ManpowerGroup Inc. (MAN) Q3 2012 Earnings Report, Transcript and Summary

Welcome to the Manpower Third Quarter Earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. To ask a question, you may press star, one. I would now like to turn the meeting over to your host for today’s conference. Mr. Joerres, you may begin.

Good morning and welcome to the third quarter 2012 conference call. With me today is Mike Van Handel, our Chief Financial Officer. I’ll go through the high-level results for the quarter; Mike will then spend some time on the segment detail as well as the balance sheet and our outlook for the fourth quarter. I’ll do some wrap-up comments and then of course we’ll open it up for questions. Before we move into the call, I’d like to have Mike read the Safe Harbor language.

Good morning everyone. This conference call includes forward-looking statements which are subject to risks and uncertainties. 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. Jeff?

Thanks Mike. The third quarter was about what we expected from a revenue standpoint, with revenue coming in at $5.2 billion, down 4% in constant currency, right in the middle of our forecast range. As anticipated, we saw declining trends throughout the quarter in three of our five segments: the Americas, southern Europe and northern Europe. Asia Pacific was flat with prior year and Right is showing an improving growth trend. Earnings per share came in above expectations at $0.79 per share with the help of higher gross margin and strong expense management. Our operating profit was 119 million, a decline of 25% or 19% in constant currency. The operating profit margin declined 40 basis points to 2.3% as a result of SG&A expense de-leveraging from the contracting revenues. We clearly have more work to do in the area of gross profit and expenses as we look at the economic landscape throughout the world. We are acting on the premise that we are entering a prolonged period of soft economic conditions, and as a result we will need to take appropriate adjustments on our expenses and continue to drive more efficient ways to deliver the core parts of our service. With that, I’d like to turn it over to Mike Van Handel.

Thanks Jeff. As Jeff mentioned, revenue was in line with our forecast for the quarter, down 4% in constant currency or 3% in constant currency on an average daily basis. Earnings per share, however, was much stronger, coming in at $0.79 versus $0.68 at the midpoint of our guidance. Three cents of this outperformance can be attributed to stronger operational performance as our gross profit margin exceeded our expectations and was slightly ahead of prior year. One penny is due to lower other expense, $0.05 is due to the lower than expected tax rate, and the final $0.02 is due to currency exchange rates. We were expecting a negative currency impact of $0.08 per share and it turned out to be a negative $0.06 per share as the euro strengthened during the quarter. Our gross profit margin for the quarter was 16.6%, which was slightly above our forecast and the prior year. Our gross profit margin on temporary recruitment declined 20 basis points year-on-year, but this was offset by the favorable impact of growth in our higher margin Manpower Group Solution and Right Management outplacement services. Changing currency rates on the underlying gross profit amounts also favorably impacted gross margin by 10 basis points. Included in the temporary recruitment decline is 10 basis points of decline related to changes in business mix as some of our lower margin business grew faster than our higher margin business. While the staffing markets continue to be price competitive, we have witnessed a stabilization in the gross margin decline in several markets. Gross profit from permanent recruitment fees was down 7% year-on-year in U.S. dollars or 2% in constant currency. During the quarter, we saw permanent recruitment fees in Europe contract while permanent recruitment fees in the Americas were up 13%. On a global…

Thanks Mike. The third quarter was, as I said, in many respects very much in line with what we had anticipated – revenue down approximately 4%, gross margin up slightly, and expenses well controlled with operating profit percent coming in at 2.3%. We were able to at the same time manage not only field expenses but corporate expenses in a very aggressive way, which created an additional positive effect. The quarter, of course, was not without challenge. As we looked at several of the markets going into the third quarter, we knew we would be challenged and we have been. Revenue moving down 4% from being basically flat in the second quarter does put pressure on profitability. However, this slowing has been gradual and in some cases it has at this time begun to plateau. This is what we had talked about in previous conference calls. This is extremely different than what we saw in 2008 leading up to 2009, which is when we had some very dramatic drop-offs in revenue month-over-month, and in some cases it was even week-over-week. We have not experienced, though that of course could still happen. At this time, we do not see that occurring in the fourth quarter as both of our largest operations – the U.S. and France – at this time with the visibility that we have gives us confidence in being able to achieve our fourth quarter estimates. While we are enthusiastic and confident about our future, we are at the same time also and must be very pragmatic. The hand that we are holding is very different than what it was six months ago, and even for that matter 12 months ago. We are not looking at a catapult out on the other side of this downturn like we’ve seen…

Thank you. [Operator instructions] John Healey, your line is open. John Healey – Northcoast Research: Sorry about that, I had you on mute. Sorry. I wanted to ask about the Right Management business a bit. It looks like you guys are calling for 6 to 8% revenue growth, and it looks like it’s all constant currency. Was a little bit surprised that maybe there wasn’t a bit more growth maybe coming outside of the U.S. for that business. Hoping you could refresh us on the mix of that business, domestic versus international, and maybe what you’re hearing from your large customers as it relates to that business unit.

Okay, thanks John. You did see Right go from basically 3% to 6.5% increase in revenue from second quarter to the third quarter. We do see that the U.S. companies tend to be a bit more aggressive earlier in how they can downsize. We’re also not calling for massive downsizing because we do believe companies are still fairly lean, but given the economic backdrop, we think that they really will go after it. So we’re seeing most of that occur in the U.S. It takes longer to sometimes formulate those plans through some forms of social plans in Europe, so our mix of business is still skewed towards the U.S., particularly on the career management side. Mike, I don’t know if you have the exact number, but I know we’re running probably around 50% of our business, if not more, coming out of the U.S. on career transition.

Yeah, a little bit more than that – probably closer to 60% on career transition, so a little bit more skewed towards career transition. And overall, the mix would be about 70% career transition, about 30% talent management; and of course, the talent management is the discretionary spend and we are seeing companies be a bit more hesitant. The sales cycles are going out longer, so we are seeing things slow a little bit on that side while the outplacement side, which we said earlier, was up about 18%. So we are seeing that tick up a little bit as companies pull back a bit.

Right. And because this is a little bit different of a soft patch this time than what I would consider a real down, we are still seeing wins in the talent management area, and interestingly a fair amount of them in Europe and fairly large wins in the context of a talent management. So there’s a bit of schizophrenia out there as I think would be anticipated, given that the environment is some uncertainty, but things are still kind of holding in there. John Healey – Northcoast Research: Got you. And I wanted to ask about the restructuring a bit. I feel like when any company talks about restructuring, the immediate reaction is things are bad in the business or the outlook’s bleak. But when I hear you guys describe it, I think you used the phrase agility initiative, and spending time with you guys in the past I’ve always felt like that there was a phase that you were going to enter where maybe you looked at the branch network and the go-to-market strategy and tried to become a bit more nimble. Is it fair to say that some of this restructuring and recalibration approach to the market is strategic and has nothing to do necessarily with the current economic environment that we’re in, and this was probably a part of your game plan altogether? I’m just trying to understand the initiatives and just trying to understand the thought process a bit more.

Sure, good question. I mean, no doubt as I stated in some of the prepared remarks, our strategy is still intact but we’re going to want to make some different roads, maybe, to get to the end of game. So we had been positioning, and many of you who have listened to us for while, positioning what we are doing with national sourcing centers, what we’re doing in trying to really take and to our branding strategy look at Manpower, and how do you deliver that in a much more efficient way, in a kind of transactional commodity way where some of the Experis things—there’s a little part of that, and then there are some of the rare candidates. So when you look at the simplifying and the efficient delivery models, we have been working on this for about two years and we would have anticipated driving some of this into the organization. Now, having said that, we are looking for not a normal recovery, meaning as I had said, there’s not going to be a catapult out. If you look at 2010, we were running 20 to 25% constant currency growth for a little while. We don’t see that, and what we want to be able to do is to bring our leverage point where it might have bee leverage at 15 or 18%. What if you get 8% and you’re able to get your cost basis, your delivery system to get that same kind of leverage at 8 that you might have gotten at mid-teen? And those are the things that we’re working on that were in our plans, but we’re going to be accelerating them and accelerating them quite rapidly because we do see some challenges in Europe; and frankly the U.S., while still doing well relative to the rest of the world, still has some things that could put little bumps in our road, like the Affordable Healthcare Act and a few other things. So our view is we’re going to—you know, agility has been talked about within the organization. We’re just going to increase agility and simplicity in a pretty dramatic fashion. John Healey – Northcoast Research: Great. Thank you guys, and congrats.

Tim McHugh, your line is open. Tim McHugh – William Blair: Yes, thanks. First, I just wanted to ask – you mentioned kind of for the fourth quarter here that it still assumes a slightly weaker kind of growth rate, but can you talk a little bit just about how the growth rate progressed across the quarter? I know you said something about Italy stabilizing, but just I guess for the overall business, did you see increasing signs as the quarter went on, or are we just facing easier comparisons? Just some more color there would be helpful.

Sure, Tim. Good question, and it depends a little bit upon which country and where you’re at, because there’s a little bit of everything in there. I would say as we look at the quarter, and you really have to look at it on an average daily sales basis because the number of days moved around within the month. If I average all of the countries together, things were fairly stable throughout the quarter itself, and in some cases a little bit better in September than in July and August. But it depends a little bit upon which market you go to, so if you look at the U.S. market, we certainly have seen things fairly stable throughout on an average daily basis. September looked a little bit better than what we saw in July and August, and as we look to the first few weeks of October, we see some improvement as well in terms of the U.S. market. Part of that is, as you know and as we’ve talked about, we have exited some clients in the U.S. and that’s part of the reason why our business is down year-on-year, just from a pricing standpoint. And so we’re starting to anniversary some of that, so that is what is helping us a little bit as we move into the fourth quarter. But I think the market itself seems to be getting a little bit more strength overall. So I think moving in a favorable direction in the U.S., although I would say not a dramatic shift either at the same point. The French market, on the other hand, I would say July and August looked pretty much the same. Things got a little bit weaker in September, and the first few weeks in October look to be weakening a little bit further. So you have a little bit different story in the French market, and then as you look beyond mainland Europe, I would say—you know, if I would put the rest of it together, I would say things were fairly stable, bouncing around a little bit but no discernible trend in terms of getting significantly improving or getting significantly worse overall. So I think as we think about the fourth quarter, we do think that as you put all of this together, things are probably going to be softening just a bit, not dramatically. Of course, if it does, we have to revisit the earnings guidance overall. But at this point, we’re looking for a fourth quarter that revenue-wise maybe decelerates just a little bit further, but not dramatically further. Tim McHugh – William Blair: Okay, great. And then Mike, one more numbers question – the tax rate, which was lower than expected this quarter, and excluding the French reclassification, you’re guiding to 31% for next quarter. Is that type of tax rate sustainable, or are there some specific items helping you in the short term here?

There are some specific items. We did do some reorganization of some of our units for business reasons, but we’re also able to free up some tax losses, and that helped drive down the overall tax rate. So it is a cash impact, which is good. As we look forward, though, I think we’ll see that tax rate, that underlying rate move from 31% in Q4 up to something that’s probably going to be closer to what we would see as a normalized rate between 36 and 38%, all before that French business tax that you called out. Tim McHugh – William Blair: Okay, great. Thank you.

Paul Ginocchio, your line is open. Paul Ginocchio – Deutsche Bank: Thanks for taking my question. You haven’t made any comments on 1Q, Mike. I’m just wondering if you’re comfortable with expectations or see no reason to make comments on it this time around. And I’ve got one follow-up.

Yeah, I think at this point, Paul, I’m not going to make any direct comments on the first quarter. I think we’re in an environment where things are changing fairly quickly, so rather than go out and make any call on Q1, I think we’ll just wait to see how the next couple of months play out. Occasionally I do that. I decided we wouldn’t look too far forward just because I think depending upon how things go, either improving or going the other way, we’ll just see how things progress. So why don’t I go to your next question. Paul Ginocchio – Deutsche Bank: Sure. Jeff, for you, it seems like you’re talking more about some risks on some downside scenarios. I don’t know if I remember this from last quarter. At least our economists at Deutsche Bank are feeling a little bit better about things, so I’m just wondering what you’re seeing or why you keep talking about potential downside scenarios maybe more than last quarter. Thanks.

Right, and I think it’s just being pragmatic. When I view risk, there’s a couple different ways I look at it. One is what kind of cycle are we in, so if we’re in a cycle where you make some strategic moves, and I would say historically we’ve done some good things in a downturn and then coming out the other side we’ve been able to really capture some good profitability. What we’re really talking about here is that for Europe to work its way out, they’re going to need to do some things and announce some things, and clearly the ECB has done some assistance in calming what’s going on, but the problems have not been solved. So when the items come out and there is some decisions to be made about who’s in and who’s out and what will happen and those sorts of things, I think there will be a little bit of disruption in the market and some time to work its way out. So what we’re talking about is not gloom and doom as much as a longer period of standstill, and then after that longer period of standstill, not a catapult. So what we want to do is to adjust ourselves based on that realization that you’re not going to get leverage on the same cost basis or capacity that we would have done coming out of 2009. That’s really, when we’re looking at our strategic plans and what we’re doing and how we’re doing it, is we want to reset our base through the simplification and agility, and as I said, if things start to trim up, we’ll just make more out of that. If things trim down, we can create some agility. So your economists are a lot smarter than I am, but I think Europe’s got some ways to go before things are solved, and typically what happens is we’re seeing that as they create some more uncertainty then even move into certainty, the labor market will be stuck for a little while. They’ll be using us because there’s some good secular trends, but they’ll be stuck for a little while. So I don’t want to paint gloom and doom, but I want to be realistic that this is not a 2009 going into 2010 cranking out numbers on our way to our objectives within two years. So we want to do that, but we’re going to do that with a different cost basis and accelerate some of the plans, as John Healey talked about, that we had in place. We’re just going to move them forward a lot faster. Paul Ginocchio – Deutsche Bank: That’s very helpful, thanks. And Mike, just a real quick one – when do we cycle some of those bigger finance integration projects in the U.S.? Is that in the first or second quarter?

On Experis? Yeah, it comes sort of tail end of the fourth quarter into the first quarter, so that’s when we’ll start to see those cycle through. I did mention, we did have some of the financial services. There were a couple of other accounts, one of them in the technology sector, as well that was pulling back on the Experis side. So I think we’re seeing the key accounts on some of the IT work pulling back in a more significant way in some cases, so I think it’s just a matter of where we are. I think when you look at it on the IT in Experis, the SMB actually is performing quite well. There we saw an improvement of 6% within our U.S. business, so that is moving still healthy. On the flipside—

There’s some big kahunas.

-there’s some big accounts on the other side. The key accounts were down 16% within Experis, and if you take five very large accounts, their business is down about 50% and that accounts for most of the drop on the Experis U.S. business. And that’s really just a matter of a change in demand outlook and what the type of projects that some of these large accounts were doing with us, so it’s not necessarily lost business, it’s just business cycling through.

So we are not happy with our Experis performance in the U.S., but when we dig into it, there are some reasons. The team is highly motivated, highly competent. We have full confidence in the team to crack it, and you can see some of this, whether it be the SMB increase in business, how we’re shifting our business, making sure that those couple larger ones like a very large technology company that’s having some challenges right now just came out and said – boom! – we’re not doing this. So the core of the business is strong. Our book of our business just almost through serendipity created a little bit of challenge for us, and we’ll get this worked out. We also had a little bit of a pay bill gap where we were getting squeezed on pay bill gap, and we’re going back to the basics. Pay bill gap in this business, that’s what you live by and that team’s going to be executing that a lot better. Paul Ginocchio – Deutsche Bank: Thank you.

Andrew Steinerman, your line is open. Andrew Steinerman – JP Morgan: I think probably the thing that I’d be most interested in aggregating up is the gross margin achievement and discipline. You did a great job of trying to call it out country by country, but when you pull it together, the biggest (inaudible) I see here is the flex gross margin narrowing to 20 basis points year-over-year where last quarter it was 60 basis points. And in that second quarter decline, you called out holiday impacts, weaker perm, and pricing, and so if you could help us bridge from the performance in the second quarter to the kind of more favorable third quarter, that would be great.

Sure, sure Andrew. So just to summarize, as you said, the temporary recruitment side was down 20 basis points year-on-year this quarter. Last quarter, that piece was down 60 basis points year-on-year. We did have issues with more holidays in the second quarter, some bridge holidays, and we called that out; and that was a reason for some of the challenge, if you will, in the second quarter. Those same challenges aren’t with us clearly to the same level as where we’re at in the third quarter, so some of this certainly was expected. We thought some of it would go away, but I certainly was encouraged to see that overall gross margins, I think, are stabilizing overall. That doesn’t mean we’re happy with where they are; it doesn’t mean it isn’t a very price competitive environment – it is. But when you look at the regions within the U.S., within southern Europe, within Asia Pacific, the overall staffing margin year-on-year was flat to slightly up. So really, it’s northern Europe where we’re feeling the challenge and what’s coming through in the consolidated group here, and as you correctly mention, that’s still due to a little bit more vacation, a little bit more bench time or lower utilization, if you will, in markets where we would carry a bench, would be Germany, Sweden, the Netherlands. And then you also have in the U.K., you’ve got the agency workers regulation which doesn’t impact our dollar gross margin as we’re passing those cost increases on, but it does impact the gross margin percent. So overall, I think it was an encouraging quarter from that perspective. It still is a price competitive environment where we continue to run a number of initiatives on price. It’s a tough environment but I think we’re managing through it fairly well. Andrew Steinerman – JP Morgan: Great. And just so I got it exactly right, Mike, when you mentioned bench and agency, did that help third quarter year-over-year versus second quarter year-over-year, or those were things that weighed kind of equally second quarter year-over-year and third quarter year-over-year – you’re just mentioning them as headwinds.

Yeah, those were with us in the second quarter as well. Andrew Steinerman – JP Morgan: Okay, perfect. Thank you.

Sara Gubins, your line is open. Sara Gubins – Bank of America Merrill Lynch: Thank you. Good morning. Given the level of uncertainty, particularly in Europe, do you see the reorganization efforts as a one or two quarter process, or is this something that you think will be going on over the next year or so?

Well, a lot of it has to do with how it unfolds, and clearly from an organization perspective we don’t like to dribble these things out but they become complicated where you might have some pretty complicated calculations and process within certain countries. Our view is we would not like to see that, and our goal is to not have that happen; but as the euro comes out with their stances and some form of fiscal unity or not, or some form of expulsion of a few countries or not, I think really depends on what does that then mean for some of those plans. But our view is that we’re going to do what’s right to make sure that that agility and simplicity matches up with the softness in Europe, but at the same time make sure that we are not becoming so shortsighted, which the world is still going to really well for us. There’s still good secular trends, there’s still the other side of that. So we’re going to get aggressive. We’re going to make it meaningful because we believe we can in how we’d set other things up, but we would like to see it happen fourth and first and we’ll let the world kind of dictate, if you will, based on some other news whether there’s anything left that we should be doing after that. Mike, you have anything to add?

Yeah, the other thing I would just say, Sara, as you know, the accounting room’s rules are pretty technical around restructuring charges and when you can take them and how you can take them, so while decisions may be made at certain times, sometimes the restructuring has to follow a little bit just based upon the rules as well. So as Jeff said, we would rather group it and announce some of it and get it behind us, but some of it may just hit a couple of quarters just as the accounting sometimes lags a little bit and has to follow in terms of how the rules work. Sara Gubins – Bank of America Merrill Lynch: Okay. And then following up on that, I’m wondering if part of these efforts would include things like closing offices in a market like France. I’m wondering about it because in the past, you said that you would essentially just have to not plan to have those locations going forward or else it wouldn’t make it worth it to close them. And if that’s the case, I wonder in a market like France which is really more Manpower business-focused as opposed to solutions focused, how would that impact the way that you actually do business in a market like that?

Right. So a couple things in there – yes, we are looking at and have been doing office consolidation across the world because we’re able to use technology a little different. We’re moving to and have for some time to larger offices which gives us actually more flex and agility in downturns. In many of the European countries, we’ve had multiple, many offices in one city center and we’re moving to maybe one or two. We’ve also done that in France. We’ve closed 200 offices in France and reduced by 1,000 people since 2009, basically, 2008. We will continue to look at how do we make sure that those offices are right. But if we are going to be leaving a market and no one else is there, we’ve got competition really going after it super-hard and eliminating that, there could be some goodness in there too. So we’re looking at it very closely. France is a much more complicated issue in what you do and how you do it, and as you said it is primarily a Manpower market, not as much of an Experis market and a Manpower Group Solutions market, though we’ve made good gains in both of those areas as well. We’ve recently had some pretty good wins in Right in France. So you know, we will look at all countries. France is a very large part of the portfolio and is going through some unique challenges, so we will be spending time and have spent time looking at what is the right thing to do for there, for now and as we move into the future. Sara Gubins – Bank of America Merrill Lynch: Okay, thank you.

Mark Marcon, your line is open. Mark Marcon – Robert W. Baird: Good morning. Great to hear about the restructuring. Can you talk a little bit—I know the accounting rules are varying with regards to exactly when you’re going to book them, but can you just talk about kind of sense from a cash perspective how much we may end up seeing come out over the next six months in order to take these initiatives, just ballpark, and what your anticipation would be in terms of how quickly we’d get a payback on that?

Well I would say in general one of the things we’re looking at is to simplify, as I talked about, and that includes programs and other things. So those don’t come along with the large kind of reorganization and restructuring, so we’re trying to go through that right now so the payback, when you’re able to simplify other parts of the business, actually is a lot faster because you don’t have to pay back some of those European, or for that matter U.S. redundancy charges. But I think it would premature for us right now. As much as I know it would help you to plug into your model, but I think it would be premature as we’re going through this thinking now, have been for some time right now. We will do it when it’s appropriate and respectful for everyone in our organization as well. Mark Marcon – Robert W. Baird: I certainly appreciate that. But it sounds like it’s going to be material, and probably—you know, in the years that I’ve known you, it sounds like this is probably the most strategic one that you’ve talked about. Is that a fair characterization?

Well, I would say that in the past, and you’ve followed me since I’ve been in my 30’s, which is a long time ago. Clearly I think the key out of that is that we really used downturns to create about 10 to 15% capacity, close offices that wouldn’t be closed again, take out things or consolidate things, kind of more with less, and really get leverage out on the other side. We want to and will do that again, but the other side has less growth. Still good growth, but less growth, so from a strategic perspective of looking at what Europe brings us, and for that matter what Asia, which doesn’t really have restructuring issues as much as just really good expense management. From a strategic perspective through simplification and agility, this really is something more than no more business trips for a little while, everybody flies economy, which by the way we do that now anyway. Everybody flies economy and we share sandwiches – that’s what you do in short downturns. In this one, we’re looking at it and somewhat from an enthusiastic perspective, and I say that carefully, but enthusiastic in that we’ve set ourselves up to change some delivery models. We’ve set ourselves up to do things. We’ve built the brand really well over the last four or five years, so now what we do over this more softer patch, which might last whatever period of time it may last, and then have growth on the other side with a little less. So from that perspective, I think you’re right – it is more strategic and we have more opportunities because of the work we’ve done in the last three, four years to actually achieve some of these things. Mark Marcon – Robert W. Baird: Great. And then it sounds like—I mean, not only will the benefit be that when things get a little bit better, although certainly not a catapult, but it sounds like even while we’re kind of muddling along the profitability will improve. I mean, it sounds like even if things stay at a steady state, we should ultimately end up seeing an improvement with regards to profitability.

Clearly, and in fact if you were to net it all down, my statement to Mike was Mike, you know, I’ve been thinking and what I’m thinking is we need to try to figure out how to get the same leverage we would have gotten out of previous upturns but with less revenue. Show me some math – how do we do that? And that’s really the core of what we’re doing, is to get that same—and if it doesn’t go down, we’ll get the benefit on being flat as well. So that’s really what the core strategy is on that. Mark Marcon – Robert W. Baird: And so your biggest investors have always been focused on the 4% margin target, and it sounds like we wouldn’t necessarily get to a 4% margin target in this environment, but it would take a lot less to get us there.

That’s in the strategy, and you know what? I’m sure there’s some employees on the call – I’ve told them there’s no excuses to get to 4%. So that’s our view right now. Mark Marcon – Robert W. Baird: Great. Thanks for the color.

Kevin McVeigh, your line is open. Kevin McVeigh – Macquarie: Great, thanks. Hey Jeff, obviously there’s a lot of transition in Europe. Is there anything in the U.S. around obviously with the election and the fiscal cliff? Are you starting to see any change in behavior around that that may provide a spurt kind of post-November? And then longer term, what about the business that enabled you to kind of do more with less in terms of your approach to deliveries – the technology investments over the years that’s enabled you to shrink the footprint, or business mix? Just any thoughts around that. And then just openly, what’s the break-even point as you think about the business today, Mike? And I know there’s a couple different questions there, so if you could just help us on that.

I think there were four.

First of all, what’s really interesting is we’re not hearing a lot from our clients about the fiscal cliff. It doesn’t mean it won’t be real or won’t be painful. There’s just so much distraction on the election side. When we look at what the U.S. clients are talking about, particularly those that have large footprints in Europe, which many of them do, they’re mostly concerned about the uncertainty. They’re concerned about the PMI data, or if you can look at that kind of data, in China and having it come down a bit. So there is this sense of we’re doing okay in the U.S., but we also know we’re interconnected so we’re really looking at pulling it down. There is a real fear of what does that Affordable Healthcare Act mean, what doesn’t it mean? You know, our industry had a nice, very positive ruling going from 12-month look-back to 3-month look-back, which made a substantial difference to us, so that’s really the key part as we’re looking at it. When we look at some of the other elements that you have there, Mike, you may want to address how we can get at that break-even; but you know, it’s the little bit of a question where you can look a some revenue growth from a Europe perspective. I think you saw this time and heard Mike’s color on intra-quarter, where again we’re not just seeing a massive amount of down like we saw in others, so it’s a little hard to predict some of that. Kevin McVeigh – Macquarie: Got it. And then Mike, real quick, what percentage of the revenue did you walk away from because of price this quarter?

Well, I think you have two things. One is how much did we exit, and then how many opportunities did we decide not to play in, and that’s a little bit harder number to get at. But I think as we looked at the U.S. business going back now almost a year ago, it was around 3% or so that we actually exited from. A little bit harder to say in terms of business coming on where we are just opting not to propose, just given the price dynamic of some of the business that’s out there. So there clearly is pressure in the marketplace, but we’re not participating in all that.

And along those lines, I think that has really prompted us to accelerate, and we’ve piloted many ways to deliver differently in those accounts. So clearly we can deliver differently in our small/medium size businesses, and we’re looking at doing that; but where we’ve really been working a lot on is that kind of, if you will in round numbers, 50% book of business which we would call on-contract or key accounts. Many countries, including the U.S., have already done centralization of that. The quality, the speed have proven out to be quite desirable; in fact, in some cases even better, so those are the ways that we can accelerate, which will also drive some of those cost savings and then have those offices really focus on those medium-size businesses, which I think Mike gave you some texture on our SMB business in the U.S., of how it’s gone up. But that’s a part of what you’re seeing, is that dynamic of how we’re delivering and achieving the Manpower quality standards, which is a lot different than our competitors, and still getting out into that medium-sized marketplace. Kevin McVeigh – Macquarie: Thank you.

Last question, please?

Jeff Silber, your line is open. Jeff Silber – BMO Capital Management: Thanks so much for sneaking me in. In your comments, in a number of regions you talked about the difference between the smaller and larger clients. I’m wondering, are the trends diverging even more so than they have been in the past few quarters; and if so, what can you do about that?

Well, we’ve always had different dynamics between those. One of the things that is helpful is that if you look at—just take a percent of workforce is temporary in the U.S. and then take that and say, okay, how much are the key accounts are using that versus medium and small accounts, and you can see it’s very disproportionately for large, medium and larger accounts. We are starting to see some of that sneak down, which helps us as we’ve increased 6% of our business in SMB in the U.S. alone. So some of the dynamic is shifting, but clearly the big guys still are the ones who really use it strategically. But the shifts in use of technology, how we’re doing it, we have really not felt a bite in that at all. We use a lot of technology here to make sure that we are—you know, to really split sourcing versus recruitment. We’re doing a lot of strategic sourcing with some good technology and becoming quite efficient on that. So I would say those markets have been different; it’s just that the actual revenue, if you will, or billable hours coming out have been dominated by large-medium and large accounts, and we’re starting to see that get a bit more spread. Our temp to perm conversions in the U.S. are still positive, and we see that as medium-sized companies have really discovered the beauty of doing that as opposed to having their own staff. We have the technology, they don’t really look at that technology the same way, and therefore we’re able to deliver it in a much more efficient way. Jeff Silber – BMO Capital Management: And if you could just remind us what the mix is between small and large clients in your major regions? Thanks.

Yeah, overall if we averaged across, it’s pretty close to 50/50. You’d see it skewed a little bit more towards the large key accounts when you get to the U.S. market, the U.K. market. It’d be a little bit more than 50%, but it’s pretty close to that. Jeff Silber – BMO Capital Management: All right, thanks so much.

All right, thanks all.

Thank you for joining us.

This concludes today’s conference call. Thank you for your participation.