Welcome to ManpowerGroup's Fourth Quarter 2023 Earnings Call. [Operator Instructions] This call is being recorded. If you care to drop off now, please do so. I would now like to turn the call over to ManpowerGroup's Chairman and CEO, Mr. Jonas Prising. Sir, you may begin.

Welcome and thank you for joining us for our fourth quarter 2023 conference call. Our Chief Financial Officer, Jack McGinnis, is with me today. For your convenience, we have included our prepared remarks within the Investor Relations section of our website at manpowergroup.com. I will start by going through some of the highlights of the quarter and the full year, then Jack will go through the fourth quarter results and guidance for the first quarter of 2024. I will then share some concluding thoughts before we start our Q&A session. Jack will now cover the Safe Harbor language.

Good morning, everyone. This conference call includes forward-looking statements, including statements concerning economic and geopolitical uncertainty, which are subject to known and unknown risks and uncertainties. These statements are based on management's current expectations or beliefs. Actual results might differ materially from those projected in the forward-looking statements. We assume no obligation to update or revise any forward-looking statements. Slide 2 of our earnings release presentation further identifies forward-looking statements made in this call and factors that may cause our actual results to differ materially and information regarding reconciliation of non-GAAP measures.

Thanks, Jack. Two weeks ago, I attended the World Economic Forum Annual Meeting in Davos, Switzerland. The themes from the meeting centered on the uncertain outlook for 2024 caused by increasing geopolitical tensions and slowing economic growth in many parts of the world. At the same time, AI was a major discussion topic, with many believing we are entering a new era of accelerated digital transformation with developments in AI holding the promise of accelerating productivity and growth. Most organizations are just at the beginning of their AI journey – they are committed to responsible adoption of AI throughout their enterprise, yet they know they need data quality and infrastructure along with a skilled workforce to truly maximize its impact. Our own recent data finds 58% of employers believe AI will have a positive impact on their organization’s headcount in the next two years and more than 70% cite training staff, finding qualified talent, and redefining roles as the top challenges to fully leverage the technology. We are committed to being a partner of choice for companies and people to navigate this significant transformation where the digital transition will require a skills transition at speed and scale. Looking at our real-time data and research and following discussions with our teams around the world during our annual strategic roadshows, it is clear the outlook we have been predicting and tracking for the last few quarters continues to play out. Employers, particularly in large enterprise organizations, remain cautious, pausing on non-critical investments and postponing projects until more clarity on the outlook emerges. Our industry is always the first to feel the impact of economic softening and this cycle is no different, as we have seen employers reduce their temporary and permanent hiring while lowering their project spend appetite. This is most noticeable…

Thanks, Jonas. Going back to the quarterly results on slide 3, revenues in the fourth quarter came in slightly above the mid-point of our constant currency guidance range. Gross profit margin came in at the high-end of our guidance range. As adjusted, EBITA was $116 million, representing a 30% decrease in constant currency compared to the prior year period. As adjusted, EBITA margin was 2.5% and came in at the high-end of our guidance range, representing 100 basis points of decline year-over-year. During the quarter, year-over-year foreign currency movements had an impact on our results. Foreign currency translation drove a 1% favorable impact to the U.S. dollar reported revenue trend compared to the constant currency decrease of 5%. Organic days-adjusted constant currency revenue also decreased 5% in the quarter. Turning to the EPS bridge on slide 5, reported losses per share was $1.73 which included $3.18 related to restructuring costs, a non-cash goodwill impairment charge and other items. Excluding these costs, adjusted EPS was $1.45. Walking from our guidance mid-point, our results included a stronger operational performance of $0.10, slightly lower weighted average shares due to share repurchases in the quarter which had a positive impact of $0.01, a foreign currency impact that was $0.01 better than our guidance due to the strengthening of the euro and the pound during the quarter, and other expenses had a positive $0.11 cents impact. Next, let’s review our revenue by business line. Year-over-year, on an organic constant currency basis, the Manpower brand declined by 3% in the quarter, the Experis brand declined by 11%, and the Talent Solutions brand had a revenue decline of 14%. Within Talent Solutions, our RPO business experienced a year-over-year revenue decline in line with the trend from the third quarter. Our MSP business also experienced revenue declines in…

Thank you, Jack. We have taken decisive actions to manage costs and improve our business and are accelerating our transformation roadmap to simplify our operations to drive sustainable efficiencies. The actions we have taken within our Germany Proservia Managed Services business simplify our Germany business and position it for success. We remain confident in our Diversification, Digitization, and Innovation, DDI strategy, and are making strong progress across many key pillars of our plan. Diversification is how we accelerate growth of higher margin business in all our brands. The Manpower brand is our history and our future, and the diverse clients we serve across verticals has enabled us to pivot to opportunities as economic uncertainty has impacted some sectors to a greater extent than others, and some geographies more than others as well. Last quarter, we saw solid demand in automotive, public sector and logistics in several markets, offsetting pressures in other manufacturing verticals across our portfolio. We also continue to strengthen the flexibility of our delivery models, so our teams serve our clients in ways that best work for them. The growing demand for integrated, on-site solutions with our clients is strengthening our relationships while we achieve increased productivity and revenues. Our focus on specialized skills is also beginning to deliver profitability improvements as we continue to boost skills and employability with our Manpower MyPath program, creating talent at scale in response to skills shortages and demographic trends. Today every company is a tech enabled company. To meet the varied needs of our clients we are diversifying delivery in our Experis IT resourcing and services brand, with off-shore and near-shore solutions including our IT Talent Hub in India that is bolstering enterprise client fulfillment. At the same time, our Experis Academies continue to develop IT talent for growth roles in…

[Operator Instructions] The first question comes from Andrew Steinerman with J.P. Morgan.

Good morning, Jonas. It does seem more likely that the Fed will orchestrate a soft landing here in the U.S., and obviously the stock market has received that favorably. Obviously, a soft landing still needs to be executed, and that would be slowing GDP and rising unemployment rate. So I wanted to note about your first quarter guide. I know you used the word cautious, but it does include a more narrow year-over-year revenue decline in the U.S. compared to the fourth quarter. Is that only about the year-over-year comps, or do you feel like that's the early effect of a soft landing as well? And I'm only talking about the US.

Good morning, Andrew. I'd say that our first quarter guide reflects both, because what we've seen, and I mentioned this in our prepared remarks, in a number of markets, including the US, we've seen stabilization in terms of our trends at the lower level, for our brands, as well as for the various offerings such as PERM. So that stabilization carries us through into the first quarter, and that means the comparable decline of course lessens. So that's why you're seeing the improvement. So comps do play a role, but also the fact that we're seeing sequential stabilization across brands and offerings in the US and a number of other countries as well.

Jonas, could you just say a little bit more about how a soft landing in the US would affect Manpower's US business?

Well, if we see that the economy improves and what will drive the biggest difference to our business is that employer confidence broadly improves, that will clearly mean that we could reach then the inflection points and see an upturn in demand for our services across all of our brands. And I think that is, of course, will be welcome use when it happens, as we mentioned in our prepared remarks, but not seeing that inflection point yet, but a soft landing in the US would of course be very welcome.

The next question comes from Jeff Silber with BMO.

Thanks so much. Just a follow-up from Andrew's question. Maybe if I can ask the same thing about Europe, obviously trends there are a little bit weaker. But what do you think we'll take to get that either economy moving again or your business moving again in that region?

Good morning, Jeff. Yes, as you might have seen this morning, the economic trends in Europe are noticeably weaker and they just declared across the Eurozone a no growth environment for Q4. But some of the reasons behind that lack of economic growth are higher energy costs, less government stimulus. But I think what is clear from speaking to clients in Europe is they consider the environment tough, the outlook uncertain, but the headwinds manageable. So they still have a constructive outlook as they look into 2024. And they are clearly telling us, we're not seeing the upturn yet, but we expect things to improve as the economy improves. If you look at the distribution of where the economic pain is the greatest, I think it's clear that Northern Europe and Germany in particular, face as major economic headwinds and other parts of Northern Europe as well. Netherlands and Scandinavia, and we can see that reflected in our business. And then we have Southern Europe with France, getting a little bit softer, but Italy and Spain actually still being relatively strong from an economic growth perspective. So all of this to say Europe is lagging the US in terms of economic growth, which could also mean that as we think about a softer landing, the US could come back sooner and quicker than Europe potentially. So the likelihood of a major step down today, as we look out and we talk to the companies that we serve, appears to be more focused on black swan like events related to geopolitical events that are very hard to predict. Other than that, their outlook is constructed into a recovering economy, so they believe it will, they just don't know when.

Okay, that's helpful. If I could go more broadly, and we could talk about billing rates and spread, I know every region is different, but if you can give us some high level color in terms of what's going on there, that I'd appreciate it, thank you.

Jeff, sure, this is Jack. Yes, I'd be happy to talk to that. I mean, I'll talk more generally since we don't publish specific billing rates due to the number of major markets, we're in, but what I would say, and this aligns very much to what you saw, in the GP margin walk is staffing is holding up very, very well. So we're seeing stable margins on the staffing side, and that's coming through in terms of bill rates. I'd say pretty stable overall for the fourth quarter. And as you think about our guide into the first quarter, we expect that to continue. Our guide does reflect on the staffing margin and the gross profit margin side. A little more pressure in Northern Europe. We do expect to see a little more sickness in some of the bench countries based on what we're seeing in January. Nothing that we would say would be a concern as we get through the first, after the first quarter, but we do expect a little bit, but that's really more an impact on utilization. But so far, I'd say spreads and bill rates are holding up and are actually have been quite resilient.

The next question comes from Josh Chan with UBS.

Hi, good morning, Jonas and Jack. I guess my first question is on margins. Could you talk about in Q4 what transpired to be slightly better than you expected on a margin front? And then if you roll over into Q1, how much of that sequential margin decline from Q4 to Q1 is just reflective of typical normal seasonality and how much of the changes is anything structural or demand related?

Thank you. Yes, sure. I'd be happy to talk to that. So yes, we did come in at the higher end of our GP margin range, which was great. The way I would explain that, and you saw the year-over-year bridge on the margin, but generally as we looked at the guide, France came in a bit better. We did say that we had a bit of a cautious guide on France in the fourth quarter. So France came in a bit better, and those higher levels of activity at higher margin year-over-year in France came through, which helped the staffing margin a bit. And I'd say, PERM came in very close to what we were expecting. So what you're starting to see, and I know you inquired on this last quarter, is did PERM peak in previous quarters at that minus 70 basis points year-over-year? You look in Q4, you see us go to minus 30. And to your question on Q1 expectations, we continue to see that anniversary impact on PERM having a lesser impact year-over-year on the GP margin trend. So we would expect that trend to continue. It will be a less year-over-year decline into the first quarter. And as you look at the gross profit margin for Q1, at that 17.3 at the midpoint. Really, that reflects continued stable staffing margins, as I mentioned, with a little pressure in Northern Europe on some utilization issues, but I would say that's isolated. And PERM continues at stable activity levels as we talked about. And I think that the other item with Q1 is, as I mentioned in my prepared remarks, it is typically our smallest quarter, and they get hit by some seasonal trends at all that impact the margin a bit as well when you look sequentially from Q4 into Q1. So I'd say that's -- those are the main considerations as you think about GP margin.

Okay, that's really helpful, thank you. And then on the US, could you just comment on how you're seeing the seasonal ramp up in this staffing business? Usually you ramp up starting in Jan 1 and kind of progresses through the next couple of months. So just any comment on the pace of that ramp up versus normal, and then if you can have any finer color on how much better the Americas decline in Q1 would be versus Q4, that would be helpful, thank you.

So I'll take the first question, part of your question, Josh, and then have Jack jump in on the second part. So the seasonal ramp that we expect to see in the beginning of the year is a little bit slower than you would normally expect, which is not surprising given the economic headwinds that we're seeing across Europe and the US and Canada specifically. So it is incorporated in our guide and it's a little bit slower, of course, we're early in the quarter, so this may all change, but that's what we're seeing right now.

And Josh, I would just say on your question on the guide for the Americas for Q1. So you can see Americas overall at the midpoint at that minus 1% in constant currency. Breaking that down between North America and Latin America, what that really means for the U.S. The U.S. just completed a pretty stable trend in the second half of 2023, down 14% days-adjusted in Q3 and Q4. And we see pretty consistent levels of activity at lower levels. As we walk into Q1, that means from a year-over-year perspective, the U.S. will be high single digit decline improving. But again, and this came up earlier, a big part of that is the comparable from the prior year where the U.S. did step down in the first quarter. But I think the main takeaway is activity levels remain relatively stable. And I'd say it's very similar for Canada. We don't talk a lot about Canada, but Canada has been performing very well on a margin perspective, but experiencing declines not dissimilar to what we've been seeing in the US market as well. So and that's pretty consistent in the second half of the year and into the first quarter. And then Latin America continues to do very well, so we anticipate growth. Again, that's what's driving that only minus one for the region overall. And Latin America has been performing quite well. It's good to see Mexico go back to double-digit growth in the fourth quarter. And we anticipate the first quarter will be a good environment for Latin America from a revenue perspective.

The next question comes from Mark Marcon with Baird.

Good morning, Jonas and Jack. I was wondering with regards to PERM, what percentage of GP is PERM currently running at?

Yes, Mark, thanks for that. PERM is currently at 15.3%. And I know you inquired on this last quarter as well. It has stepped down a little bit. Last quarter it was about 16.5%. And I think that just reflects the continued stabilization. I think year-over-year, the rate in PERM decline year-over-year was about the same. And we're just seeing that kind of work its way in. So, I think that reflects, and I think we commented a little bit on this last quarter as well. I think that reflects a range that's in line with where we were pre-pandemic. So, PERM has stabilized quite a bit and is more of a typical mix of our GP on an overall basis.

That's great. And then you've got a number of efficiency initiatives in place. I'm wondering, do you have any updates with regards to, as we think about the unwinding of the Proservia business, what that would end up doing with regards to German margins, all things being equal. And then, Jonas, you mentioned a number of initiatives that you put in place, including we've got the deployment of PowerSuite, we've got some new AI initiatives in place. How, like as we go out, say, six months to a year from now, how much more efficient could Manpower be?

So I'll start that, Mark, with your question on Germany specifically. And yes, I think the wind down of Proservia is a major step forward in improving the profitability of Germany. It was a very complex wind down. We're very happy with the way that was conducted. And as I mentioned in our prepared remarks, we've substantially concluded all the one-off actions related to that. So where we are now is just, we're down to the final runoff of client contracts through the first half of next year. In my guide, we don't disclose profitability outside the major markets, but what I will say directly to answer your question, in my guide, I do carve out the runoff impact of Proservia for the first quarter. So I said that that's about 20 basis points on the margin, if you were to include it. If you do the math, that would indicate a loss of about $7 million at the midpoint for that business. So I think, directionally, that gives you a bit of an idea of, that will run off after the second quarter and that will be removed from the run rate. And so that will have a significant impact in improving Germany's profitability once we get to the midpoint of 2024. So it gives you a little bit of an idea of the improvement. And we feel very good about the progress we've made on the Manpower side, as you've seen from the revenue growth rates in Germany. And that will be very good for us in the second half of the year.

And Mark, to talk a bit about the efficiencies, a good starting point is probably DDI. So our diversification strategy is all about improving our margin mix within and between our brands so that we move into higher margin businesses. And I think we've made some excellent progress. And as we noted in our prepared remarks, our margin, our GP margin has been resilient. And that's really great to see. Some of that comes, of course, from an improved business mix within our brands as well as between our brands. The digitization efforts that we've been working on almost for four years now have really established us at the forefront of our industry because we're deploying common global platforms for front and back office and web properties. And we are implementing now the last big operations and as I mentioned in the prepared remarks by the end of this year, substantially all of our revenues will run through the same web and front office platforms. And that's what we're really excited about because we think that there are clearly efficiencies and productivity initiatives that we can now drive not only in each country but across geographies and implemented at speed and scale in a way we were never able to do before. But it also means that we can improve recruiter productivity and drive fill rates up in a way as we transfer best practices and we implement new tools to support our recruiters become even more successful and productive at a scale and speed that we've never been able to do before. But as I also mentioned in my prepared remarks, one of the things that I've learned as it relates to AI in general and Generative AI in particular is that to take advantage of these new technologies which look immensely promising in so many areas, the requirement to be able to take advantage of those is to have a modern technology infrastructure. And of course that's exactly what we have been building for a number of years. So it's too early to talk about the impact of large language models and Generative AI now but the promise they hold we think is immensely exciting and we feel very good about how we are positioned to take advantage of those improvements as they come to market because we have a global platform where we can deploy them across all of our global organization at the same time. And that is exactly what we're working on as we look ahead into the future.

Thanks for that, Jonas. And then, Jonas, you were a Davos. You obviously get to talk to lots of European leaders while you're there as well as your own people. How are your clients in Europe thinking about the economic environment unfolding for this year? You mentioned it. It lags the U.S. but there's obviously supply chain constraints that might be impacted by what's occurring geopolitically at this point in time. And fuel prices continue to be high and then you've got farmers that are revolting. What's the general sense there in terms of how far along are we in terms of this period of softness and when we might see an inflection? I know you're hesitant to say when the inflection could occur, but does it feel like it's getting worse or is it stabilizing?

Well, I think it depends on which country you're in, Mark. But if I step back and you think about what happened during and after the pandemic, we came out of the pandemic in ‘21 with tremendous supply chain shortages and companies ordering anything and all the products and services they could get in a pipeline that they largely started to start consuming and see a return to normal supply chain functioning sometime end of ‘22 and all the way through ‘23, they've been working off the inventories that they've been getting and as they look ahead, they are constructed on the outlook because they note that the uncertainty exists primarily due to geopolitical events, but the economic news are actually quite encouraging. Labor markets remain strong. Inflation is coming down. Energy prices have stabilized and their supply chain issues have normalized post pandemic. So from an economic perspective, as you look out, many of the European business leaders we spoke with were quite upbeat in terms of their outlook for 2024. They note that geopolitical uncertainties could impact that, but that's nothing they control. So within the things they control, they felt constructive about ‘24, but they know we don't know when it's going to be improving. We don't know when interest rates are going to come down, but overall they are probably very much thinking that this is an environment that is tough, challenging headwinds in a number of industries, but they can see the elements of a recovery are there. And until then they're waiting, they're holding, but they are getting ready for the recovery. That's my sense.

The next question comes from Kartik Mehta with Northcoast Research.

Thank you. Good morning, Jack, I wanted to go back to a statement you made about bill rate spreads and then holding fairly stable. And so I'm assuming competition hasn't picked up. And if that's an accurate statement, are you at all surprised considering what's going on with revenue trends that competition hasn't picked up?

Well, I would say on that, Kartik, really if you look at the labor market to Jonas's earlier comments, the backdrop to all of this is the labor market still relatively tight. It's been incredibly resilient. And as a result, it's still relatively hard to get quality workers. So our clients are willing to continue to pay, I'd say stable bill rates and margins have been holding for that reason, even though demand has been down, I think the backdrop of labor market still being relatively tight is a big part of the equation that's holding staffing margins to where they are. And I would say, it isn't broad brush. There are, as we said, there are a lot of markets that are actually not seeing the same degree of pressure that we're seeing in some of North America and some of the European markets. And that's been a positive as well, I think, in terms of stronger demand in certain markets. If you take a step back and you look at markets like Italy only down low single digits, right? So it's really in the markets where you see the bigger declines that I think it is a fair question to ask why aren't you seeing a little more pressure? But I think if you look at the labor markets in those countries, that's really the reason why it's been holding up quite well.

And then I wanted to get your perspective, you or Jonas's perspective on Right Management, we're hear at least in the headlines, more layoffs, more companies kind of right-sizing their labor force. And I'm wondering, as you -- just the outlook on that business.

Kartik, what we have seen is an increased demand for the services of Right Management. But I think we need to put that within the context of what we're seeing employers doing overall. So while they are -- some are trimming their workforces, most employers are still holding on to their workforce. And any reduction in workforce for now has been really mostly felt by our industry and other indicators of labor market flexibility, it doesn't touch their specific workforce. Clearly, you've seen the tech company, the large enterprise tech companies do this early into ‘23 and resize their workforce. And you now have other organizations that are also trimming their workforces for various reasons. But as we look into the first quarter, what we're estimating is that we'll continue to seek good demand for Right Management resources, but not an accelerated demand for those offerings. And that would indicate that the employer attitude is still by and large, hold on to our workforce and wait for the economic conditions to come back, employer confidence to increase as opposed to preparing for larger scale layoffs that would indicate a much stronger growth in Right Management. So that's how we would think about it.

The next question comes from Manav Patnaik with Barclay’s.

Thank you. Good morning. Jonas, apologies if this is an overgeneralization, but what environment, I guess, is perfect for you guys. So in the US, I suppose, if there's a soft landing and job growth is still moderating, perhaps there's more temp than permanent hiring activity because of that. And then in Europe if things seem to be worse, not along the same lines. So is that just bad that there's no hiring, temp or permanent, just trying to appreciate what the right mix is?

Well, Manav, the perfect environments for us are global demand for our services and solutions is booming, but that is not the case for our industry in this moment, at least. But I would say when we think about the demand for our services, this is an economic cycle that is increasingly looking similar to many other cycles that we have seen. As we discussed in our last quarter earnings call, from what we're seeing, whilst our industry is absorbing a lessening of demand, taking within a historical context, this is still within the realms of a softer economy, whether it's a soft landing or a lighter recession that's for others to say. But there, the stabilization of PERM recruitment across a number of quarters now in the context of a strong labor market means that companies are still hiring people. They are just being much more deliberate, much more cautious, and much more precise in what kind of talent they're bringing in. And I'd say the same thing applies for temporary staffing. Yes, we've seen a drop in demand, in particular, from an enterprise client perspective and in certain sectors, but overall, both geographically in LATAM and in Asia Pacific, as well as in other parts of Europe, you can see that there is still demand for temporary staffing and our Experis consultants with the IT skills and specializations that they have. So what we believe is going to be an important turning point is when employers caution moves into employer confidence in an improved outlook. And as we've seen in past recoveries, the time when employers are more confident but not fully confident in the recovery is when we see a big move upwards in demand for our services and solutions across our brands. Because a lot of companies, of course, are reducing their own hiring, their talent acquisitions, teams are either gone or are reduced. And that means they need additional capacity to ramp up the workforce they need to be able to compete and to prepare to execute and continue their business strategy. And that's, I think, where we are. Right now, employers are more cautious. They think it's manageable and you can see that in our overall numbers. But when they get more confident and they feel the turning point is here, that's when we will see it in our business, both in the US as well as in Europe.

Got it. And just as a quick follow-up, I mean, given a lot of this, as you've described, is kind of an economic cycle. When you review your businesses, like in Germany, Proservia, and then even Netherlands or whatever, like at what point do you decide it's more, like how do you decide it's more than just an economic cycle and you need to get out of those businesses? Like what are some of the common traits that lead you to that decision?

Well, I think the Germany example with Proservia is really a unique one-off situation. With a specific business that we took over from a client, it ran very well for a number of years, but then structural issues within that business have proven to be very difficult for us to turn around. And at this point, and with the German economy being the state that it is, we feel that it's time to make a significant change, which is what you saw us doing. The other aspect of the Proservia business is also non-core to our strategies. So it is really a unique situation in Germany, and that's why we made the change. The situation in Netherlands is not at all on the same -- at that level. It's a market that's struggling and where we felt that this was a good time to make this adjustment. But overall, we expect to compete and do well in Netherlands over time, just as we expect and feel really good about the German market.

The next question comes from Tobey Sommer with Truist Securities.

Thanks. I wanted to touch on something you just mentioned. We've heard that large companies in general have not reduced their own internal recruiting capacity as much as might be normal by historic terms in slowdowns. Could you talk about what you're seeing in terms of internal recruiting capacity at customers and what that may imply for demand for staffing PERM RPO, for example, in a recovery?

Toby, I think what we're hearing is that the teams, since there's not a lot of hiring going on in many sectors, those individuals have been reallocated. And as you look at two other functions and or have left and are doing different things. So in our conversations, as it relates to, for instance, opportunities within our RPO, many of our customers are getting ready for an upturn or asking us to prepare. They are not ready to pull the trigger yet, but they are clearly thinking about the recovery and what they need to be doing when they are confident that the market is coming back for their product and services. So we really expect this to play out more or less the same way that we've seen other returns and bounce back as far as the industry is concerned, both here in the US and across the world, frankly.

Okay, so it sounds like internal recruiting capacity at corporations is being drawn down. Great. What are you experiencing in domestic IT staffing demand? And in particular, I was wondering if you could comment on the financial services vertical and in tech, including global tech. Thanks.

As we mentioned in a couple of calls ago, the first hold down really came from enterprise tech and what we've seen there is a stabilization at the lower level. Convenience clients are holding up much better than enterprise tech and they are actually significantly better because of the skills shortages still prevalent in that market. So I would say the tech demand has stabilized at a lower level, better for convenience than for large enterprise organization. The banking and the finance sector are now feeling a bit more headwind but I would characterize it as manageable and you saw our outlook for Experis overall is sequentially stable to slightly improved in the US looking into the first quarter.

Next question comes from Trevor Romeo with William Blair.

Hi, good morning. Thanks so much for taking the questions. Just one maybe on Japan which might get lost in the shuffle a bit given all the focus on Europe but I think it's been a real bright spot. The performance there has been strong and consistent. So could you maybe just talk about the drivers behind the strength there in Japan. What kind of outlook you have there in the near term?

Thanks for bringing that up, Trevor. It's the 37th consecutive quarter of growth in Japan and I think Japan is a really interesting example of a country that is struggling demographically and has a shortage of labor, but we've managed to position ourselves both from a Manpower and Experis perspective as really the experts in finding and creating talent at scale. And that's really been one of the key factors of how we've made progress in Japan is of course excellent recruitment and delivery capabilities, but each of our brands also has a very strong reskilling, end-up-skilling arm of that brand. So we are generating a lot of talent with marketable skills and scale in Japan, and that is really a main factor of the progress that we've seen. We've also moved into some interesting healthcare areas, elder care, as well as childcare in Japan. Given the aging population, we've seen that as a very good opportunity and that's been an investment that we've made over a number of years and that is starting to take hold and we think that will continue to be an important part of our business. So the team in Japan has done an excellent job really finding the opportunities that exist in a market where you have an aging demographic, a shrinking workforce and being seen as a solutions provider by not only finding great talent but creating talent at scale. And that's exactly what we intend to do as we see similar trends play out both in Europe and in the US through our experienced academy as well as our Manpower MyPath programs making sure that we are known as the company that has great ability to find but also to create the needed talent for our clients which helps us deliver the best talent in the market in time and at speed.

And Trevor, I would just say for the first quarter guide for Japan, Japan has been running at days- adjusted just about double digits to high single digits and we anticipate that for the first quarter maybe closer to the very high single digits days-adjusted so very strong outlook for the first quarter for Japan.

Okay, that's great. Thank you both. And then just quickly on SG&A. I guess where do you think you are in terms of cost management? It sounds like you took some additional headcount reductions this quarter. How much room do you think you have for additional reductions whether the headcount or other avenues if the sluggish macro kind of continues?

Sure. I'd be happy to talk to that very quickly. So I think we feel good about the actions we've taken. We did, we talked about the additional headcount down. Personnel costs are about two-thirds of our overall cost so as we end the year, we're down 9%. We moved another 3% down in the fourth quarter. So I think we feel that we've taken the necessary actions for the most part based on the current environment. Certainly, we've talked a lot about Germany and the change and improving the trend for that business once we conclude the Proservia here. But I think we feel pretty good, but at the same time, continuing to balance that. So as Jonas said, we want to be prepared for the upturn when it happens. So it's a balance, and we want to make sure we have the right sales personnel and the right producers for when that happens. And so we are balancing that carefully, but you did see additional cost takeout in the fourth quarter, and we expect that trend to continue into the first quarter on a trending basis.

The next question comes from Heather Balsky with Bank of America.

Hi, good morning. Thank you for taking my question. You talked with the first question in the Q&A about the U.S. and some of the signs of stabilization. I'm curious if you can elaborate further which markets beyond the U.S., you kind of feel like things have stabilized. And then a little bit more color on what you're looking at to get confidence in things stabilizing, just given all the macro challenges we see right now. Is it data out there? Is it what you're seeing in the underlying business through January? Is it what you're hearing from your customers? Just helpful to get your thought process. Thanks.

Sure. Heather, I'll talk to that very quickly. So I think you're right. U.S. is our second biggest business. We did see that stabilized in the second half of the year. I think the other big one, number four, business for us is the UK. UK went from minus 15% days adjusted to minus 13% in Q4. So slight improvement, seeing underlying stabilization. We expect that to continue based on the guide that we gave into the first quarter. So I'd say of the bigger markets, those are the two big ones that we've seen good stabilization in the second half of 2023. And as I'd say on activity levels going into the first quarter, I will say not quite in that same camp a little bit further decline would be France and Italy, but very modest. So we're not talking about those markets seeing significant pullbacks. We're seeing more gradual easing. And so that's in our guide that takes France from minus four in Q4 to minus five in Italy, moves from that minus three days-adjusted to a little bit bigger of a decline into the first quarter as well. So those are the main countries when I think about stabilization of the bigger countries, we're in. And to your point, I think the second part of your question was what type of data points would be good to monitor as we look at that potentially changing. I think on the Manpower businesses, manufacturing PMIs are always a pretty good read through in terms of demand. And so I'd say continuing to look at that. As we sit here today, Europe continues to be in the 43 to 44 range, so quite below the 50, in the US as well. So I'd say that is important. And then I think on the professional side, it's really going to come down to Jonas's earlier comments on employer confidence with restarting IT projects and related spend. So that's going to come down to elimination of deferring projects and moving more into scheduling those projects moving forward. So and as you mentioned earlier, some of that's going to be predicated based on overall events in the economy and interest rates and other factors that give employers the confidence that we're moving into a more predictable environment.

Thank you. It's helpful. And this is a follow up question. If something we're at [inaudible] paying attention to is what's going on in the Red Sea and Panama Canal. I'm just curious, have your customers started talking about that at all? Is there any sense of concern or is it still too early? Thanks.

Overall, Heather, I see it's still a bit early. There have been well publicized circumstances around some of the automotive industry and that is well known and so that may have an impact but will and primarily in that case from our perspective Germany but other than that I think it's a little bit early still, Heather.

We will take our last question from George Tong with Goldman Sachs.

Hi. Thanks. Good morning. The midpoint of your revenue guide points to a widening rate of constant currency decline and you talked about weaker economic trends in Europe relative to the U.S. Based on business trends you've seen so far in 1Q, can you elaborate on which regions in Europe are seeing the most amount of incremental softening in revenue?

Yes, George, I'd be happy to talk to that. So you're right on a constant currency basis we do step down from minus five in Q4 to minus six but I would say days are a big factor in Q1. So when you adjust for billing days, we're actually running very close to the same trend so days-adjusted, organic days-adjusted we were at minus 5% in Q4 and we're also at minus 5% in Q1 but there are puts and takes and that to your point so the way I would look at it is the rate of decline improves in the U.S. as we've talked about earlier largely due to the fact that we start to anniversary a bit of a step down in the year ago activity levels relatively stable. And I would say the UK, similar I would say, similar activity levels into Q1, a little more pressure in France and Italy into Q1. I think if you offset that against favorable trends in APME and LATAM, that kind of gets you to an overall days-adjusted organic, constant currency in line with what we just completed. So a bit of puts and takes. And then I'd say the other area where we're seeing a little more pressures, Northern Europe, that we talked about in the Nordics and the Netherlands market that we talked about earlier on the call. But that's a bit of the rundown on the progression from Q4 to Q1.

Got it. That's helpful. And you mentioned it's difficult to pinpoint when one an inflection will happen with revenue. What are the elements there? How do you think about when operating margins will potentially inflect?

Yes, I would say very much in line with the revenue trend. So I think we've done a lot of work on cost actions in the second half of ‘23. We feel good that that's going to work its way through in preserving margin as we go forward here. As you think about those inflection points on revenue, PERM is going to be part of the equation. We talked about RPO. When hiring programs commence again in a bigger way, we'll see, we would expect to see more RPO activity. The good news is we continue to have very strong global RPO clients when demand and hiring requisitions recommence, we will see a surge in that business when that occurs. And as the operational leverage comes back into the business, you'll see us expand our EBITA margins accordingly with that. So I would say moving very much in line with revenue trends as we move forward.

Thanks everyone. That brings us to the end of our earnings call for the fourth quarter. We look forward to speaking with all of you again as we report our first quarter results sometime in May. Until then, thanks everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.