ManpowerGroup Inc (MAN) 2020 Q1 法說會逐字稿

Thank you for standing by, and welcome to ManpowerGroup First Quarter Earnings Results Conference Call.

(Operator Instructions)

This call will be recorded.

If you have any objections, please disconnect at this time.

And now I will turn the call over to ManpowerGroup's Chairman and CEO, Jonas Prising.

Sir, you may begin.

Good morning.

Welcome to the first quarter conference call for 2020.

On the call with me today is our Chief Financial Officer, Jack McGinnis.

We will start by going through some of the highlights of the first quarter, then Jack will go through the operating results and the segments, our balance sheet and cash flow.

Jack will comment on some considerations for the second quarter of 2020, and I will then share some concluding thoughts before we start our Q&A session.

Before we proceed, 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-19 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 includes additional forward-looking statement considerations and important information regarding previous SEC filings and reconciliation of non-GAAP measures.

Thanks, Jack.

The first quarter of 2020 was an unprecedented one for our company.

The magnitude of speed or the change in market conditions that occurred in the last couple of weeks of March was unlike anything we've seen in our over 70-year history.

With that in mind, I would like to begin by thanking the ManpowerGroup team around the world for their incredible response to what is a health crisis first and an economic crisis next, with a significant impact on our people and business.

The health and well-being of our people, our employees, our clients and our associates has been and continues to be our top priority.

With our talent and teams and their expertise, we have responded with speed to this global emergency, enabling us to support our associates and clients around the world.

Our global footprint has allowed us to leverage the learnings from our APME business as we experienced the first wave of the COVID-19 pandemic move from Asia to Europe to North America and to Latin America.

We have a robust enterprise risk management framework, and our business continuity plans were executed with speed and deficiency at a global, regional and country level.

The technology investments we've been making for some years as part of our transformational journey have been critical in allowing us to respond immediately in response to the global pandemic.

In a matter of 10 days in March, we were able to shift more than 80% of our people to remote working, and have also extended our cyber and information security capability to accelerate the ability for some of our associates and consultants to work at home for clients where this was previously not possible.

As has been well reported, by the end of March, significant lockdown measures had already been implemented in our main markets in Europe and North America as well as in other countries.

With governments unable to provide firm information and dates on when and how restrictions will be lifted, predicting where our business will be in the short term is very difficult in this highly uncertain environment.

Instead, we will be providing a more detailed update than usual within our country performance commentary, including revenue trend currently being experienced in April to provide more insight in what -- into what we're seeing and how we're managing through this in the short term.

In the first quarter, revenue came in at $4.6 billion, down 6% year-over-year in constant currency.

On a same-day basis, our underlying constant currency revenue decreased 7%, reflecting the sudden drop of activity during March as our largest markets experienced COVID-19-related work restrictions.

On a reported basis, operating profit for the first quarter was $38 million, down 63% in constant currency.

Excluding restructuring charges from both years, operating profit was $86 million for the quarter, a decrease of 39% in constant currency.

Reported operating profit margin came in at 0.8%, down 130 basis points in constant currency from the prior year.

And after excluding the restructuring charges, operating profit margin was 1.9%, down 100 basis points from the prior year.

Reported earnings per share of $0.03 reflects the impact of restructuring charges, a noncash pension settlement charge and an increased effective tax rate.

Excluding the special charges, our earnings per share was $0.82 for the quarter, representing a decrease of 39% in constant currency.

I'm proud to say that we have a strong leadership team that moved very quickly during the start of the pandemic to support our clients and our associates.

We did this while protecting the bottom line as much as possible in the first quarter, while creating plans for a very challenging second quarter.

Our diversity across geographies, industries and offerings has benefited us as some businesses have not been impacted materially by the crisis at this stage.

Despite a very tough global economic environment, we did see revenue growth from Japan, Canada, Spain and India in the first quarter.

We're leveraging opportunities where industries are growing, such as logistics and food services to partially offset material declines in manufacturing in many markets.

Across our countries, we had implemented initiatives to reduce our SG&A and are prepared and ready to take further cost actions to optimize our business structure through this economic downturn while preserving our ability to rebound when market conditions improve.

I'd now like to turn it over to Jack to take you through the financials and country performance details.

Thanks, Jonas.

As a result of the COVID-19-related impacts, on March 18, we disclosed we were withdrawing our previous guidance for the first quarter.

Revenue in the quarter represented a reported decline of 8% year-over-year and on a constant currency basis, represented a decrease of 6%.

Acquisitions offset the impact of dispositions in the quarter and did not have a significant impact on the revenue trend in the quarter and more billing days this year contributed to about 1% of additional revenue.

This results in an organic constant currency days adjusted revenue decline of 7% in the first quarter and compares to fourth quarter decline of 1.5% on a similar basis.

Our revenue trend during the quarter on a billings day-adjusted basis included the monthly year-over-year constant currency revenue decline of 17% in March.

In March, the majority of the decline was driven by our European businesses during the last 2 weeks of the month as governments issued states of emergency and related lockdown requirements.

Our gross profit margin was down 30 basis points year-over-year and reflected lower permanent recruitment fees and higher sickness and absenteeism in certain countries as well as increased direct costs associated with early termination of client contracts during the COVID-19 crisis in March.

Our first quarter performance resulted in an operating profit decline after restructuring costs of 41% or 39% on a constant currency basis.

This reflects the significant and sudden operational deleveraging experienced in March.

This resulted in operating profit margin of 1.9%, excluding restructuring costs.

On a reported basis, earnings per share was $0.03, which included restructuring costs which had a $0.68 negative impact and a previously disclosed pension settlement charge, which had an $0.11 negative impact.

Excluding these costs, earnings per share was $0.82.

Regarding our effective tax rate.

Previously, we had guided to a full year estimated rate at 34%.

As we have discussed in the past, our effective tax rate is significantly impacted by the French business tax.

Although this French business tax is primarily calculated based on revenues and not pretax earnings, it is considered income tax for U.S. GAAP purposes.

In the normal -- in normal economic periods, the French business tax has represented about 7% of our effective tax rate, meaning our 34% to 35% estimate was comprised of an underlying 27% to 28% corporate tax rate component based on blended country income tax rates globally, plus the 7% impact of the French business tax component.

Although corporate income taxes in France will be scaled downward due to lower pretax income, the French business tax will not see as comparable level of decrease since it remains calculated on revenue levels.

As a result, the French business tax component will become a more significant portion of our total income tax expense in 2020 as our underlying corporate income tax amount will decrease on lower taxable income, but the French business tax amount will not decrease as significantly as is derived from revenues of our French business, which will not be as reduced as significantly as pretax income.

This incremental French business tax weighting within our overall tax expense increased our effective tax rate about 7% in the quarter, and we will provide further updates as the year progresses as a result is dependent on revenues in France.

Separately, the first quarter tax expense included a discrete favorable benefit of $4.3 million, which lowered the effective rate by about 6%.

The effective tax rate for the first quarter, excluding restructuring and pension settlement costs, represented 36.3%.

Looking at our gross profit margin in detail.

Our gross margin came in at 15.7%.

The staffing/interim margin increase of 10 basis points year-over-year was offset by a decline in permanent recruitment fees year-over-year as a result of the COVID-19 impact in March as well as lower talent-based outcome activity within the Manpower business.

We anticipate the ongoing material decline in higher-margin permanent recruitment activity during the duration of government lockdowns in most of our markets as the COVID-19 crisis continues into the second quarter.

Next, let's review our gross profit by business line.

During the quarter, the Manpower brand comprised 62% of gross profit, our Experis Professional business comprised 23%, and our newly launched Talent Solutions brand comprised 15%.

As part of our year-end 2019 earnings release, we discussed our brand updates.

Our year-over-year comparisons reflect the restatement of our brands for the prior year period.

During the quarter, our Manpower brand reported an organic constant currency gross profit decrease of 10%.

Gross profit in our Experis brand declined 6% year-over-year during the quarter on an organic constant currency basis.

In our 2 largest Experis markets, this reflects flat gross profit in the U.K. and a decrease of 2% in the U.S. This was offset by declines in Sweden, Germany, the Netherlands and Australia.

Talent Solutions includes our global market-leading RPO, MSP and Right Management offerings.

Organic gross profit growth in the quarter increased 5% in constant currency, which was driven by MSP and RPO activity in the first 2 months of the quarter.

We experienced a sharp reduction in RPO activity during March as many client programs initiated hiring freezes in light of the COVID-19 crisis.

Our Right Management business experienced a decline in gross profit of 3% in organic constant currency during the quarter.

Although Right Management has historically experienced an increase in outplacement activity during economic downturns, we are not seeing an increase in outplacement activity at this time as we believe clients are uncertain as to the duration of the downturn.

Our reported SG&A expense in the quarter was $686 million, including the $48 million of restructuring costs.

SG&A expense was $638 million, a decrease of $21 million from the prior year, after excluding restructuring costs from both years.

On a constant currency basis, excluding restructuring costs, SG&A expenses were down 1% compared to the prior year.

Excluding the restructuring costs, SG&A expenses as a percentage of revenue in the quarter represented 13.8%, which reflected the significant deleveraging on the sudden drop of revenues in March.

As the drop in activity in mid-March was significant and sudden, we were not able to meaningfully scale down SG&A in this very short time period.

However, we have taken significant actions in late March and early April, which will allow us to reduce SG&A to a much greater degree to better offset the significant gross profit declines anticipated in the second quarter.

This includes leveraging government unemployment related benefits, which allowed us to move unutilized staff and associates quickly on to these programs.

We expect to recover the restructuring costs of $48 million through cost savings over the next 12 months with full run rate savings beginning in the third quarter.

As we previously announced, the geographical segments now include the results of Right Management, and prior periods have been restated for comparative purposes.

I'll now turn to cash flow and balance sheet.

I move these slides up in the order as a result of current market conditions.

Free cash flow, defined as cash from operations less capital expenditures, equaled to $172 million.

This represented strong growth compared to free cash flow in the prior year of $92 million.

We have historically experienced increase in free cash flow as we enter a downturn as we begin to collect out our receivables while we incur lower payroll costs on lower activity.

This contributed to a strong free cash flow effect in March.

We would expect a similar underlying trends through the beginning of the second quarter, provided that we experienced consistent client payment patterns.

At quarter end, days sales outstanding decreased slightly year-over-year.

In this environment, one of our top priorities is maintaining strong cash flows from collection activities.

To date, we have not experienced a significant decrease in cash receipts from clients and are watching this very carefully and ensuring our collection teams are appropriately staffed to diligently pursue payments as per original payment terms.

Capital expenditures represented $9 million during the quarter.

During the quarter, we purchased 871,000 shares of stock for $64 million.

As of March 31, we have 5.9 million shares remaining for repurchase under the 6 million share program approved in August of 2019.

Our balance sheet was strong at quarter end with cash of $1.1 billion and total debt of $1.04 billion, resulting in a net cash position of $56 million.

Our debt ratios are very comfortable at quarter end, with total gross debt to trailing 12 months EBITDA of 1.42 and a total debt to total capitalization at 28%.

Our debt and credit facilities did not change in the quarter, and the earliest euro note maturity is not for another 2.5 years.

In addition, our revolving credit agreement for $600 million remained unused.

Now I will turn to the segment results.

The Americas segment comprised 22% of consolidated revenue.

Revenue in the quarter was $1 billion, an increase of 1% in constant currency.

OUP, including restructuring costs, equals $17 million.

This represented a decrease of 26% in constant currency from the prior year, excluding restructuring costs.

Of the $13 million of restructuring costs, $11 million related to the U.S., where we consolidated branches and other facilities and optimize front- and back-office processes and the balance related to Canada and other countries in the Americas where we continue to simplify our operations.

The U.S. is the largest country in the Americas segment, comprising 60% of segment revenues.

Revenue in the U.S. was $611 million, down 2% compared to the prior year.

Adjusting for billing days and franchise acquisitions, this represented a 6% decrease year-over-year, which included a 12% decrease in the month of March.

The impacts of the COVID-19 crisis became more significant in the U.S. as we ended the quarter.

During the quarter, OUP for our U.S. business decreased 44% to $13 million, excluding restructuring.

SG&A costs included $4 million of one-off items, including a bad debt charge and a state sales tax-related charge.

Excluding restructuring charges, OUP margin was 2.2%, a decrease of 160 basis points from the prior year.

Within the U.S., which now includes Right Management as part of Talent Solutions, the Manpower brand comprised 34% of gross profit during the quarter.

Revenue for the Manpower brand in the U.S. was down 5% in the quarter or down 12% when adjusted for billing days and franchise acquisitions.

The Experis brand in the U.S. comprised 33% of gross profit in the quarter.

Within Experis in the U.S., IT skills comprise approximately 70% of revenues.

During the quarter, our Experis revenues declined 1% from the prior year and after adjusting for billing days, this represented a decline of 3%.

Our Experis business in the U.S. has held up well during the COVID-19 crisis.

Talent Solutions in the U.S. contributed 34% of gross profit, experienced a 9% revenue increase in the quarter or a 7% increase on a days adjusted basis.

As indicated earlier, our RPO business has experienced significant client hiring freezes in late March into April as a result of the COVID-19 crisis.

On an overall basis, based on April activity to date, our U.S. business is experiencing a revenue decline of about 20%.

And that reflects the Manpower and Talent Solutions businesses are both down significantly in double digit declines, and the Experis business is in the mid-single digit decline.

It is uncertain when COVID-19-related restrictions will be lifted in different parts of the U.S. and how those developments will impact our revenue trends.

Our Mexico operation had flat revenue growth in the quarter in constant currency in the month of March and the month of March was in line with the quarter overall.

The business in Mexico performed well in the quarter in a difficult environment.

The government of Mexico issued lockdown requirements at the beginning of April, which is having an impact on our business.

During April, our Mexico business is currently experiencing percentage revenue declines in the mid- to high single digits.

The Mexico government has extended COVID-19 restrictions through May 30.

Revenue in Canada was up 9% in constant currency or 7% on a days adjusted basis, and this included a 3% revenue decline in the month of March.

We're very pleased with the performance of our Canada business as they continue to lead the market.

During April activity to date, Canada's current rate of revenue decline is in the low double-digit percentage range.

Canada has extended their COVID-19 restrictions through May 12 in large parts of the country.

Revenue growth in the other countries within Americas was up 10% in constant currency.

Southern Europe revenue comprised 42% of consolidated revenue in the quarter.

Revenue in Southern Europe came in at $1.9 billion, a decrease of 5% in constant currency.

OUP, including restructuring costs, equal $53 million.

Excluding restructuring costs, OUP decreased 26% from the prior year on constant currency, and OUP margin was down 100 basis points, driven by France and Italy as a result of the severe impacts of the COVID-19 crisis in March.

Of the $13 million of restructuring costs in the region, about 1/3 relates to Portugal, where we are significantly reducing our less profitable call center operations, 20% relates to Spain for front office centralization and organizational simplification and about 15% each relates to Italy and Switzerland for front office delivery changes, including branches and back office optimization.

And the balance primarily relates to simplification of our Israel and Eastern European operations.

France revenue comprised 56% of Southern Europe segment in the quarter, and was down 14% from the prior year in constant currency or down 15% on a days adjusted basis.

In March, France experienced a days adjusted constant currency decrease of 34%, driven by the government's declaration of a state of emergency mid-month.

During April activity to date, our business has been experiencing a year-over-year decline of approximately 65%.

OUP was $38 million, a decrease of 29% in constant currency, and OUP margin was down 70 basis points in constant currency at 3.5%.

We have taken significant actions in France to reduce our costs during this period of materially reduced activity.

We have moved about 1/4 to 1/3 of our full-time equivalents through government temporary unemployment programs and other initiatives and have cut virtually all discretionary spend.

These actions should reduce France's SG&A significantly in April as we manage through the crisis.

Improvement in the rate of revenue decline is dependent on the timing of the government's actions to ease the lockdown requirements.

As of today, France has announced that their COVID-19 restrictions will be extended through May 11.

Revenue in Italy equaled $328 million, representing a decrease of 5% in constant currency, which included a 17% days adjusted decline in March.

At the end of March, the government-imposed additional significant restrictions due to the crisis and April activity to date has been down approximately 20% to 25% year-over-year.

Permanent recruitment has been an important component of our Italy business and has declined materially during the crisis.

We experienced a 50% decline in permanent recruitment gross profit in March, and April activity to date is down approximately 70% year-over-year.

Excluding restructuring costs, OUP declined 28% in constant currency to $16 million, and OUP margin decreased 150 basis points to 4.8%, largely driven by lower gross profit margin on a lower perm contribution.

We have taken significant action in Italy to reduce costs during this crisis, which also involves moving FTEs onto temporary unemployment programs.

This, combined with the benefits of the restructuring actions, should allow our Italian business to significantly reduce their SG&A in April.

As of today, Italy's broader restrictions have been extended through May 3, and there may be some businesses opening before that date.

Revenue in Spain increased 4% on a days adjusted basis on constant currency from the prior year in the quarter, which includes a days adjusted decrease of 5% in March as the impact of the crisis took hold.

During April activity to date, Spain is currently operating at an estimated year-over-year revenue decline of about 25%.

Although Spain has recently eased certain work related restrictions, the government has announced they intend to extend their broader lockdown through May 9.

We acquired the remaining interest in our Manpower Switzerland franchise at the beginning of the second quarter last year.

This business represented 5% of Southern Europe's revenues and experienced trends similar to the other countries in the region due to the COVID-19 crisis.

Our Northern Europe segment comprised 23% of consolidated revenue in the quarter.

Revenue declined 8% in constant currency to $1.1 billion.

OUP, including restructuring costs, represented a loss of $14 million.

Excluding restructuring costs, OUP was $5 million, representing a decline of 72% in constant currency, and OUP margin was down 120 basis points.

The decline was driven by Germany, the Netherlands and Sweden.

Of the $20 million of restructuring costs, 2/3 relates to Germany, where we are taking significant actions to reduce finance and shared services back office costs, with the balance relating to the Nordics, the Netherlands and Belgium, where we continue to simplify our operations.

Our largest market in Northern Europe segment is the U.K., which represented 36% of segment revenue in the quarter.

During the quarter, U.K. revenues were flat in constant currency and down 2% on a days adjusted basis, which included a days adjusted decline of 6% in March.

In April activity to date, our U.K. business experienced an estimated year-over-year revenue decline of approximately 20%.

As of today, the [U.K.] (corrected by company after the call) government has imposed COVID-19 restrictions through at least May 7.

In Germany, revenues declined 15% on a constant currency basis or 16% on a days adjusted basis in the first quarter, which includes a days adjusted decline of 23% in March.

In April activity to date, we estimate a year-over-year revenue decline of 30% to 35%.

As Germany is a bench market, meaning our temporary workers are staffed as full-time employees, for which we absorb the cost of unutilized time and sickness, our ability to utilize government unemployment benefits for our bench associates and full-time equivalents is critical to being able to preserve gross profit margin and minimize operating losses in the current environment.

The German program is subject to certain conditions and is providing 60% of loss after tax wages due to the COVID-19 crisis.

We anticipate this program will allow us to avoid absorbing substantial levels of unutilized bench cost to preserve gross margin.

In addition to the restructuring actions I mentioned, the business is also taking significant SG&A actions to reduce the cost of running operations, also utilizing the government program, which is allowing us to reduce SG&A costs significantly in April.

Germany has announced they will start to gradually lift certain provisions of their lock down beginning May 4.

In the Nordics, revenues declined 11% on a days adjusted basis in constant currency, which includes a 15% decline in March.

The 2 primary businesses in the Nordics are Norway and Sweden, which are both bench model businesses.

During April activity to date, our Nordic businesses estimate a total revenue decline of approximately 20%.

Government programs for unemployment benefits for our bench associates and FTEs running the operations are also critical in these markets, and we expect this will allow us to minimize the impact of gross profit margin erosion and reduce SG&A significantly in Sweden and Norway during these steep declines in activity.

Revenue in the Netherlands decreased 18% in constant currency on a days adjusted basis during the first quarter, which includes a decline of 21% in March.

In April activity to date, we are currently experiencing a year-over-year revenue decline of 30%.

We previously mentioned new legislation increasing the cost of temporary work in the Netherlands effective at the beginning of the quarter and this did not appear to have a significant impact on our revenue trends as we experienced an improvement in the rate of revenue at the beginning of the first quarter.

Netherlands also has significant bench operations related to our Experis business, and current government programs will be utilized to compensate for wages pertaining to bench associates as well as our FTEs running operations.

Belgium experienced a days adjusted revenue decline of 15% in constant currency during the first quarter, which includes a decline of 30% in March.

During April activity to date, we are currently experiencing a year-over-year revenue decline of 45%.

Other markets in Northern Europe had a revenue increase of 6% in constant currency, primarily driven by January and February results and involved year-over-year growth in Poland and Ireland.

We expect these markets to experience a high single-digit revenue decline, approaching a double-digit decline in April.

The Asia Pacific Middle East segment comprises 13% of total company revenue.

In the quarter, revenue decreased 14% in constant currency to $595 million.

Adjusting for the deconsolidation of our Greater China operations, following their initial public offering in July 2019, this represented an organic constant currency revenue increase of 1% in the first quarter.

OUP, including restructuring costs, equals $17 million in the quarter.

Excluding restructuring costs, this represented a constant currency reduction in OUP of 21%.

And after adjusting for the Greater China deconsolidation, representing an organic constant currency OUP decline of 6%.

OUP margin decreased 30 basis points, excluding restructuring costs.

All of the restructuring costs of about $3 million involve Australia, where we continue to simplify the business after exiting certain low-margin clients.

Revenue growth in Japan was up 8% on constant currency basis during the quarter, which includes a days adjusted revenue increase of 6% in March.

The government of Japan initiated more restrictive COVID-19 measures in April in Tokyo and other large districts, which will be in place through May.

In April activity to date, we are experiencing a year-over-year revenue in the low single-digit percentage range, but this trend could be negatively impacted as a result of the recent restrictions.

Revenues in Australia declined 22% in constant currency adjusted for billing days and includes a decline of 31% in March as the COVID-19 crisis took hold.

In April activity to date, we are currently experiencing a year-over-year revenue decline of 30%.

Revenue in other markets in Asia Pacific Middle East were down 26% in constant currency.

And adjusting for dispositions, this represented a 7% growth rate.

The largest market in the group includes our India business, which is experiencing double-digit revenue declines in April as the country has imposed various COVID-19 restrictions.

We estimate that other markets overall will experience double-digit revenue declines in April.

As Jonas mentioned previously, our business is impacted significantly by the COVID-19 restrictions in place in the markets in which we operate.

We cannot forecast when and to what extent these restrictions will be lifted throughout the world or the change in demand for our services as restrictions are lifted.

And as a result, we cannot forecast our second quarter earnings and will not be providing guidance.

I will cover a couple of quick administrative items.

The impact of net dispositions in Q2 represents a year-over-year net revenue reduction of about $100 million in the second quarter, largely representing the deconsolidation of Greater China for one last full quarter.

As I mentioned, the French business tax, which is recorded as income tax expense for U.S. GAAP, will have an impact on our tax rate in 2020 as it is based on revenues and not earnings.

We estimate that our weighted average shares to be 58.5 million, reflecting share repurchases through March 31.

In summary, as we manage a very difficult environment during the second quarter, we are taking significant actions to scale back our SG&A to respond to the immediate significant gross profit reduction.

We entered this environment with significant liquidity and balance sheet strength and are laser-focused on optimizing cash flow through strong collections and balance sheet management activity in the second quarter.

Although we have outlined the significant immediate actions we are taking, we are also continuing to move our strategic programs forward.

We believe this will allow us to capitalize on new business opportunities when we enter a recovery phase and will make us a stronger, more efficient and more productive enterprise.

With that, I'd like to turn it back to Jonas.

Thank you, Jack.

As we mentioned earlier, we're taking actions to maintain margins through GP preservation programs and SG&A reductions to preserve operating profit margin to the greatest degree in the short term, while keeping our operational and financial strength positioned to rebound when market conditions improve.

We believe we have an opportunity to accelerate our strategies in several areas in the short term with the intent to emerge stronger and better positioned in the market over the long term.

As we manage through this crisis and prepare the business for future opportunities, I'd like to emphasize the following points.

First, our #1 priority is to support our clients, candidates and employees through this difficult health care and economic crisis.

As a global leader in workforce solutions, we can provide our clients with customized solutions as they continue to adjust their workforce during the crisis and prepare for the recovery and help our candidates navigate a turbulent labor market, finding new opportunities and acquiring new skill sets.

Our employees will go above and beyond to achieve these objectives, and we will provide the necessary tools processes and learning opportunities to ensure we help them to fulfill this mission.

Second, we have a leadership team with deep experience in managing through significant downturns, and this is certainly the case in key markets where many of our operational leaders have previously managed the business through the Great Recession.

This experience, together with our additional capability in technology and innovation, will allow us to identify and capitalize on new opportunities as they emerge.

We will also be well positioned to respond to industry rebounds, and I believe this is a competitive advantage as we manage through this crisis.

Third, we're leveraging our diversification.

Different from the last recession, we now have a larger portion of our business dedicated to professional services and Talent Solutions.

We've seen much smaller declines within our Experis business compared to the Manpower business.

Our investment in the growth of this business is serving as well as it has been more resilient to the sudden changes in the global work environment.

Additionally, portions of our Talent Solutions business are focused on helping our clients through this downturn with customized solutions.

Although we've seen a decline in hiring activity from some of our major RPO clients, as expected in the current environment, we are also finding selective opportunities elsewhere.

Right Management hasn't yet seen a significant uptick in outplacement activity, which we take as an indication that our clients are uncertain as to the duration of this downturn.

And finally, we will continue to optimize our operations as we focus on improving our structural efficiency.

We're continuing our transformational journey to take out costs out of our back office and our delivery models, which is reflected by our first quarter restructuring actions.

We also continue to invest in digital tools to position ourselves for both efficiency and growth.

As we continue these transformational activities, we're also taking the needed short-term actions in light of the COVID-19 crisis and are cutting discretionary costs and scaling operations back, as needed.

This also includes our executive officers and other senior global leaders as well as our Board of Directors, leading the way by reducing their own compensation.

We are focused on managing costs as efficiently as possible in the short term, while ensuring we continue to progress transformational actions, which will allow us to accelerate our strategic priorities and emerge stronger on the other side of the pandemic when the economy shifts back to growth.

And these are some of the reasons why I'm very confident that we will be able to manage the significant short-term challenges while keeping our long-term strategic objectives and opportunities firmly in sight and allow us to emerge stronger when this crisis passes.

I would now like to open the call for Q&A.

Eunice, we're ready for the questions.

(Operator Instructions)

Our first question is from the line of Andrew Steinerman of JPMorgan.

This is Michael Cho on for Andrew.

My first question is, as we think about the restructuring costs, in the quarter, I guess if this downturn is prolonged, how should we think about areas for more cost actions in the future?

Michael, this is Jack.

I think on the restructuring costs, as we talked about, we'll start to see those savings fully ramp-up in the third quarter.

We'll be pretty close, I think, probably about 80% of the run rate effect in the third quarter.

So we will start to see some immediate impact on that, in addition to all the other actions that we've talked about.

But I would say we definitely have more opportunity to continue to take out costs from the organization.

I think what you've seen us do in phases is take out back-office costs in different regions.

And we've done that in a very significant way in North America, and we continue to do that based on the restructuring actions we've just announced.

And we're doing that more significantly in Europe at the moment, and we're doing that in Germany, as we talked about in our prepared remarks.

So I would say, as we continue to optimize our organization, these type of programs will continue to be rolled out to other large markets, and there's further opportunity as we move ahead.

So I think you should expect that, that is clearly one of the key levers we're going to continue to pull, is ongoing optimization.

At the moment, we're dealing with very short-term actions that we've talked about to immediately take SG&A down as a result of the crisis, but we are continuing to move forward our strategic programs and we haven't stopped those.

And so we will continue to move forward our transformation programs, which includes taking out back-office costs.

Great.

If I could just squeeze one more in.

You gave some great color around trends through April.

And I guess I'm particularly thinking about Europe and the U.S., but there are temps at work today in April, despite the broad government shutdowns, is there any reason to think that they won't remain with clients in the near-term as the downturn is prolonged?

No, I'd say what we're seeing now, and I think we talked about in our prepared remarks where we are seeing some growth opportunities, particularly food and consumer goods are an area where we continue to see good activity; logistics; transportation, we continue to see good activity.

And there are parts of manufacturing related to those segments that are continuing to be quite strong.

So I think what we've seen is our model is working for a lot of our clients, continues to be an important part of their workforce, and we don't see that changing.

I think if anything, as we emerge from this crisis, I think we'll start to see an increase.

And I think a lot of employers will continue to see the benefits of temporary staffing on their business models as a result of this crisis and as we continue to emerge from it.

So I don't see -- there is a lot of core underlying work continuing, to your point, and I don't see that changing.

The next question is from the line of Hamzah Mazari of Jefferies.

This is Ryan Gunning on for Hamzah.

Just real quick, could you update us on any regulatory changes you're seeing upcoming in the business you're tracking across the various regions?

Yes.

Maybe, Hamzah or rather, Ryan, the regulation changes that we've talked about were, be it prior was really around Japan as well as the Netherlands.

And in the case of Netherlands, as Jack mentioned in his prepared remarks, we've not really seen an impact to the business as far as those regulations were concerned.

And also in Japan, so far, at least, we are seeing no material impact to the Equal Pay legislation that was introduced earlier this year.

So I think both of those are really something that we don't expect to see any major business impact from.

Okay.

Great.

And just a quick follow-up.

Could you just talk a little bit about how the Man business today is different versus 2009 recession?

And alongside that, any thoughts in general, how you're thinking about your downturn playbook in -- during this pandemic?

Yes.

So stepping back and thinking about how this evolved compared to the 2008-2009 recession, of course, this is very different, both in terms of why it's occurred.

It's a health care crisis first.

And the speed and magnitude of the change that happened in waves across different parts of the world was really -- is very, very different from what we've experienced in the 2008-2009 recession.

As it relates to us, what we've really seen is we were able to very quickly adapt to remote working, which, of course, helps when it's a health care crisis, and we have to practice social distancing.

Our business mix is much stronger today than it was in the last recession.

Experis today is 23% of our business.

And back into '08, it was 14%.

Our Solutions business was only 4% in '08, and it's now 11%, excluding Right Management.

We also have a lower percentage of fixed SG&A than we did in the last recession.

And taking as an example, we had 4,500 physical branches in 2008, and now we have less than 2,500.

And we've really been able to move, thanks to the technology investments that we've made, a whole lot of activity online, which should help us in terms of moving this to a more flexible cost structure.

And finally, we also went through a simplification initiative in 2012 and 2013 to really lower -- structurally lower our cost base as well.

So it is in terms of our preparedness, essentially allows us to be more flexible in cost.

We have more technology impacting the business and we're able to adjust and adapt much quicker to a changing environment than we would have been in 2008 and 2009.

And I would just add, as we mentioned in our prepared remarks, the one other item that's very different now is the strength of the government programs in the very immediate term, so we are much better to leverage those.

So to Jonas' point, this has moved much faster than it did in the last big downturn.

And as a result, the governments have responded with bigger programs in the immediate term.

So we are better able to leverage those programs now, which wouldn't have existed to the same degree previously.

The next question is from the line of Jeff Silber of BMO Capital Markets.

Really appreciate the color in March and April by the different regions.

I think you mentioned that France was down 65% in April to date.

I just want to confirm that.

And if so, why is that country doing so much worse than some of the other countries you're in?

Yes, that's correct.

So that is the run rate we're seeing in April in France.

And before I answer your question around why, and it's, of course, our view as we look across the world, and we see the different levels of lockdowns occurring, I should say that for France, and that is true also across Europe, the effects of the lockdown appeared to have stabilized across Europe.

So what we're seeing in France today is roughly what we saw a few weeks ago, and that's true across all of Europe as well.

So the reaction to -- by the market and to our business volumes appears have stabilized in Europe.

As to your question as to what and why is France so much deeper than most of the other markets?

France implemented the strongest lockdowns that we've seen across Europe on March 16.

And there are a few things that are different in France.

You have very strong union representation, number one.

The President, President Macron said that we will lock the country down at whatever it may cost.

And that means from an employer perspective and an employee perspective, they're essentially being held hold by the French government for the duration of the lockdown.

And third, all of those programs that were in place -- were put in place were known by the 16th of March.

In many of the other countries, the lockdown was established, and then it took a number of weeks for companies to know how they would be compensated and what rules were in place for the employee support programs that Jack mentioned.

In France, this was all established from the very beginning.

And essentially, in terms of the workers, they are covered virtually to 100% of lost income for the duration of the lockdown.

And companies are also getting support activity.

So I think it's a combination of the severity of the lockdown, the massive financial support program and the fact that they were very transparent and knew what those support programs were that essentially shut the country down within the course of 48 hours, which was something, of course, that we've never experienced before.

So if you take this in equivalent terms to the U.S., it would be the same as having roughly 70 million to 80 million people not working and out of the workforce, because that's roughly the percentage of workers that are today on the temporary unemployment programs in France.

So 50% of private employment today is subject to these programs.

So the numbers were massive, and all of it happened within 36 to 48 hours.

That was very helpful.

I really appreciate that.

Switching gears, Jonas, I think in your prepared remarks at the beginning, you talked about maybe some of the lessons that you learned in APME since the crisis started a little bit earlier there.

Can you give us some color what you learned?

And I know in China, because of the deconsolidation, you may not be as privy to the issues there, but I'm wondering if we're seeing any green shoots in China in your business?

Well, I'll start with your last part first.

In China, since we've deconsolidated and we IPO-ed the business in the summer of last year, we don't really have any operational insights, and the last earnings release came out covering the period towards the end of 2019.

So they'll be releasing results later on.

So we don't really have operational insights other than what you can read from the papers of what's happening in China.

But in terms of the lessons learned in APME was really going through our business continuity process and starting to ramp up all of the measures we will take to protect the business, both in terms of remote working as well as the safe working for those that were not able to work remotely and really just establish our processes because we expected that the waves starting in Asia would make it to Europe, as they did, and then they would move from Europe to North America and subsequently to Latin America.

So our business has really benefited from the global visibility of what we needed to prepare for.

So whilst the changes in France were very, very sudden and the change in Italy and Spain, a little bit less sudden but still very quick over the arc of 2 weeks, we had processing in place as a company, both from a technology perspective, from a business continuity perspective, from a employee safety and health and well-being perspective that we could activate and in some cases, already anticipate.

And that's been very helpful in our ability to adapt to this rapidly changing environment very, very quickly.

And our next question is from the line of Seth Weber of RBC Capital Market.

Question on the Experis margin was better than kind of what we would have expected.

Do you think that, that is -- is there -- is that sustainable that you can continue to outperform on the gross margin side on Experis?

Or is there just some sort of lag effect there that you think will -- that will soften more going forward?

Yes, I would say that if you step back, generally speaking, all of our businesses were performing to expectations up until the middle of March.

Manpower is facing the headwinds we had anticipated as it relates to the slowdown in global manufacturing, but Experis was showing very -- was showing good growth, and our Talent Solutions business was showing very strong growth.

But the Experis business, as we would expect, holds up better because the projects are of a longer-term nature.

The skill sets remain very -- in very high demand and technology is going to be a sector that after -- before the pandemic and after the pandemic is going to be a very good sector to be in.

And our margin profile in the Experis business is stronger than what we have in the Manpower business.

Now having said all of that, of course, you saw a delayed action in some of the cases and most of the downturn we saw in the Experis business would be occurring in the bench markets that we have in Germany and in the Netherlands in Europe.

For the first quarter, we really didn't see much of a change in Experis in the rest of the world.

And now, of course, as Jack talked about in his prepared remarks, we are starting to see some of that come through.

But there are of the much smaller nature than we would see in Manpower.

But we do expect to see some softening in the Experis business as a whole.

But we continue to feel really good about our positioning overall and the opportunity for profitable growth in -- when growth returns for the Experis business.

Okay.

And then maybe, Jack, in your prepared remarks, you mentioned something about earlier termination of contracts.

Is there any more color around that, just whether it's sizing?

Just how the mechanics of that will look?

Anything you could add to sort of flesh that out.

Yes.

No, I would say, Seth, on that, really, was getting out at the very end of March when some of the contracts, typically with some of the staffing contracts, they're shorter terms.

And commonly they will end at the end of the month, end of a quarter.

So we had a lot of contracts maturing at the end of March.

So as we worked with our clients, and Jonas mentioned what was happening in France and France was a piece of this, we had to work with our clients on early termination of those contracts, which meant looking at the associates on assignment and ensuring that they were going to get paid through the end of a contract and some specifics and those type of items.

So as a result of that, we ended up absorbing a little bit more direct cost than we normally would have.

I would say that's isolated to March because it really was dealing with what was happening with those contracts mid-month.

A lot of those contracts have been reset at the beginning of April.

So I wouldn't anticipate that, that's going to be an ongoing issue for the second quarter.

It was really trying to get at we were experiencing a bit more direct cost and absorbing a bit more cost as we unraveled some of that activity at the very end of March.

We also had the impact of our bench countries.

I would say that's a bit different.

That's where we had a bit more unutilized time and higher degrees of absenteeism and sickness, which we absorb as part of that.

But as we mentioned, the good news is we're able to leverage some of those government programs beginning in April.

So we wouldn't expect to have that same degree at the end of March that we will have in April.

And the next question is from the line of Mark Marcon of Baird.

Great.

I was wondering if you could just -- first, what are your capital allocation priorities?

And specifically, how are you thinking about the dividend?

Yes.

So Mark, I'd say, our capital allocation strategy remains consistent, and we've been pretty clear on that in the past.

So the dividend has been a priority for us in the past, and we continue to rank that very high on the list.

If we look at excess cash beyond that, we tend to look at whether there's an acquisition that needs cash.

If that's the case, we will devote excess cash to that.

If there isn't an acquisition and there haven't been any very, very significant acquisitions for us, then excess cash has been returned through share repurchases.

Now with that being said, we don't preannounce share repurchase activity.

You can see we did -- we were active in the first quarter.

But we also said, at this time, we're very focused on a very strong -- preserving a very strong balance sheet as we get through the second quarter.

On the dividend specifically, Mark, that is typically an action that we review with our Board at our May Board meeting.

So after that meeting, we have an announcement on the dividend for the next 12 months, and we will wait to review that with our Board in May, and we'll make an announcement after that meeting.

Okay, great.

And then you gave really good color in terms of what you're seeing thus far in April.

Some of the lockdowns are going to be coming off.

I'm wondering how are you thinking about what the magnitude of the rebound is going to end up being when the lockdowns come off, particularly, any sort of experiences or color that you're getting from your clients in some of the markets where either it's happened, such as in China or markets that are just at the early stages, like Austria or Germany is talking about it for -- in the very near future.

What's the discussion like?

What's the expectation in terms of the rebound?

Well, Mark, it's a great question, and it's very hard to tell.

And the reason it's hard to tell is at this point, as we mentioned, we don't really have much operational insight into the China rebound, more than what you read about various industries coming back in China.

And I don't know that China is a good proxy for the rest of the world.

What I can say, though, is that we are relatively pleased in terms of -- we're not pleased with the lockdown effects, of course, in our business, but we are pleased to see that across Europe, the trend has stabilized at the levels that Jack described.

So we would expect, once the lockdowns open up, that, that trend will improve.

Now the difficulty in predicting how that improvement will take shape, is the lack of specificity and the lack of clarity on part of the governments on which sectors are opening up, what is the essential, what is nonessential and how that all plays out in the various countries.

And frankly, the Austrian opening up or Denmark opening up is still -- it's still too early to see any meaningful trend that we can extrapolate.

And that's why, in summary, it's so hard for us to predict where it's coming back.

But of course, what we expect to see, so we've seen stabilization in Europe, which is a good starting point.

And when the lockdowns come off, we would expect to see improvement in those trends.

The degree and the momentum of which is very difficult to guess at this point, just as we couldn't guess that the French market would drop down to 65% in the course of 48 hours.

So we'll monitor that, of course, very carefully.

We would expect North America to lag Europe in terms of the stabilization by another couple of weeks, 2 to 3 weeks maybe.

And then so towards the beginning of May, that activity should be, if it plays out the way it has in Europe, that should be the next starting point for us to think about the improvement in trends as the lockdown eases in the U.S. as well as in Canada.

And then followed by Latin America, which is the last wave where we have business -- significant businesses.

And they will probably be seeing something stabilize towards the mid-May, maybe towards the end of May.

So it's very dependent on how the government is planning to release it.

Now we are expecting it to be gradual.

So I don't think it's going to be the reverse of the French shutdown starting up again.

But it is clear that there is a desire for many governments to ease the economic pain that follows the health crisis.

And the good news is the health crisis in many parts of the world now appears to be under controlled or more manageable, which means we can now put our focus and attention to averting or softening the effects of an economic crisis.

And as we would expect to be in the forefront of that based on our industry, and Jack talked about, if you ever needed a reminder of why operational and strategic flexibility is important, this pandemic clearly illustrates that to many of our client companies.

So we're going to be watching.

And of course, as we talked about also in our prepared remarks, we've been very careful in terms of we've taken significant actions in Q1, but especially also in Q2.

But all the while preserving our ability to rebound when demand improves and so we can respond to our client needs at that time.

So we've been very careful in making sure that we balance the short term by maintaining our ability to take advantage of the market when it improves.

Great.

And then just wondering, with regards to the U.S. How do you think the widespread use of furloughs is going to impact kind of the demand for temporary staff when things eventually start rebounding?

It's hard to tell.

I mean the furloughs in the U.S. are really -- it's a very different mechanism, but the aim of the furlough mechanism and the support, the PPP support programs and others are very similar to what all of the European governments and other governments in Asia are trying to achieve, which is lessen the economic crisis by making the pain of unemployment not felt by the employees, so that when the economy starts to come back that they haven't had a material reduction in their purchasing power to the greatest degree possible.

So one would expect that, of course, those employees are going to be coming back.

But by the same token, the ability to flex the workforce is going to be important, if not more important going forward as well.

So we would expect this to look similar after the economy starts to gain traction again, that this would play out in a similar way to what we've seen in past recessions.

And our next question is from the line of Gary Bisbee of Bank of America.

This is Jay Hanna on for Gary this morning.

Just to get a little more granular on the, I guess, the differentiation in market performance.

All the insight you gave on France was great, but to be expecting a 65% decline in April versus just, I believe, you said 20% to 25% in Italy in April.

I mean that seems like a pretty big difference, particularly as it seems like Italy was maybe even hit a little bit harder, and that goes for Spain as well just a 25% decline.

So what's like really driving that gap there?

Well, Jay, if you look at how the government implemented the lockdowns, it was a social lockdown, was announced early.

But for all intents or purposes, companies could still operate reasonably unimpeded, except some sectors up until probably the last week of March in Italy and following on with Spain really starting in April.

So there was a lot of social distancing and evidence sector, certain high contact sectors like hospitality and restaurants and hotels and all of those were impacted early on.

But a lot of the businesses that we serve continue to operate well -- further into March.

And that's one of the reasons why you're seeing a smaller effect in Italy and in Spain.

But as I mentioned earlier in our Q&A, the very severe impact in France is, I think, unique to France due to the severity and the speed of the lockdown, the very transparent employer and employee support programs that were well-known and strong union influence those are a number of factors that made France's reaction come on faster and go deeper.

So France is really a bit of an outlier at this point.

So those would be the reasons that I think you can think of there being a difference between Italy, Spain and France, for instance.

That otherwise, have reasonably similar labor market structures.

Okay.

And then, obviously, it seems like Experis has held in there a little bit better.

Have you seen any meaningful success, I guess, in the other lines with temps working remotely?

Yes.

We've had customers also within Manpower as well as on our Talent Solutions business, where we are able to run parts of that business remotely with remote recruiters, engaging with clients and all of that is really thanks to some of the technology investments we've made over a number of years.

And we think that this pandemic and actual effect is going to accelerate and give us more flexibility in how we deploy technology, not only how to run our own internal operations, but how we support our clients and how we engage with candidates.

And I think you're seeing that on the Experis side, but we've also on the Talent Solutions side and in some cases, also on the Manpower side.

Yes.

And I would just add, Jonas.

Within Talent Solutions, MSP has been holding up fairly well so far, too.

So obviously, that's going to depend on what happens next with some of the restrictions and so forth in the U.S. But MSP so far through mid-March has been actually holding up well.

The next question is from the line of Ryan Leonard of Barclays.

Yes.

I was just curious, as you look out the -- I think you walked through some of the rationale for, I guess, not providing official guidance, even though you gave a lot of detail on the trends.

I mean, is it safe to say that the trends you've seen in April, are your expectations for the worst case?

Or is there still a number of enough uncertainty out there that you don't really want to put numbers out there until you have a better sense of how these different countries start to recover?

Yes.

So I would say the trends for April, clearly, based on what Jonas was giving some color to in terms of what we're seeing in Europe.

We have seen consistent levels.

At these lower levels, they've been consistent the last couple of weeks here in April, where we see really the height of the restrictions in place in many of those countries.

So the question will be, to the extent that does the U.S. see some additional pressure, we're not sure.

I think Jonas mentioned that the U.S. is behind a couple of weeks from what we saw in Europe.

It could be that the U.S. ends up very consistent for the rest of the restriction period at the levels we're seeing right now.

We just don't know that for sure.

So is April a pretty good view of what will be kind of the low point for the quarter?

Very likely, but it's just really hard to say at this point.

So for that reason, we wanted to be very transparent in what we were seeing in April.

It really is going to be -- the quarter overall is going to be dependent on the impact of the restrictions being lifted and how that impacts the demand for our services immediately upon those restrictions being eased.

So that's what we can't predict at this stage, and that's why we provided all that color on April.

Got it.

That's helpful.

And then just on the U. S. Experis business, down mid-single digit in April was -- it's relatively stable.

Is that the nature of existing contracts that are already ongoing?

Or is -- maybe can you comment on like new business trends that you're seeing there, just to help kind of understand what's like the lagging versus the leading indicator?

Yes.

I would say it's a mix.

But I'd say largely, it's a continuation of our business and our strategy in the U.S. I think what we've talked about the last couple of quarters is our convenience business has been very, very strong in the U.S., and that's actually contributed to GP margin increase in the last few quarters, and that continues.

So the Experis business, as we mentioned, was down about 3% days adjusted in the first quarter.

And it's only come off very slightly so far at the minus 5% or so here in April.

So it's holding up well, and that's largely due to the existing clients we continue to serve.

But there actually have been wins in there as well.

And we've had wins in April that are part of that as well, which have helped offset some replenishment of other business.

So no, we feel good about that.

And we also mentioned that U.K. was flat in the quarter overall as well.

So the U.K. will likely see some pressure, As we mentioned in the U.K. overall, we expect to see declines in April.

But I would say, Experis specific to the U.S., where your question was, it's a bit of both, and there have been some wins as part of that in April.

And our next question is from the line of George Tong of Goldman Sachs.

This is Blake on for George.

It sounds like labor strikes and the discussion of reforms have taken a bit of a back seat in France to the lockdowns.

What are your expectations for discussion of labor reforms and strikes in France going forward once the labor market starts to pick up and we see more activity in France?

Well, as you might recall, the pension reform at this point has been passed.

So that's already the new law.

And those were the main -- that was the main reason for the strikes.

And of course, the French labor market is always evolving with various initiatives.

So there's nothing on the horizon that would say that we would know about further labor market tension coming in, in France since the pension legislation has been passed by their parliament.

So that being said, there is nothing we know of today, but that can, of course, certainly change.

But overall, as we mentioned at our fourth quarter earnings call, whilst there were some strikes, the overall impact was reasonably limited at the time, and I think they've moved beyond that at this point in time.

So France continues to work on their labor market reforms.

But as it relates to our business, what we can see and the things and the changes that have been made are, by and large, favorable to our industry.

And we don't see any of those new legislations or reforms being reversed at this point.

Got it.

That's helpful.

And then it looks like in 4Q, we had seen some improving trends in bill pay spread pretty broadly across your businesses.

How do you see bill pay spreads evolving as labor markets absorb this sudden shock and in sectors gradually reopened?

Just curious, what kind of trends you're expecting in terms of bill pay spreads?

What I would say, we were pleased to see that our staffing margin continued to improve in the first quarter, even though we were in this kind of environment.

So that tells us that our underlying pay bill spread is looking good.

And I would also, as an overall comment, say that the changes that we're seeing in staffing GP as well as overall GP today are all related to business mix changes as well as the changes that are occurring because of the COVID-19 pandemic.

They're not due to any price pressures that we're seeing.

So I think fundamentally, what we had before, which was a good market and our ability to fairly price for the skills that our customers are looking for continued, and we were pleased to see that, that continued all the way through the first quarter.

So there's not been really any change to that view.

Next question is from the line of Tobey Sommer of SunTrust.

I was wondering if you could comment on the scope of potential acquisitions as we come out of this, and the areas of interest to the firm as you kind of see the experience in the Experis P&L versus the core Manpower brand and the rest of the business?

Because you did come out pretty aggressively after the last downturn.

Well, as Jack mentioned, our capital allocation, our strategy hasn't really changed.

So as we focus on organic growth, but should we consider acquisitions, we are very careful and -- but should we consider acquisitions, they would be in the area of Experis and Talent Solutions, so they would not be in the area of Manpower unless it relates to franchise acquisitions.

And we are very careful on acquisitions in our industry, making sure that not only is it a good business, but it's a good strategic fit, it also has to be a very strong and good cultural fit so that we ensure we can retain the key talent within any business that we would be looking at.

So our strategy and approach hasn't really changed.

And in the RPO business, have there been any surprises in the performance?

And how do you see that evolving in this environment?

I think we saw some very good evolution in the fourth quarter, and that strength carried on very nicely into the first quarter as well until the pandemic hit.

And then as you would expect, the number of our clients that were in sectors that were exposed in first lines, such as airlines and other businesses in that particular case -- in those cases, they pulled back pretty strongly.

And that's what we're seeing reflected in our activity right now.

But the good news is none of those clients have left us.

These are programs.

That's why they work with us.

We provide the strategic and operational flexibility for them.

And when their business picks up again, we would expect to see a strong rebound also on the RPO side in those sectors that were affected.

But of course, we're also doing business in many sectors that aren't affected.

And as we talked about, in our prepared remarks, we are seeing those -- some of those sectors actually be beneficial to our RPO business in the U.S. as well as elsewhere in the world.

And that brings us to the close of our first quarter earnings call.

Thank you for participating today, and we look forward to speaking with you all again at our second quarter earnings call in July.

Thanks, and have a good rest of the day.

Thank you, speakers.

And this does conclude today's conference call.

Thank you all for participating.

You may disconnect now.