didn't dip during the pandemic year and just continues to grow. And we've seen a very strong surge participants are in demand for our RPO solutions. And really what's driving that in conversations with clients Is there a need to find talent across the world in various markets? And that's, of course, the strength of our RPO business, are being able to serve our clients, not only here in the U. S. And in Europe, but really everywhere in the world with a common offering. And that's really resonating with our clients. And the team has been very good as well in terms of improving their productivity And efficiency and also leveraging the data insights that we have in both MSP and RPO, so that we're able to play back The data insights to our clients and suggest improved ways of running their business. So it's been great To see the progress of RPO and as we mentioned in prior calls, we have a very strong pipeline are ahead because we think the operational and strategic capability that our RPO and MSP offerings provide our clients As a follow-up, could I ask, does the wage inflation outlook and environment And as well as the short labor supply, particularly in the U. S, are those influential factors in the outlook for RPO and MSP. They are driving some inflation in terms of all participants are dependent on the wages that are being paid. But frankly, part of the reason we are such an Attractive solution to our clients is that through the use of RPO and MSP, you do mitigate the impact all the wage inflation because we have such scale and visibility across the market that that is part of the value that we provide to our are willing to mitigate in as much as it's possible and to still guarantee the supply, the wage Inflationary effects of the wages for our clients. Thank you very much. Participants are ready. Thank you. Our next question is from the line of Gary Bisbee of Bank of America Securities. Your line is open. Participants Hey, guys. Good morning. So you called out France for the slight revenue miss versus your prior outlook. All participants But when I look at it versus those prior expectations, it looked broader than that. Most of the segments were a bit shy of the ranges you'd expected. And I guess, can I'll Can you help us understand a little better what's driving that? What I'm really interested in is, so how much or Where and how significant is labor shortages pressuring that like 3% delta on revenue? How much was supply chain? Participants And are there any other I guess Mexico is a little worse, any other major factors that are worth calling out? And just any color on how Those same factors are impacting the outlook for Q4. Thank you. Gary, this is Jack. So, No, I would say France definitely was a driving force. I'd say Definitely about half of the difference from the guide. I think specific to France, the story really is with the loosening of the curfews and the restrictions at the end of Q2, we anticipated a more robust recovery into Q3. And the reality is it just didn't materialize at the pace we anticipated. And as our prepared remarks said, the Supply chain issues became much more visible, became a bigger factor. Now with all that being said, France did improve from Q2 to Q3. So we did see underlying improvement versus 2019. They were running minus 12% in Q2. They improved to minus 10%. I'll And to your question about the guide, we see that ongoing improvement continuing into Q4. So we see France moving to Down 8% versus 2019 level, so steady gradual improvement. I think the main change is we just pulled back the pace a little bit due to the disruption we're seeing at the moment, and we're using that based on trends we're seeing in October With activity levels continuing through the end of the year. So, as Jonas said, we do anticipate that some of this is temporary and will work itself out. We still are very optimistic on the recovery in France beyond the next quarter. So that would be one. I think getting back To the guide though, definitely Mexico, as I mentioned, was more severe than we originally anticipated. Albert? Really, the story there is our early conversations with clients is what we guided our original guidance on. Once the implementation took effect, we just saw a more cautious approach from our clients than was originally communicated to us in terms of their demand. And so that came through. Albert? I'd say those are probably the 2 bigger ones. As we mentioned on the Manpower side a little softer, but I would say just a little softer. We saw some of that pressure as we ended Q2 in the U. S. Manpower side. And as Jonas mentioned, we saw that improving in mid September into October in terms of associates on assignments Gradually increasing and we're incorporating that into our guidance in Q4, as I mentioned earlier. And I'd say the other one may be, participants To some degree, the Manpower business in the UK was a little bit softer than we would have anticipated. A lot of that was offset by good strength on the participants are in the U. K. So I'd say those are the main drivers when I consider the revenue trends overall. Okay, great. And then I just wanted to clarify on the amortization from the acquisition, you said $24,000,000 is now your expectation for the annualized Expense there and I guess as part of that is the $4,000,000 or $5,000,000 that has been running before that, does that continue so the new Yes. The new rate is $24,000,000 annually based on our preliminary purchase accounting. We will finalize this in the months ahead, but right now, we think that's Pretty good numbers. So basically, dollars 6,000,000 a quarter, if you want to straight line it on an ongoing basis. Participants And that is an improvement from our initial guide, where we were closer to about $9,000,000 a quarter or so. So Yes, you can use that as your ongoing modeling for 2022 from an amortization perspective. And I'd say generally the other metrics I gave about Attain are basically holding in line with our original announcement as well. Okay. So the $6,000,000 includes both the acquisition and what you had previously. That's the total number. No, no, no. I'm sorry. The $6,000,000 is just the Attain amortization and then our previous run rate Albert? We'll continue as well. So that was more modest. So if you look at our amortization in Q3, it was $4,000,000 Yes. Participants So anticipate that with the attained, so our total amortization in Q4 will be about $9,500,000 $10,000,000 Got it. All right. Participants Thank you. Our last question is coming from the line of George Tong of Goldman Sachs. Your line is open. Hi, thanks. Good morning. I guess I wanted to dive into the supply chain dynamics that you're seeing. The supply chain shortage is certainly nothing new. But what was it that happened in the quarter that you would say was the tipping point that cause the trends to manifest more evidently in your results and when would you expect participants are going to play out over in terms of just how many quarters do you think this impact that these headwinds could last? And how would you participants expect the shape of the recovery to look. George, this is Jack. Thanks for the question. I would say, all participants Really, I think the story on the supply chain is you're right, it wasn't new. But I would say in prior quarters, it was really masked by The performance of the over performance of all the other sectors that were doing so well based on the increased demand. So when we got to the 3rd quarter And as we were anniversarying the very the large recoveries from the prior year, it just became much clearer the impact that Supply chain was having, particularly in the automotive sector. And so I'd say that's what we meant when we said it became a more visible part. It just stood Much clearer, because as we were starting to anniversary some very significant growth rates from a year ago, It just became much easier to see the impact it was having. And as it continued, it was starting to have a more pronounced So I'd say those are the that's really the main factors, which is why we gave it a little bit more prominence in our prepared remarks. All participants? In terms of the timeline, well, that's really hard to say. I think, we'll a lot of participants have different views on when the supply chain issues will ease up. I think our view and our discussions with customers is we do expect That they are transitory and as Jonas said, they are a reflection of the increased demand that is there. So from an underlying basis, the demand is very strong. But we'll continue to work with our clients who are very close to these issues and we'll just see how that timeline evolves over the next quarter or 2. And I would just add, George, that in all of our conversations with the clients, they see this as a delay participants are not a reduction in their demand or their outlook. So they remain very optimistic And they are very intent on keeping us engaged because their comment to us is, look, we don't know when it's coming, but we know it's coming, Albert? You have to be ready. And that is in part what's driving our confidence and optimism as we look ahead because participants The elements of a traditional recovery are all there, and we think there are some pauses in some key markets That will eventually play themselves out in a very strong way for us as we go forward. And as it happens, in some of those markets, we are very, very strong, such as France all participants And Manpower in the U. S. As well, so and the U. K. Continuing. So it's something that we are managing well, but Albert? Also from the client conversations we have, feel quite good about even though there is a delay in the rate of recovery is slowing somewhat, Albert? We feel very good about the future opportunities. Got it. Very helpful. In Australia, you mentioned that revenues So that loss was and if there are any patterns that you noticed with that customer loss that could potentially be seen elsewhere in the business? Participants. Thanks, George. Yes, no, on that one, that one is actually pretty straightforward. We had an arrangement with a client That we were able to renegotiate with a new contract that had improved terms. And as a result of that, We moved to a net fee arrangement. So it's a continuing client, very good business for us. And with that Change, we were able to improve the margin, but that did result in a net treatments in terms of net fees as opposed to a gross up, which it would have shown previously. So I wouldn't say that that's indicative all participants Any other trends or anything like that. It really was a bit of a one off with that one client And it's really straightforward. Got it. Very helpful. Thank you. Participants. Thanks, everyone. And that brings us to the end of our Q3 earnings call. Thank you for joining us today. Participants are in the line with us. And we look forward to speaking with you next on February 1, 2022, which will be our 4th quarter earnings call. Until then, thank you and look forward to speaking with you soon. Thank you for participating in today's conference. You may now disconnect.