ManpowerGroup(MAN) - 2022 Q4 - Annual Report

Part I Business ManpowerGroup is a global workforce solutions leader whose business is cyclical and largely dependent on European markets - ManpowerGroup operates a network of over 2,200 offices in approximately 75 countries and territories, serving a diverse client base from small businesses to large multinational corporations[12] - The company's business is sensitive to economic cycles, with staffing demand rising in growth periods and outplacement demand increasing in downturns[22][23] - As of December 31, 2022, the company had approximately 30,900 full-time equivalent employees and operated through 2,062 offices globally[33][37][59] Core Brands and Services | Brand | Specialization | | :--- | :--- | | Manpower | Contingent staffing and permanent recruitment, focusing on office and industrial roles. Also offers Talent Based Outsourcing | | Experis | IT professional resourcing and project services, specializing in areas like Cloud, Cyber Security, and Digital Workspace | | Talent Solutions | Combines Recruitment Process Outsourcing (RPO), Managed Service Provider (MSP) via TAPFIN, and career management via Right Management to deliver data-driven workforce transformation solutions | Segment Operations Operations are divided into four geographic segments, with Southern Europe being the largest by revenue, driven by industrial staffing - France is the company's largest operation, accounting for 56% of the Southern Europe segment's revenue in 2022[37][39] - In the Americas, the United States represents 71% of the segment's revenue, operating through a mix of 445 branch offices and 138 franchise offices[33] 2022 Revenue Mix by Staffing Type and Segment | Segment | Industrial Staff | Office Staff | Professional & Technical Staff | | :--- | :--- | :--- | :--- | | Americas | 29% | 17% | 54% | | Southern Europe | 72% | 14% | 14% | | Northern Europe | 38% | 22% | 40% | | APME | 8% | 56% | 36% | Competition and Market Position The company competes in a fragmented industry against key rivals like The Adecco Group and Randstad, serving many large multinational clients - The largest publicly owned competitors specializing in recruitment services are The Adecco Group and Randstad[47] - Large national and multinational clients comprised approximately 60% of revenues in 2022[48] Human Capital Management The human capital strategy focuses on upskilling programs and aims for 50% gender diversity in global leadership by 2025 - The Manpower MyPath program has impacted over 200,000 lives through 2022 and now represents 38% of the associate talent pool[63] - The Experis Academy has graduated over 1,700 developers, bridging IT skills gaps for more than 160 tech companies[64] - The company has a DEIB goal to achieve 50% gender diversity at the global leadership level by 2025; the Global Leadership Team is currently 33% women[68][69] Risk Factors Key risks include sensitivity to economic conditions, intense competition, cybersecurity threats, and adverse government regulations - The business is highly sensitive to macroeconomic conditions, with Europe representing 64% of revenue and particularly susceptible to recession risks[86][87][88] - The company faces significant cybersecurity risks, as an independent assessment identified vulnerabilities that could facilitate a security incident[98] - Intense competition in a tight labor market makes it difficult to attract and retain qualified associates, especially those with critical IT skills[108] - Government regulations pose a significant risk, as exemplified by new legislation in Mexico that had a material adverse impact on the business[142] Unresolved Staff Comments There are no unresolved staff comments - Not applicable[156] Properties The company's operations are primarily conducted from leased premises, with no individually material owned properties - Most operations are conducted from leased premises, and the company does not anticipate difficulty in renewing leases or finding alternative sites[157] Legal Proceedings The company is involved in routine litigation and legal matters handled in the ordinary course of business - The company is involved in litigation of a routine nature and various legal matters, which are being defended and handled in the ordinary course of business[158] Mine Safety Disclosures This item is not applicable to the company - Not applicable[159] Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's stock trades on the NYSE under MAN, and it actively repurchases shares, with 2.0 million authorized as of year-end 2022 - The company's common stock is listed on the New York Stock Exchange under the symbol MAN[166] - As of December 31, 2022, 2.0 million shares remained authorized for repurchase under the August 2021 authorization[169] Issuer Purchases of Equity Securities (Fourth Quarter 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Plan | | :--- | :--- | :--- | :--- | | Oct 1 - 31, 2022 | 376,067 | $66.48 | 376,067 | | Nov 1 - 30, 2022 | 479 | — | — | | Dec 1 - 31, 2022 | 875 | — | — | | Total | 377,421 | $66.48 | 376,067 | Management's Discussion and Analysis of Financial Condition and Results of Operations Revenues decreased 4.3% to $19.8 billion in 2022 due to currency headwinds, though constant currency revenue grew 4.9% - Foreign currency exchange rates had a significant unfavorable impact in 2022, reducing revenues by 9.2% and net earnings per share by approximately $0.88[181] - The company recorded a $50.0 million goodwill impairment charge related to its Netherlands reporting unit in the fourth quarter of 2022[187] - Gross profit margin improved by 160 basis points to 18.0% in 2022, driven by a favorable business mix, improved staffing margins, and the Experis (ettain) acquisition[186][193] Consolidated Results of Operations (2022 vs. 2021) | Metric (in millions, except per share) | 2022 | 2021 | % Change (Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Revenues from services | $19,827.5 | $20,724.4 | (4.3)% | 4.9% | | Gross profit | $3,572.4 | $3,407.5 | 4.8% | 13.8% | | Operating profit | $581.7 | $585.4 | (0.6)% | 11.7% | | Net earnings | $373.8 | $382.4 | (2.2)% | 9.9% | | Net earnings per share - diluted | $7.08 | $6.91 | 2.6% | 15.3% | Segment Results The Americas segment grew due to an acquisition, while European segments declined on a reported basis due to currency effects - Revenue in the United States increased by 27.6% (6.5% organic), primarily driven by the Experis acquisition and strong demand in permanent recruitment[199] - France, the largest market in Southern Europe, experienced a revenue decrease of 7.5% as reported, but an increase of 4.0% in constant currency[203] 2022 Segment Revenue Performance (vs. 2021) | Segment | Reported Variance | Constant Currency Variance | Organic Constant Currency Variance | | :--- | :--- | :--- | :--- | | Americas | +15.8% | +18.1% | +4.5% | | Southern Europe | -8.7% | +2.0% | +1.7% | | Northern Europe | -13.3% | -2.5% | 0.0% | | APME | -3.8% | +9.0% | +9.0% | Liquidity and Capital Resources The company generated $423.3 million in operating cash, funding share repurchases and dividends, and maintains sufficient liquidity - Cash provided by operating activities was $423.3 million in 2022, compared to $644.8 million in 2021[219] - In 2022, the company repurchased 3.2 million shares for $270.0 million and paid dividends totaling $139.9 million[223][225] - On October 1, 2021, the company acquired ettain group for an aggregate cash consideration of $930.9 million[229] - In May 2022, the company entered into a new five-year, $600.0 million revolving credit agreement, which was undrawn as of December 31, 2022[239] Application of Critical Accounting Policies A $50.0 million non-cash goodwill impairment charge was recognized for the Netherlands reporting unit in Q4 2022 - The annual goodwill impairment test in Q3 2022 indicated the fair value of the Netherlands reporting unit approximated its carrying value[258] - Deteriorating macroeconomic conditions and financial performance below expectations triggered an interim impairment assessment for the Netherlands unit in Q4 2022[260] - A non-cash goodwill impairment charge of $50.0 million was recognized for the Netherlands reporting unit, with the remaining goodwill of $55.1 million at risk for further impairment[262][263] Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to foreign currency risk, as 82% of revenues are generated outside the U.S., particularly in Euros - Approximately 82% of revenues and profits are generated outside the United States, with 44% from European operations with a Euro-functional currency[268] - In 2022, the strengthening U.S. dollar caused reported revenues from services to be 9.2% lower than they would have been in constant currency[269] - As of December 31, 2022, the company had $956.6 million in Euro-denominated notes, which are designated as a hedge of its net investment in Euro-functional currency subsidiaries[274] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2022 Consolidated Statement of Operations Highlights (in millions) | Year Ended Dec 31 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues from services | $19,827.5 | $20,724.4 | $18,001.0 | | Operating profit | $581.7 | $585.4 | $187.6 | | Net earnings | $373.8 | $382.4 | $23.8 | Consolidated Balance Sheet Highlights (in millions) | As of Dec 31 | 2022 | 2021 | | :--- | :--- | :--- | | Total Assets | $9,130.4 | $9,828.9 | | Total Liabilities | $6,672.3 | $7,297.2 | | Total Shareholders' Equity | $2,458.1 | $2,531.7 | Consolidated Statement of Cash Flows Highlights (in millions) | Year Ended Dec 31 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Cash from Operating Activities | $423.3 | $644.8 | $936.4 | | Cash used in Investing Activities | ($85.3) | ($987.0) | ($42.4) | | Cash used in Financing Activities | ($482.1) | ($283.7) | ($435.2) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable - Not applicable[489] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2022 - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[490] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, an assessment audited by Deloitte & Touche LLP[493][494] Other Information The company entered into new letter agreements with key executives in February 2023, outlining severance and post-employment benefits - The company entered into new letter agreements with key executives on February 17, 2023, outlining severance and post-employment benefits[497] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, officers, and governance is incorporated by reference from the 2023 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023[504] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023[503] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference, with 3.9 million securities available for issuance under equity plans - Information on security ownership is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023[505] Equity Compensation Plan Information as of December 31, 2022 | Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,034,090 | $89.04 | 3,896,515 | Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the 2023 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023[508] Principal Accounting Fees and Services Information regarding principal accounting fees is incorporated by reference from the 2023 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023[509] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section contains the index to financial statements and a list of all exhibits filed with the Form 10-K, including governance documents, debt agreements, and executive compensation plans[511][516] Allowance for Doubtful Accounts Reconciliation (in millions) | Year | Beginning Balance | Provisions | Write-Offs | Translation & Other | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | | 2022 | $121.6 | $6.2 | ($12.4) | ($6.1) | $109.3 | | 2021 | $128.1 | $17.9 | ($17.7) | ($6.7) | $121.6 | | 2020 | $113.5 | $20.3 | ($17.8) | $12.1 | $128.1 | Form 10-K Summary This item is not applicable - Not applicable[521]