ManpowerGroup(MAN) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the company's unaudited consolidated financial statements for the period ended September 30, 2022 Consolidated Balance Sheets Total assets decreased to $8.6 billion, driven by lower cash and accounts receivable balances Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets | $5,421.8 | $6,422.7 | | Cash and cash equivalents | $527.5 | $847.8 | | Accounts receivable, net | $4,720.3 | $5,448.2 | | Total assets | $8,556.9 | $9,828.9 | | Total current liabilities | $4,450.0 | $5,780.5 | | Long-term debt | $883.0 | $565.7 | | Total liabilities | $6,140.3 | $7,297.2 | | Total shareholders' equity | $2,416.6 | $2,531.7 | Consolidated Statements of Operations Q3 2022 revenues declined to $4.8 billion, while operating profit and net earnings increased year-over-year Q3 and Nine Months Performance (in millions, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues from services | $4,800.9 | $5,140.6 | $15,018.3 | $15,342.1 | | Gross profit | $878.5 | $853.0 | $2,696.8 | $2,481.2 | | Operating profit | $161.5 | $150.5 | $480.9 | $418.8 | | Net earnings | $111.3 | $97.7 | $325.1 | $271.3 | | Net earnings per share – diluted | $2.13 | $1.77 | $6.10 | $4.90 | Consolidated Statements of Cash Flows Operating cash flow for the nine-month period decreased to $289.2 million amid higher financing and investing outflows Nine Months Cash Flow Summary (in millions) | Cash Flow Activity | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $289.2 | $382.9 | | Cash used in investing activities | ($65.3) | ($44.6) | | Cash used in financing activities | ($394.8) | ($226.8) | | Change in cash and cash equivalents | ($320.3) | $45.5 | | Cash and cash equivalents, end of period | $527.5 | $1,612.6 | Notes to Consolidated Financial Statements Details key accounting policies, goodwill impairment risks, acquisitions, debt restructuring, and segment performance - The annual goodwill impairment test in Q3 2022 found no impairment, though the Netherlands reporting unit's fair value approximated its carrying value, indicating a heightened risk of future impairment[38][39] - On October 1, 2021, the company acquired ettain group for an aggregate cash consideration of $930.9 million to accelerate its IT resourcing services strategy[55] - In May 2022, the company entered into a new five-year, $600.0 million revolving credit facility and issued €400.0 million in 3.50% notes due 2027[74][77] Segment Revenues (Q3 2022 vs Q3 2021, in millions) | Segment | Q3 2022 Revenue | Q3 2021 Revenue | | :--- | :--- | :--- | | Americas | $1,239.8 | $997.6 | | Southern Europe | $2,039.8 | $2,382.6 | | Northern Europe | $954.1 | $1,166.6 | | APME | $586.9 | $611.2 | | Consolidated | $4,800.9 | $5,140.6 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance, highlighting macroeconomic sensitivity and significant unfavorable currency impacts in Q3 2022 Operating Results Q3 2022 reported revenues fell 6.6% but grew 5.4% in constant currency, with improved gross and operating margins - The strengthening of the U.S. dollar had a 12.0% unfavorable impact on revenues and an approximately $0.32 per share unfavorable impact on diluted EPS in Q3 2022[122] - The 170 basis point increase in gross profit margin was driven by improved staffing/interim margins, a better business mix, and the Experis acquisition[133] Q3 2022 vs Q3 2021 Performance Summary | Metric | Q3 2022 | Q3 2021 | Reported Variance | Constant Currency Variance | | :--- | :--- | :--- | :--- | :--- | | Revenues from services | $4,800.9M | $5,140.6M | (6.6)% | 5.4% | | Gross profit | $878.5M | $853.0M | 3.0% | 14.6% | | Gross profit margin | 18.3% | 16.6% | +170 bps | - | | Operating profit | $161.5M | $150.5M | 7.4% | 23.7% | | Operating profit margin | 3.4% | 2.9% | +50 bps | - | | Net earnings per share – diluted | $2.13 | $1.77 | 20.3% | 38.6% | Segment Operating Results The Americas segment grew due to an acquisition, while European segments declined on a reported basis due to currency headwinds Q3 2022 Revenue Growth by Segment | Segment | Reported Variance | Constant Currency Variance | Organic Constant Currency Variance | | :--- | :--- | :--- | :--- | | Americas | 24.3% | 27.1% | 7.8% | | Southern Europe | (14.4)% | (0.7)% | (1.1)% | | Northern Europe | (18.2)% | (3.9)% | (1.2)% | | APME | (4.0)% | 12.0% | 12.0% | Q3 2022 vs Q3 2021 Operating Unit Profit (OUP) Margin | Segment | Q3 2022 OUP Margin | Q3 2021 OUP Margin | | :--- | :--- | :--- | | Americas | 5.7% | 4.1% | | Southern Europe | 4.9% | 4.6% | | Northern Europe | 1.3% | 1.4% | | APME | 4.0% | 3.7% | Liquidity and Capital Resources Operating cash flow decreased due to working capital needs, while capital was returned via share repurchases and dividends - Cash provided by operating activities decreased to $289.2 million for the nine months ended Sep 30, 2022, from $382.9 million in the prior year[181] - During the first nine months of 2022, the company repurchased 2.8 million shares of common stock at a total cost of $245.0 million[196] - As of September 30, 2022, the company had $527.5 million in cash and cash equivalents, and $599.6 million available under its revolving credit facility[192][194] Item 3. Quantitative and Qualitative Disclosures About Market Risk Confirms no material changes to market risk disclosures from the 2021 Annual Report on Form 10-K - There have been no material changes to the company's market risk exposures since the 2021 Annual Report on Form 10-K[207] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[208] - No changes in internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[209] PART II OTHER INFORMATION Item 1A. Risk Factors Confirms no material changes to the risk factors disclosed in the 2021 Annual Report and Q1 2022 Form 10-Q - The company's risk factors have not materially changed and are consistent with those disclosed in the 2021 Annual Report on Form 10-K and the Q1 2022 10-Q[211] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the repurchase of 1.15 million shares during Q3 2022, with 2.4 million shares remaining authorized - As of September 30, 2022, there were 2.4 million shares remaining authorized for repurchase under the August 2021 plan[212] Q3 2022 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | 326,001 | $76.69 | | August 2022 | 266,608 | $76.13 | | September 2022 | 554,493 | $72.14 | | Total Q3 2022 | 1,147,102 | $74.35 | Item 5. Other Information Discloses the Audit Committee's approval of various non-audit services provided by Deloitte & Touche LLP - The Audit Committee approved non-audit services by Deloitte & Touche LLP in 2022, including tax return preparation, transfer pricing advice, and assistance with tax audits[215] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files