ManpowerGroup Inc (MAN) 2013 Q2 法說會逐字稿

Welcome, and thank you for standing by.

At this time, all participants are in a listen-only mode.

(Operator Instructions)

I would like to turn the meeting over to Mr. Jeff Joerres.

Sir, you may begin.

Good morning, and welcome to the second quarter 2013 conference call.

With me is our Chief Financial Officer, Mike Van Handel.

I'll go through the high-level results for the quarter, and then Mike will spend some time going through the details of the segments as well as some forward-looking items for the third quarter.

Then I'll discuss a bit more of our progress and the simplification efforts.

Before moving into the call, I would like to have Mike read the Safe Harbor language.

This conference call includes forward-looking statements, which our 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.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements can be found in the Company's annual report on Form 10-K and in the other Securities and Exchange Commission filings of the Company, which information is incorporated herein by reference.

Any forward-looking statements in today's call speaks only as of the date of which is made, and we assume no obligation to update or revise any forward-looking statements.

During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.

We include a reconciliation of those measures, where appropriate, to GAAP on the Investor Relations section of our website at manpowergroup.com.

Thanks, Mike.

We had a very solid second quarter, particularly with the backdrop that Europe, while it has become a bit less volatile, clearly has not righted itself.

Despite that, we were able to achieve solid results.

Our initiatives to take the correct revenue, broaden our solutions business, and re-calibrate our costs, are all ahead of schedule.

And as a result, you are seeing the improved second quarter over what we had originally anticipated.

Our revenue for the quarter was $5 billion, down 3% in constant currency, as well as in US dollars.

Contributing to the less-than-expected revenue decline with a better-than-expected performance in Southern Europe.

Pricing discipline remains a key focus within the Organization, but also, at the same time, we must be careful that we are not positioning ourselves out of the market.

Based on our revenue from a macro perspective, as well as revenue by country, we feel confident that our strategy for pricing is on track.

And that we will continue to build momentum in the marketplaces that are showing a more positive disposition for growth.

We are still experiencing moderate gross margin pressures, particular in northern Europe, and while we are maintaining our discipline, it underscores the importance of focusing on our efficiency and re-calibration efforts.

Our gross margin in total across all countries has stabilized for the most part, but as I mentioned earlier, we are still experiencing difficulty in northern Europe.

It doesn't mean where we are not under price pressure in other parts of the world.

Rather, it's more of the normal competitive pricing environment that we have seen over the last several months and a few years.

We have worked diligently at managing our business mix, with ManpowerGroup Solutions continuing to grow, which is having a favorable impact on our overall gross margin.

Our operating profit for the quarter was $128 million, or 2.5%.

Excluding restructuring charges, our operating profit was $148 million, at 2.9%.

A very large impact and effect on this was our re-calibration of costs, which both Mike and I will talk about more as we get further into the call.

Our earnings per share, at $0.87, was up 71% on the year-on-year basis, and before restructuring it was $1.05, up 38% over last year.

And now for additional information on the segments, I'd like to turn it over to Mike.

As Jeff mentioned, we had a strong performance in the second quarter.

Earnings per share before restructuring charges was $1.05, which significantly exceeded our guidance range of $0.84 to $0.92 per diluted share.

In comparing our reported results to the midpoint of our guidance, $0.16 of the $0.17 of performance was fully attributable to our operations.

This was partially due to revenues contracting only 3% in constant currency, which was at the favorable end of our guidance range.

But more importantly, to cost re-calibrations under our simplification plan that exceeded our expectations.

The out-performance was also broad-based geographically, which -- with each of our operating segments exceeding their forecast.

Other expenses were slightly lower than expected, which added $0.01 to the quarter, and the income tax rate was slightly lower, which also added $0.01.

Currency was unfavorable by $0.01 in the quarter, and we were forecasting it to be flat.

This resulted in earnings before restructuring charges of $1.05.

Restructuring charges incurred in connection with our simplification plan were $20 million.

This is at the higher end of our guidance range, as we were able to identify more savings opportunities than anticipated.

Restructuring charges amounted to $0.18 per share, which results in the second quarter reported earnings per share of $0.87.

Of the $20 million in restructuring about, two-thirds relates to employee severance costs and about one-third to lease costs from office consolidations.

These restructuring costs impacted each of the operating segments, and therefore, as we review these segments, it is important to consider OUP and OUP margins, excluding these restructuring charges.

Restructuring charges were incurred in each of the segments, with the Americas at $4.4 million, Southern Europe at $3.3 million, Sorthern Europe at $9.3 million, Asia Pacific Middle East at $0.4 million, and Right Management at $2.6 million.

Our total gross profit margin came in at 16.6%, which is stable with the prior year and stable with the first quarter.

Our staffing gross profit margin was also stable with the prior year, with our Manpower business being down slightly, offset by a 50 basis point improvement at Experis.

From a geographical perspective, we saw nice improvement in staffing gross profit margin in two of our largest markets, the US and France.

The French gross margin was aided by the CICE payroll tax credits, which are part of the broader French economic stimulus program.

Gains in staffing gross margin in these two markets were offset by declines in other markets, especially in northern Europe, which I will discuss later in my segment review.

Our ManpowerGroup Solutions business favorably impacted our overall gross profit margin by 10 basis points, primarily as a result of strong growth in our Recruitment Process Outsourcing offering.

Our Permanent Recruitment business, excluding RPO, negatively impacted gross profit margins in the quarter by ten basis points.

Permanent Recruitment fees in total were down 3% in constant currency from the prior year, representing an improvement from what we saw in the first quarter, which was a decline of 10%.

Permanent Recruitment fees as a percentage of gross profit remained stable with the prior year at 12.9%.

From a geographical perspective, we saw strong growth in Permanent fees in the Americas, up 13%, with contraction in all other segments.

Next, I'd like to review gross profit by business line.

Our Manpower business, which represents traditional staffing and recruitment services in the office and industrial verticals, represents two-thirds of the Company 's gross profit.

Manpower's gross profit was down 3% in constant currency, an improvement from what we saw in the last two quarters.

Our Experis business comprises 18% of total gross profit.

Approximately 70% of our Experis business is IT services, 10% accounting and finance, 10% engineering, and 10% other professional services.

Our Experis gross profit declined 7% in constant currency in the quarter, primarily as a result of a sluggish market in Europe.

ManpowerGroup Solutions business represents 10% of total gross profit, and consists of Recruitment Process Outsourcing, MSP, talent-based outsourcing, Borderless Talent Solutions, and strategic workforce consulting.

Our gross profit growth of 5% in ManpowerGroup Solutions was primarily driven by RPO and MSP, both of which had strong growth, reflecting our clients' increasing desire for higher value-based solutions.

We've invested in our RPO and MSP offering over the last several quarters, and they our both regarded as industry-leading global offerings.

Our Right Management business represents 6% of gross profit and declined 1% in the quarter in constant currency, an improvement from prior quarters.

Right will be discussed in more detail during my segment review.

SG&A expense in the quarter with $708 million, which includes the $20 million restructuring charge.

Therefore, recurring SG&A costs before restructuring charges was $688 million, a decline of $50 million from the prior year.

Of this $50 million decline, $1 million relates to changes in currency rates, and $49 million relates to a 6.7% reduction in year-over-year operational costs.

Overall, we achieved significant improvement in our SG&A efficiency of 50 basis points, from 14.2% of revenue to 13.7% of revenue.

SG&A expense for the first half of the year was $1.44 billion, or $1.39 billion before restructuring charges.

This represents a year-on-year reduction in operational SG&A costs of $99 million in constant currency, or a reduction of 6.6%.

Much of these savings are the direct result of our cost re-calibration under the simplification plan that we put into place in the fourth quarter of last year.

As you will recall, our simplification plan called for reduction in current year expenses of $80 million, and a reduction in our expense run rate from the beginning of the year to the end of the year of $125 million.

As you can see from the progress in the first half of the year, we are far exceeding our goals.

We've been able to identify many more saving opportunities than expected, and many of the opportunities we identified have resulted in significantly greater benefit.

The important thing to keep in mind is that this is not a cost-cutting exercise but rather a cost re-calibration.

This is about how we more efficiently drive our business in a significantly different way.

This shows up in the current year as a favorable impact from lower costs.

More importantly, we have lowered our leverage point and expect further productivity gains on future revenue and gross profit growth.

By lowering incremental SG&A on future growth, we can drive strong, incremental operating profit margins, allowing us to reach our 4% operating profit margin target in an accelerated fashion.

As we look to the second half of the year, earnings will benefit from the cost re-calibrations taken in the first half of the year.

This will be augmented by further cost re-calibration initiatives.

Based upon our simplification actions taken to date, and those scheduled for the balance of the year, we expect SG&A expenses before restructuring charges to be down more than 6% in constant currency in the second half of the year.

This will result in a year-on-year cost reduction in excess of $180 million in constant currency for the full year.

This is more than double the cost reduction anticipated for the year in our simplification plan, a tremendous effort by the Organization.

Now I'd like to discuss the performance of our operating segments.

The Americas had a strong profit performance in the quarter, delivering $42 million of OUP, or $46.9 million of OUP before restructuring charges, on revenue of $1.1 billion.

This reflects a 28% increase in OUP before restructuring charges, and a 90 basis point improvement in OUP margin to 4.1%, excluding restructuring charges.

The strong performance was driven by a higher staffing gross profit margin, 13% growth in gross profit from Permanent Recruitment, and strong growth in ManpowerGroup Solutions.

The increase in gross profit was delivered on a lower cost base, driving greater efficiency and productivity to the bottom line.

Our US business, which represents two-thirds of the Americas segment, had revenues of $749 million, down 2% from the prior year.

Despite the modest revenue decline, the US delivered an exceptional profit performance, with OUP of $34.4 million before restructuring, an increase of 40% over the prior year.

This reflects an OUP margin of 4.6%, an increase of 140 basis points over the prior year.

These strong results were driven by a strong price discipline, resulting in an expanding gross profit margin and effective cost reductions as part of the simplification plan.

Within the US, our Manpower business represents 57% of revenues.

Our Manpower revenue was down 2% on a reported basis, or 3% on an average daily sales basis, similar to the first quarter.

Manpower's revenues were unfavorably impacted by 2% in the quarter as a result of a large client project that concluded in the first quarter this year.

Also similar to the last quarter, our SMB business performed slightly better, with modest revenue growth over the prior year, while key accounts were down slightly.

Experis represents 38% of the US revenue, and saw a revenue decline of 5% compared to the prior year.

Within our Experis business, our focus continues to be on improved pricing and margin expansion.

We have driven a number of pricing initiatives and have been selective on new opportunities, while replacing lower margin business with higher margin business.

This has driven strong gross margin expansion of 90 basis points in the quarter.

This gross margin expansion, combined with effective cost reductions, resulted in growth in the Experis business line contribution of 37%.

Our US ManpowerGroup Solutions also did very well in the quarter, with revenue growth of 16%.

This growth was primarily driven by strong growth in our RPO and MSP business.

As you all know by now, President Obama has delayed the employer mandate component of the Affordable Health Care Act until 2015.

We were not expecting a significant impact from the Bill on our business, and therefore this deferral has minimal impact on us.

Revenue growth in our Mexico operation has been softening the last few quarters and was down 1% in constant currency.

Despite the softness in staffing trends, we were able to sell more higher-value solutions business, which resulted in total gross profit growth of 4%, or gross profit margin expansion of 70 basis points.

In Argentina, revenues were up 4% in constant currency, reflective of the highly inflationary environment, as billable hours were down 11%.

Despite the weak top line performance, we were able to double our operating profits on an improved gross margin and a lower cost base.

Revenue in Southern Europe was stronger than expected, coming in at $1.8 billion, which is a decline of 7% in constant currency.

Revenue exceeded expectations due to modestly improving trends in France, Italy and Spain.

On an average daily basis, Southern Europe revenue was down 7% in the second quarter, an improvement from the 8% decline in the first quarter and the 10% decline in the fourth quarter of last year.

OUP in the quarter was $57 million, or $60.1 million excluding restructuring charges, an increase of 17% in constant currency.

OUP margin expanded 60 basis points to 3.3% before restructuring charges.

This margin expansion was driven by an improved staffing gross profit margin, which was aided by the French CICE payroll tax credit we discussed last quarter.

SG&A expenses were also reduced in the quarter.

One technical matter which I should note is a change in how we are reporting the French business tax, which rolls up into the Southern Europe segment.

As you may recall, beginning in 2010, in accordance with the US accounting rules, we began reporting the French business tax as part of our income tax provision in our consolidated results, and removed it from our direct costs.

This change was only made of the consolidated level, and was not made within the Southern Europe segment, and therefore segment reporting was not consistent with consolidated reporting.

This quarter, we revised our segment reporting for Southern Europe and restated previous periods to exclude the business tax from Southern Europe's direct cost so that it would be consistent with our consolidated reporting.

We believe this revised reporting will reduce confusion related to the business tax, as the segment reporting will now be consistent with our consolidated reporting, and there will no longer be a reconciling amount between the two.

You can find the restated quarterly segment amounts going back to 2010 as an Appendix to today's quarterly earnings presentation on our website.

Our French operation is 73% of Southern Europe revenue for the quarter.

Revenue in France was $1.3 billion, a decline of 9% in the quarter.

This is a slight improvement from the prior quarter, when organic revenues were down 10% from the prior year in constant currency.

Operating profit in France before restructuring charges improved 22% in constant currency, to $42.9 million.

The OUP margin expanded 80 basis points to 3.2%.

This strong OUP performance was driven by expansion of the gross profit margin and SG&A expense reductions.

The primary driver in the gross profit margin expansion was the CICE payroll tax credits previously discussed.

Revenue in Italy was $278 million, which was flat with the prior year in constant currency.

We seem to have hit the bottom in Italy, as we have witnessed notable improvements in year-over-year growth trends compared to the two last quarters, where on an average daily basis revenue was down 3% in the first quarter this year and 11% in the fourth quarter of last year.

Our gross profit margin was slightly up in the quarter, while SG&A expenses decreased, resulting in OUP of $15.2 million before restructuring charges, up 18% over the prior year, or 90 basis points, to 5.5%.

Revenue trends in Spain improved in the quarter, down 4% in constant currency or 5% on an average daily basis.

This compares to a 16% average daily sales decline in the first quarter of this year.

Our team in Spain continues to manage very well in a very difficult environment.

Profitability was up in the quarter despite the drop in revenue.

Revenue in northern Europe came in about as expected at $1.4 billion, a 2% decline in constant currency, or a 4% decline in average daily revenues.

OUP for the quarter was $33 million, or $42.5 million before restructuring charges.

OUP before restructuring was up 8% in constant currency, and OUP margin improved by 20 basis points.

Our gross profit margin declined in the quarter, as a result of lower utilization of bench resources in our Manpower business in Sweden, and the continuation of pricing pressure in some markets.

In addition, the gross margin is under some pressure due to the new collective labor agreements in Germany.

These new agreements resulted in paying higher wages to our temporary associates based on length of assignment.

Generally, we our able to pass this increased cost on to our clients, but we often are not able to add a markup.

As a result, our gross profit dollars are not impacted by the new CLAs, but our gross profit margin percent is reduced.

Gross profit from Permanent Recruitment fees was down 7% in the quarter, which was an improvement from last quarter.

Our other northern Europe operations have implemented numerous actions related to our simplification plan, resulting in substantial expense declines, which have more than offset the weaknesses in gross profit margin.

Within northern Europe, Manpower represents 75% of our revenue, Experis represents 20%, and ManpowerGroup Solutions represents the balance.

Revenue in our Manpower business line increased 1% in constant currency, while Experis declined 11%.

The revenue declines in Experis have been improving the last two quarters, but demand for IT services, particularly among our larger clients, remains soft.

With the northern Europe, the UK is our largest operation, with 30% of segment revenues.

Our UK operations produced constant currency growth of 1%.

Our SMB-based Brook Street business [forward] strong revenue and profit growth on superb execution, while our Experis IT business continued to see a challenging market, especially among our larger accounts.

Our Nordics operation represented 25% of northern Europe revenue, and had a revenue decline of 1% in constant currency.

Revenue growth in the Nordics was favorably impacted by the acquisition of Workshop Bemanning in April.

On an organic basis, Nordic average daily revenue was down 8%, a slight decline from the first quarter.

Our German operation represents 12% of segment revenues, and saw flat revenue growth in constant currency in the quarter.

On an average daily basis, revenue was down 3% in the quarter, a nice improvement from the 6% decline we saw the second quarter.

We also saw revenue trends improve in the Netherlands.

Constant currency revenue was down 5% in the quarter, or 4% on an average daily basis.

This compares to an average daily decline of 7% in the first quarter.

Revenue in Belgium was down 6% in constant currency, or 11% on average daily basis.

Market continues -- market conditions continue to be difficult in the Belgian market.

Revenue in Asia Pacific Middle East came in slightly better than expected at $623 million, an increase of 2% in constant currency or a decrease of 6% on a reported basis, due to the weakness in the Japanese yen.

Our gross profit margin was down from the prior year due to some modest pricing pressure, changing business mix, and a 5% constant currency decline in Permanent Recruitment revenues.

A reduction in the SG&A costs more than compensated for the gross profit decline, resulting in OUP of $20.6 million before restructuring, an increase of 4% over the prior year in constant currency on a flat OUP margin.

Japan is our largest operation in Asia Pacific Middle East segment, representing 37% of revenue.

Japan's revenue was down 1% in constant currency, or 4% on an average daily basis.

Demand for staffing services continues to soften in Japan.

However, we continue to see good opportunity for our Solutions business, which continues to see growth over the prior year in constant currency.

Demand for our services in Australia remains weak, with revenues down 4% in constant currency, or down 11% on an average daily sales basis, similar to what we saw in the first quarter of this year.

Revenue in the emerging markets increased 10% in constant currency, with strong growth in India, Thailand and Malaysia.

Growth in China remained strong in the quarter, but decelerated from what we have seen in previous quarters.

Revenue at Right Management came in as expected at $81 million, a decline of 2% in constant currency.

Our Career Management out-placement business saw some growth in the quarter, while Talent Management was down in the prior year, as we continue to see a soft demand environment for our Talent Management offerings.

Gross margins were up in the quarter, primarily due to changes in mix and SG&A expenses were significantly down, resulting in a strong OUP performance.

Reported OUP was $7.4 million in the quarter, and $10 million before restructuring charges.

This represents a 39% constant currency OUP increase, and significant OUP margin expansion to 12.4% before restructuring charges.

Now let's turn the cash flow and balance sheet.

Free cash flow, defined as cash from operations, less capital expenditures, was the use of $97 million in the first half of the year, compared to $74 million in the first half of the prior year.

Cash flow is typically weak in the first half of the year as -- and this was exacerbated by the fact that the quarter end fell on a weekend.

This impacts the timing of our collection of accounts receivables, as we receive significant payments at month-end.

Our days sales outstanding was stable in the quarter at 55 days.

Capital expenditures for the first half of the year were $25 million, a reduction from the $34 million invested last year.

Also, as we consider our cash flow, we need to keep in mind that the French CICE tax credits that are earned in the current year and included in net earnings, for the most part, will be received in 2017, according to the guidelines of the French stimulus program.

The balance sheet remains strong at quarter end, with total debt declining from $751 million to $534 million.

This decline in debt outstanding reflects the pay-down of our EUR200 million notes, which came due in June of this year.

We were able to entirely pay down the euro notes with available cash, leaving our revolver untapped and available for other working capital needs.

As a result of this debt retirement, our total debt to total capitalization declined from 23% to 17% in the quarter.

Our debt picture at quarter end is quite straightforward.

We have the EUR350 million at a fixed interest rate of 4.5%, which come due in June of 2018, and our $800 million revolving credit agreement, which comes due in October of 2016.

At quarter end, there are no borrowings on the revolving credit agreement, and there is $79 million outstanding in other credit lines.

Lastly, I'd like to discuss our outlook for the third quarter.

As I previously reviewed, we still see revenue declines in many of our markets.

However, those declines have stabilized in many cases.

In some markets, the sentiment seems to be getting better, but we are not seeing a breakout recovery in any of our markets.

With this as the backdrop, we are anticipating third-quarter revenue declines on a consolidated basis to be only slightly better than second quarter.

We are forecasting constant currency revenues to be down between 1% and 3%, after giving consideration to slightly easier prior-year comparable numbers and the fact that a few of our operations have one more billing day in the quarter compared to the prior year.

We expect our gross profit margin to continue to be stable, falling in the range of 16.5% to 16.7%.

We expect SG&A costs to be down over 6%, which will drive increased productivity in operating profit margin from 2.8% to 3%.

We expect our income tax rate on earnings before restructuring to approximate 40%, which will result in earnings per share before restructuring of $1.02 to $1.10, on 79.2 million weighted average shares.

We expect further restructuring costs related to severance payments and office consolidations as part of our announced simplification plan.

These charges will range between $5 million and $10 million before income taxes.

At the moment, it does not appear that currency will significantly move the needle in the quarter.

Earnings estimate includes a $0.01 negative impact from foreign currency exchange rates.

With that, I'd like to turn things back to Jeff.

The second quarter was a very strong quarter.

Given economic backdrop, I am very pleased with the results of the organization and the quality of actions that we took throughout the second quarter are even more satisfying.

We have not only far surpassed our goal in re-calibration, we have very much reset the marker for the Organization when it comes to, if you will, our per unit cost.

This allows us to have a quite positive view as we look to improving our operational leverage.

We have talked about this several times, that we wanted to bring down our leverage points so that we could enhance our leverage in a potentially slower growth environment.

And we are well on our way to achieving that.

No doubt, there remains a lack of clarity regarding some of the economic challenges ahead throughout the Euro area, and for that matter even in some areas of Asia.

Having said that, the conversations that we've had with our clients and prospects would lead us to believe that there is a more positive sentiment, even though we haven't seen that show up in our numbers yet.

We did improve our overall revenue from the first quarter, which is seasonally typical.

Europe, which accounts now in this quarter for 64% of our business, had revenues of $3.2 billion.

We are seeing some leveling in that marketplace, as average daily revenues were down about 6% in constant currency, similar to the first quarter.

Within Europe, we saw some improving year-over-year declines in France and Italy, suggesting that we may start a bounce off the bottom of where we were.

The new labor laws, which have yet to really have a sizable impact on us, we believe over time will continue to drive towards a more favorable secular trend in this marketplace.

Business mix is an important part of how we are driving the strategy in the Organization, and we continue to make progress in this area.

Our Solutions business particularly, which grew at 5%, continues to gain momentum in the RPO space and the MSP space.

We continued our win rate in RPO of 20 wins in the quarter, which is continuing to stack up the opportunities for us to grow in the future, as companies will be looking to hire more people as we start to see some relief of the current economic trends.

Over one-third of our gross profit dollars came from Solutions and our higher-value professional offerings.

A very good mix, as we are driving towards some of the more value-added services.

This does not in any way take away from Manpower, as we are looking to growing Manpower.

And we have, in many cases throughout several of the countries that we operate in.

As I mentioned earlier, the Organization has done a tremendous job in our simplification efforts to re-calibrate the costs and to focus on more high-quality sales and marketing activities.

Clearly, you can see the result of this coming through.

Not only in the revenue and gross profit line, but particularly on the expense line, where we have been able to take out costs and are quite confident that we are doing this in a way that is very lasting and allows us to drive greater leverage as we move into the future.

We continue to work very diligently on the re-calibration of the Business.

As we spoke about at our investor meeting on February 25 as well as the first quarter conference call, we are working very hard at how do we drive a simpler organization to increase our speed, make sure that we are focusing on sales and revenue, and at the same time bring down our cost.

The four areas that we are focusing on are organization, programs, technology and delivery.

All four of those areas, as you have heard from Mike, are not only on track but are ahead of schedule.

And I'm confident we will be exceeding our expectations and objectives in 2013.

This will set us up very nicely for 2014.

The work that we've done in 2013, I'm sure, will unearth more areas that we can improve upon, as is true in any good continuous improvement program.

Our more agile Organization is clearly acting much faster and more streamlined.

Our decision process pace has increased, and we have been able to adjust ourself throughout the entire organization from the executive team to the branch network to operate at a faster pace.

Technology is an area that we worked very hard on.

We've had a long, very strong reputation in the areas of innovation, particularly on the client-facing side of technology.

We do not plan on giving that up.

We have been able to reduce our cost for maintaining our infrastructure, which is helpful, as we can then put more dollars into new development and application development.

We are also, at the same time, driving much more accountability into the field.

And as a result, I am confident in our ability to drive the changes that will allow us to re -- do that re-calibration that we have committed to in the second half of the year.

Delivery.

Delivery is a very important element.

We've worked at developing a more robust suite of delivery channels.

We look at the channel strategy as important to how we optimize what we have currently available, but also continue to position ourselves for the future.

We do not believe one channel fits all of our clients, and as a result a multi-channel strategy not only drives better efficiency, but also allows us to have a much better match with what the client is looking for in the way of service.

We have consolidated some offices in the first half of the year.

We have, as we did in the downturn of 2008 and 2009, been very deliberate and thoughtful.

We looked at each office's competitive forces and marketplace, the recruiting capability and the status of the potential where technology can be a real existence.

Only after looking at all these factors and more would we look at any kind of consolidation.

That's what we have done, branch by branch.

The ManpowerGroup team has done an incredible job in the second quarter in driving these changes and ensuring that we set ourselves up for a much better operating leverage in the future, and we have done that.

Looking forward to the second half of the year, the successes in the first half have allowed us to gain good momentum within the marketplace and the Organization.

As you may have seen in a Press Release issued last week, the French competitive authority has commenced an investigation into the Company and a number of industry players in France.

We believe the focus of this investigation relates to the commonly-used vendor-neutral platforms in the industry and whether these platforms adversely impact the competitive dynamic of the industry.

At this point, no specific charges have been levied, and we do not believe we are in violation of the competition laws.

The competition authority will determine whether any claims will be assessed upon their conclusion of the investigation.

Also in France, this quarter we have received claims from a number of clients requesting that we pass along payroll tax subsidies we received over the last several years related to our temporary associates.

We believe many of these claims came in the quarter due to the change in the statute of limitations that took effect in June.

We do not believe these claims have merit, as these payroll tax subsidies are intended for the benefit of the direct employer, which we are.

We intend to vigorously defend any claims of this nature.

We are creating new ways of doing business, recalibrating to drive a lower leverage point, and so far the work that has been done is very compelling.

With that, I would like to open it up for questions.

(Operator Instructions)

Sara Gubins, Bank of America Merrill Lynch.

Jeff, just a follow-up on the comment you just made about claims in France.

It sounds like those are related to historical matters, but I'm wondering if there are other more competitive discussions with clients where they're trying to get some of the savings from the tax credit?

Which might not be a legal matter but might be a competitive matter.

Right.

So you're right, those are two different issues.

So, I'll try to just put a little bit more texture on both of those.

When you look at some of the liabilities of the past, as you would say, historic tax subsidies, what we're experiencing right now is most of this is coming from third-party contingent fee organizations that are looking for ways to try to get some money back for their clients, or even perspective clients.

And we, as I said in the prepared comments, we feel good about our ability to say look, that's not what they were intended for.

Now, in a market like France, where we're down-on-down from a revenue perspective and there is a lot of challenge within the marketplace, clearly, customers are looking for lots of different avenues to get to better pricing.

When it comes to the CICE, really, our view is, that is for us, that is the way it was written.

We will be investing in employee development projects.

There's no cash that comes in for a period of time.

And we are very much staying steadfast that on the fact that this is -- we're using it the way it was intended to be used.

Now, having said that, does it find it way into some competitive bids because the industry or some of our competitors are looking at it as enhanced margin, and therefore might get more aggressive on some of the pricing?

It's hard to tell, but we're probably seeing some of that.

We're seeing that a little bit more small, medium-sized business.

But we've seen that in a few large accounts where we were a bit surprised at where that went to, and the only way they could really get there would be to count some of that CICE.

But it -- actually, at this point not -- it hasn't been in any kind of large quantity.

So, right now we're feeling confident in how we're able to keep the integrity of the CICE, but as this rolls out over the next few quarters, and even in the next year, there may be some modification to that.

Great.

And then separately on cost.

It sounds like the efforts there are going much better than expected.

Could you talk about where you -- where the positive surprises have come?

And if there are any areas in particular where you see further opportunity?

And along those lines, Mike, at the Investor Day earlier this year, you talked about needing $3 billion more to get to the 4% EBITDA margin target on the original cost savings.

And I'm wondering if you've recalculated that to see where -- what kind of rev -- incremental revenue you would need given the lower cost base?

So, I'll answer the first and Mike can take the second.

So in the four areas of what are doing in the simplification plan, the organization, programs, technology and delivery, what we've been able to do is to make sure that what -- and it was never the intent, was to say we're going to cut x% of -- if you just do the calculation, 6.6%, out of the first half expenses, because that's a blunt instrument approach.

We really went after this and said, how do we do the appropriate trade-offs?

And when we did the organizational trade-offs and the program trade-offs, we made a lot of decisions about, where would the priorities be.

How do we streamline decision-making?

How do we make a more agile organization?

How do we make sure the field is spending time on client contacts and not maybe driving some of these great programs, but doing them in a different way.

And the surprises in there is that we our able to, by taking that attitude and reconstructing, basically, how we make decisions in the Company and who is making decisions, and driving that into a different place, we were able to take out a lot more than we had anticipated.

From a technology perspective, we were caught a bit between two models where we had global support, regional support and country support and we found that there is a fair amount of duplication.

And as a result, we said we can't afford and shouldn't have that duplication, because it also slows us down.

So we found some there.

And as I mentioned in my prepared remarks, as we drive that accountability into the countries, I'm confident we are going to get more out of the countries and improve their ability to do IT and drive more applications.

The Holy Grail of this is delivery, and we are doing some very clever and innovative things in delivery strategy.

And as I mentioned, it's being able to have multiple channels to line up more what that client is looking for with requirements in price.

And as a result, we think that there's more left in there, but we're going to do that very carefully because that's touching revenue head on.

So we've done in three, four markets and it's going well.

We will expand it, but I would say there's some more left in there.

Mike, do want to cover the other part?

Sure.

Yes, so just to put into context for everyone.

So and -- at the February meeting, we had mapped out our journey to 4% EBITDA margin, and we finished 2012 at 2.4%.

So as we mapped that out, the simplification plan with a big part of that.

We had identified 60 basis points of improvement there, gross profit margin, 30 basis points of improvements.

And a lot of the gross profit margin improvement was coming off of higher-valued solutions and higher margin business growing as well as increased Permanent Recruitment.

Which we see very good opportunity when the economies improve from a secular standpoint, as we see clients looking at how they're buying those services differently.

So we think that's a good opportunity there.

But inherent in there was the assumption that the core staffing gross margin would stay flat overall as we did that.

And then to your question, Sara, the $3 billion of revenue, we think we can get very good incremental margins with a little bit of growth.

And that could add 70 basis points, just in view of the operating leverage that comes from that.

So we feel quite good about the journey, the path we're on.

Of course, the simplification plan is going extraordinarily well, and we'll get -- we'll make very good progress toward that 60 basis points by the time we exit this year.

And so I think we're at of schedule there.

I would say the GP side, I still feel very good about the opportunity there.

I think there's a little bit of risk from the underlying assumption that the staffing gross margin would be flat.

So to the extent that there's a little bit of risk there, I'm sure we'll make it up on the SG&A side, if not by a little bit.

And then we still have the revenue leverage.

So at this point, I wouldn't back off on what I think we need in terms of incremental revenue of $3 billion above where we were in 2012.

I think that's still a good marker to keep in mind, and we'll see how this evolves and see what we can drive.

But I feel very confident on the SG&A, and I think we can likely deliver a little bit more on that parameter within this road map, given the progress we've had out of the box so far.

Andrew Steinerman, JP Morgan Chase.

Mike, if you could adjust the guidance that you gave on a constant currency basis to average day basis, that would be great.

And Jeff, if you could make a comment on the UK temporary help market, which edged positive not just for Manpower but other staffing firms.

So the first European market to return to positive, albeit low positive growth, does that help us understand the timing of when some other European markets might edge back to increases?

I can go first.

So on the UK temporary market.

Yes, it is having a bit more energy to it, but we don't want to overstate that.

When we talk to clients, and I had an opportunity to be there last week, they said there is a more positive feeling, particularly in the London area.

You get into some of the Midlands, it is a little bit more difficult.

So we are hearing, and are experiencing, a slightly more positive -- but there's still more positive talk then positive numbers.

To your point, it's just up barely.

So, is that the precursor to more?

We'll look at that trend closely.

We would suspect it's going to start trending up.

Now, does that then give us a look at what would be happening in Europe?

In some countries, I believe that's true.

When we see some of the things going on in Sweden, some of the more recent numbers that we've seen in the Netherlands, they're trending nicely, not overly exuberant, but nicely.

And, as a result, we do believe that there could be an inflection point, but it is far too early to call, especially because you have this -- the summer now coming.

So it's going to be really important when we get into September -- first, second week of September, to see how fast business comes back when everybody is off the summer holiday, and then how that flows into October.

So we are more positive than negative, but very cautious about the magnitude of it moving up, because we do believe it will be a slow move up, not a real big hockey stick.

Perfect.

Sure, then in terms of just impact on Q3 from average daily sales in the guidance forecast.

So we have a couple of markets that have an extra billing day, but not all markets.

So on average, that will add, we estimate, revenue of about 0.8% of additional revenue as a result of some of the billing days that we have in those countries.

When you take that down to the bottom line, it's hard to get an exact, precise calculation on that, Andrew, but I would say it would be on the order of probably $0.03 to $0.05, something in that range.

Right, but again, the 0.8% you just gave is for the total Company, or just in select markets?

That's for the total Company, so I've averaged -- weighted average the whole thing.

Perfect.

I have got it.

Perfect.

Paul Ginocchio, Deutsche Bank.

Jeff, you touched on it on the last question, but could you just talk about maybe what June looked like relative to the rest of the quarter?

And if you can make any comments about these first few weeks of July, that would be great.

Just about maybe exit rate of the second quarter plus what you're seeing?

I'll just cover a few things, then Mike can maybe add a little texture to it.

We do, for a fair amount of markets, get some weekly data and received some this morning.

In general, very much in line with what we've been seeing as we came in towards the end of the quarter and into July, which is -- we're not seeing any further deterioration.

There is some little bump up your there, but of course, weekly is sometimes a little hard to look at.

So we -- it's not like we exited the -- it's not like we got to the quarter through a fairly weak April and a strong June.

Actually, as you look through the quarter, there was not a lot of change going on.

If you took out the additional billable days in there, as Mike had said, there was some flatness, though a little improvement.

So we are seeing this inching of improvement as opposed to, wow, we exited the quarter pretty strong and we're feeling pretty good.

That is not what we're seeing.

We're exiting the quarter stable from where we began with some four, five countries looking a little bit better in Europe.

Yes.

I think that really covers it.

I think as we -- as Jeff said, as we went through the quarter, there was some modest improvement in terms of year-on-year.

When you look at it on an average daily basis, take the billable days component out of it and just with average daily.

Some slight improvement as you went from April to May to June, but nothing dramatic, and so it seems to be the path that we're on.

And those four or five countries, is that UK, France, Spain, Italy?

Who am I missing?

France is feeling a little bit better in the last four, five weeks, but on the margin.

Yes, a little better out of UK.

Definitely you saw Italy.

And then the Netherlands was a little bit better.

Tobey Sommer, SunTrust.

I was wondering if you could take a -- just comment about the divergence between your own reported results in the US, and some other public competitors and the data that we see on temp jobs coming out of the BLS?

I'm just curious how you reconcile the difference in those reported rates of growth?

Yes, I don't think the BLS data is that great.

And it's been a challenge and a struggle that goes back five, six years.

Because how much is being included in there, and basically our industry, when you include healthcare, you include some of the other ones, you get somewhat distortion in there.

Now, does it point on a macro trends basis correctly?

Probably.

Now, we look at this market down at the market levels.

So we look at, what are we doing in specific markets?

What are the more -- that market's penetration, and then what's our penetration on that, based on our business.

So we clearly are, and have been, a bit more selective, which is why I talked early on about this notion of price inelasticity.

And we've got to make sure that we're not pricing ourselves out of the market.

And I would say we're not, but that also means that we're being very cautious.

So even just in the last 30 days, which will affect as we go into the third quarter, we made a difficult, but I believe right decision on a very large center to say look, we are just not going to do it at that price.

And they got somebody else to do it at that price, and we'll see our profitability increase.

So we feel as though, and our data shows inside, we're in line with the market we compete with.

The BLS numbers have contained some staffing companies that are not driven off of this, or not as correlated to us when it comes to growth rates.

That's how I would explain it.

I think it's -- I think you do have to focus on what we've been trying to do around the margins is just -- so we been more selective.

And when you look at what we've been able to do with the US organization to be able to do from a profitability perspective.

Quite strong in the quarter, reporting $34 million of profit, which is an increase of 40% over the prior year and an increase in OUP margin of 140 basis points to 4.6%.

So when you look at all of that, we'll trade a little bit of market share for profitability if we have to.

We've got to be -- we've got to move the Business in the right place, and not just chase every opportunity that's out there.

Because there are some opportunities that, frankly, don't fit with what we're looking to do.

Jeff, I'm interested in your perspective on healthcare staffing in the US, and whether you are looking at getting some exposure on the clinical side?

And also, what is your experience with Experis in terms of the hospital marketplace?

We'll keep an eye on the healthcare side.

We have not seen anything that would compel us to get into that.

There's a lot of forces that affect that, and therefore we would like to see that shake out a little bit more.

Where subsidies or taxes or Affordable Health Care Act drives it, we find it to be a pretty tenuous time to get into that.

And when we look at the P&L's of those organizations, while they work, they're not overly compelling to say, I have got to get into that in order to get a really good business back mix.

So we'll continue to look, but right now, I would say, pretty cautious at getting in there.

Now on the hospital business side, particularly medical records, hospital digital systems, the epic programmers.

That is a nice piece of our business, there is no doubt about it.

And on the Manpower side, even medical transcription, which would not fall into the classic healthcare side.

But the hospital business in our Manpower business in the US, that is one of our focal -- our focus industries.

And on the Experis side, the IP augmentation that's required to keep up with the changes happening in healthcare, it's great opportunities for us and we're benefiting from that.

Okay, next question.

Kevin McVeigh, Macquarie.

I wonder if you could give us a sense, Jeff, of what end markets are leading the charge this time, as you start to see some green shoots out there?

Particularly in Europe and across the US?

It's fairly classic, in that it depends a bit on the country.

So Italy with midsize manufacturers, any time there is demand we're seeing it come and being satisfied by us, which is why that's occurred.

So what I would say is, in Europe, whether it be the UK or Netherlands or Sweden, the US, in Asia, this is not a -- the tide is lifting at this point.

This is, there are companies out there that are doing a bit better, either because they have a better mousetrap or that industry is now -- suddenly automotive is still doing well.

So second, third tier suppliers of automotive still doing pretty well because of the automotive build.

It's that sort of thing.

An in fact, in the US, it's interesting.

I could pick a city out of a hat and one of them would be up 30%.

I'd pick another city and it's down 30%.

And it has to do with the lumpiness based on -- the economy isn't so strong that all boats are getting lifted, so it's really, fill in demand, which is a good secular trend for us.

Fill in any demand that I have with your people, because I want to stay agile.

I want to stay alert.

Manufacturing is feeling pretty good, call centers, transaction processing centers, life cycles of companies, where they say, I no longer want to do this.

I want to shed this, so you guys do that for us.

But it's pretty much across industry.

It's very spotty.

Got it.

And then, as you think about penetration rates, I definitely think we exceed prior peak in the US.

Any thoughts around France, Jeff?

Or any other areas in Europe, as we think about, again, penetration relative to overall non-form?

Sure.

So if we took Italy and France, I think it would be very logical to think that we would get past the previous penetration rates.

Part of that is some law changes that have occurred, which makes it more appealing to use us as opposed to what we would call basically independent contractors.

But in order to get there, we're going to need a little bit of GDP growth.

We're going to need to get some of that coming through.

But if you look at where clients are, how some positive things have been changed regarding the labor reform in both Italy and France, it would lead to a pretty good story that said we would be able to surpass previous peaks in both of those countries.

When we get to some of other countries, Germany, with some of the CLA things going on right now, it's a little bit more muddled.

So I'm not sure if we'd get past the peak.

I don't know if we have to, because they may have a growing labor market, which means we can still grow, even though the percent of the pie is about the same.

Netherlands will probably be off that peak for a little bit of while.

And Sweden, I think, will start to surpass that peak as they see some growth as well.

Super.

Jeff Silber, BMO Capital Markets.

Just wanted to go back to the cost calibrations.

You had mentioned the [$3 million] revenue goal to get to the 4% EBITDA margin.

Did the incremental margin change based on what you told us back in February, considering the better-than-expected results so far?

So on the $3 billion revenue, the incremental margin, does that change, Jeff?

I think that's the question?

Yes, sorry.

I think the -- I still think that that's still a safe number.

I'm not sure that I would change it dramatically.

I think we clearly have recalibrated the costs, taking costs out.

I think in terms of how we think about those costs coming on, I think it probably -- we still think we can be much more efficient as we drive more business through the Organization.

But I'm not sure, incrementally, we're thinking more aggressively than we were back in February.

I think back -- we're looking at low double digit-type incremental margins on that first $3 billion.

I think that still is sensible, and I'm not sure we're ready to slice the sausage any thinner than that right now, to be any more precise.

I think that's probably still a good number to use.

Okay, great.

That's helpful.

And then just a couple quick numbers-related questions.

Debt-to-cap ratio, now that that's come down, I'm just wondering how comfortable you are raising that number, in terms of taking on more debt maybe from [acting] acquisitions, et cetera.

And in terms of the delay of Obamacare implementation, are there any potential cost savings for you now that that has been delayed a year?

Okay, so in terms of the debt-to-cap, certainly we're comfortable with a little bit more leverage on the balance sheet.

So if an opportunity would arise for us, we think we do have capacity.

And we like to have the capacity in the balance sheet so that we're able to finance the debt markets if we need to, and certainly the debt markets are at a good rate these days.

So I think there is opportunity there, if needed.

And then in terms of -- from a cost savings standpoint, I don't see anything significant there.

We weren't looking at a dramatic change.

Certainly there would have been costs that would have came in a little bit from an administrative site for us.

And then certainly some costs related to our Associates, which our intention was to pass on to our clients anyway.

So it's --

But the fact that we now don't have to worry about passing on the 100%.

Right.

Would not affect the -- we would view it as a net positive as opposed to a net negative that has been delayed.

Because we likely would have, even passing on the impact of Obamacare would have probably had some -- a little bit of a lag to it, would be my guess.

And some administration cost, so I think netting it out is probably a bit of a positive for us (multiple speakers).

That's very helpful.

Tim McHugh, William Blair.

Just on the cost-cutting.

Are we at a point where most of the cost savings will be reflected in the second half run rate that you described?

Or, given that you are still making some additional cuts in Q3, as we think about 2014, recognizing you are not giving guidance, could the expense run rate continue to come down a bit?

Yes, Tim, good question.

I think it still has some opportunity to come down a little bit further.

As we look at the -- as I had mentioned earlier, for the third quarter we're looking at restructuring in the $5 million to $10 million range.

And I would -- at this point, preliminary estimate for Q4 is probably somewhere in the $10 million to $15 million range.

So probably looking at still restructuring charge of another $25 million coming through this year as part of the overall plan.

So I think there still is more opportunity, more to come.

And then I think as you look beyond that, we'll continue to work on our delivery models and our delivery channels and driving productivity and efficiency through those.

And that's a longer road, if you will, in terms of achieving all of that benefit.

So I think that fourth component of the plan actually goes in through 2014 and 2015.

We haven't fully qualified that, as that gets to be up -- that gets to be out there a little bit further, but we're ready working on elements of that.

Okay.

And then just one numbers question.

On the tax rate, you -- even excluding the French impact, you brought down the number versus what I think you were thinking last quarter, at least -- and as well as in your guidance.

Is this a new rate that we can think about going forward?

I think it's a rate you can think about for this year.

Every year, we've got a number of elements going through our tax provision in terms of business mix and country mix.

We're benefiting some this year from some of the tax planning we're doing on some and the cash flows that we have through the organization.

So I probably, as you look out beyond 2013, I'm not prepared to give guidance on that yet.

But I would bring it back more to what you saw in the previous year from an overall tax rate standpoint, which would be probably closer to the mid-40%s when you include the business tax in there.

All right.

Last question?

Mark Marcon, Robert Baird.

Congratulations on the strong performance.

I think one thing that's a key point is that you were able to perform better this quarter than last quarter, despite a still-tough environment while executing against this fairly significant restructuring.

I'm wondering if you can talk a little bit about the morale in the field, what the reaction is?

And it sounds like you've actually reduced some impediments to selling, and increased the selling focus.

Can you talk a little bit about that?

Right.

And that's why we're very adamant about this not being a cost cutting program.

This is a simplification program, and inside the Company it's called Simplify to Sell and Win.

And it's about taking burden off of our field people and making sure that we give them the best we can give them to get out there and make a difference in the marketplace.

So clearly there's been some very tough decisions that have been made, and some months that, particularly in the fourth quarter of last year, were extremely difficult.

And right now, we're still working through a few things.

As we simplify between the global and region and countries, we haven't quite made it through the gauntlet yet to carve out some of the work that shouldn't be done.

So there are some people that are rowing the boat extremely hard.

Having said that, morale is actually strong, and I visit a lot of branches and a lot of countries.

It's difficult to have really good morale in France and Italy because, when they're reading the papers, it's pretty tough, general business news and world news.

So I've suggested to our French and Italian colleagues, don't read the damn papers, just focus on our business and -- because we're doing fine.

So there's an energy in the Organization, and the energy is, is that we have a very clear path that we're driving here.

We are getting more -- better pipelines coming to our salesforce.com system.

And there's a bit of a bounce in our step.

And as a result, when you look at how our people have accepted this, what we've done with communications, how our executives have gotten out, our people are -- have a massive durability and a love for this Company.

And they're doing a great job out there.

This is -- in my internal message, in my hats off to them, this is hard work and they're doing it.

And we have not lost revenue, we have increased revenue.

We have not lost client contact, we have increased client contact.

So when I talked about, in my prepared remarks, about what I'm most proud of is the strong actions that were taken in the second quarter, that's what's going to prove out to be a stronger next 6 and 18 months.

So look, this is hard work, team did a great job, but we didn't lose a bounce in our step.

I think we gained a bounce in our step, and that's important for us.

It's certainly seems that way, Jeff.

And can you talk a little bit about what you're -- you have lots of high-level discussions.

Can you talk, in terms of the European clients that you talk to, what is the reason for the cautious optimism?

Is it the tail risk being taken off?

Or are they starting to see improvements in their own sales?

Or is it the policy steps that are being talked about now?

Right.

It's a combination of them.

So they see that some of these very difficult austerity programs that were implemented, and the dynamic between the country governments and Brussels, and the central bank saying that, I'll be here for you.

So you're starting to get a backdrop that doesn't have a -- how -- what other shoe is going to drop, and this is really going to get ugly.

That's starting to go away.

So now you're looking more at the business.

And when they're looking at the Business, I would say that there is a real complaint out there that there's some lack of liquidity.

So the small, medium-size business and even the large, medium-size business is a little constrained with the banking system right now, because they just can't get some of the liquidity.

Having said that, the clients are looking at their forward look of -- nook of business and saying, slightly better, but we're going to remain cautious.

We're going to stay on high alert.

Everybody in Europe is a little bit -- shouldn't say everybody.

There's a lot of people in Europe that are slightly disappointed that China is moderating a bit, because that sure would've helped with a little bit lower Euro to get some exporting going.

But while they have that, it's not going to be saving the day for them.

So I would say there's just a recognition about things are not going to get any worse, is the general feeling.

They've got a lot more work to do, some debt to peel off.

They're going to take austerity and moderate it a bit.

And as a result, you're going to get some of the confidence back, get some of the spending back, and this will start to grow.

And -- but our view would be, yes, it will grow and just grow at a very moderate pace.

Great, and then two quick number questions.

With regards to the benefit from the re-calibration you, during your investor presentation, discussed targeted savings that we would achieve in -- by 2014.

Can you talk about what percentage increase you might be seeing in that, given that things are going better than expected?

And then secondly, Mike, are there any things that we should take into account for the fourth quarter, as we model things out, that would be especially significant from a seasonal perspective?

Okay, sure.

So, as part of the foreign -- the road map to 4%, what we had laid out was P&L savings this year from the simplification plan of $80 million hitting the P&L.

And then a reduction in the actual run rate of our SG&A expense of $125 million so.

And so as we look at that, as I mentioned earlier, through the first quarter, we've taken out, already, $99 million of expense.

So we've exceeded the $80 million.

And as we get through the full year, I think expenses will be down in excess of $180 million.

So we -- that will hit the P&L.

And then from a run rate perspective, of course, the run rate is going to be in excess of $180 million.

So it's gone quite a bit better.

Not all of those cost savings came with restructuring charges as we go through the simplification plan.

Some things have restructuring charges associated with them, some things don't.

And so there are some elements to that which get a little bit complicated.

But that's how we see it, and that's how it's playing out.

In terms of Q4 and anything unusual, Q4 typically is a better seasonal quarter.

Usually we see things improve a little bit seasonally.

I don't think there's anything of an unusual nature as I look out to Q4 that I would call out at this stage.

Great.

All right.

Thank you, everyone.

This conference has concluded.

All lines may disconnect.

Again, thank you everyone.

Have a great day.