ManpowerGroup(MAN) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for ManpowerGroup Inc. as of March 31, 2023, and for the three months then ended, including Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Shareholders' Equity, along with detailed notes Consolidated Balance Sheets Total assets decreased from $9,130.4 million at year-end 2022 to $8,889.6 million as of March 31, 2023, primarily due to reduced accounts receivable, while total shareholders' equity slightly increased to $2,509.4 million Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $5,657.9 | $5,934.4 | | Accounts receivable, net | $4,773.2 | $5,137.4 | | Goodwill | $1,631.7 | $1,628.1 | | Total assets | $8,889.6 | $9,130.4 | | Total current liabilities | $4,579.6 | $4,911.7 | | Long-term debt | $972.4 | $959.9 | | Total liabilities | $6,380.2 | $6,672.3 | | Total shareholders' equity | $2,509.4 | $2,458.1 | Consolidated Statements of Operations For the three months ended March 31, 2023, revenues from services decreased to $4,752.3 million from $5,143.3 million in the prior-year period, leading to a decline in net earnings to $77.8 million, or $1.51 per diluted share Q1 2023 vs Q1 2022 Performance (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues from services | $4,752.3 | $5,143.3 | | Gross profit | $863.1 | $897.1 | | Operating profit | $117.9 | $138.7 | | Net earnings | $77.8 | $91.6 | | Net earnings per share – diluted | $1.51 | $1.68 | Consolidated Statements of Cash Flows Cash provided by operating activities increased to $124.6 million in Q1 2023 from $70.6 million in Q1 2022, driven by changes in operating assets and liabilities, with the company ending the quarter with $706.7 million in cash and cash equivalents Cash Flow Summary (in millions) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $124.6 | $70.6 | | Cash used in investing activities | $(13.2) | $(18.6) | | Cash used in financing activities | $(48.8) | $(95.8) | | Change in cash and cash equivalents | $67.7 | $(70.5) | | Cash and cash equivalents, end of period | $706.7 | $777.3 | - Repurchases of common stock decreased to $30.0 million in Q1 2023 from $59.9 million in Q1 2022[22] Notes to Consolidated Financial Statements The notes provide detailed financial disclosures, including $6.6 million in Q1 2023 restructuring costs, a 29.5% effective income tax rate, a goodwill balance of $1,631.7 million with impairment risk for the Netherlands unit, and segment revenue declines across most regions - The company recorded $6.6 million in restructuring costs during Q1 2023, primarily for severance and office closures, with no such costs in Q1 2022[55] - The effective income tax rate for Q1 2023 was 29.5%, down from 32.6% in Q1 2022, favorably impacted by a reduction in the French business tax rate[59] - The Netherlands reporting unit, with remaining goodwill of $55.8 million, faces a heightened risk for additional impairment if operating performance does not improve[39] Revenues by Segment (in millions) | Segment | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Americas | $1,130.2 | $1,251.2 | | Southern Europe | $2,067.9 | $2,193.9 | | Northern Europe | $967.6 | $1,094.5 | | APME | $605.9 | $618.2 | | Total (before eliminations) | $4,771.6 | $5,157.8 | Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses softening demand for staffing services due to economic uncertainty, particularly in Europe, with Q1 2023 revenues decreasing 7.6% to $4.75 billion and operating profit falling 15.0% to $117.9 million, while focusing on cost management and strategic investments Business Overview The company observed softening demand for staffing services in Q1 2023 due to increased economic uncertainty, with downside risks particularly high in Europe, and the strengthening U.S. dollar unfavorably impacting reported results - The business is cyclical and sensitive to macroeconomic conditions, with softening demand for staffing services observed in Q1 2023 due to increased economic uncertainty[103][104] - Economic risks are particularly high in Europe, a significant portion of operations, while the Americas market also faces heightened risk from inflation and rising interest rates[104] - The strengthening U.S. dollar had a -5.4% unfavorable impact on revenues and an approximate $0.14 per share unfavorable impact on diluted EPS in Q1 2023[105] Operating Results - Three Months Ended March 31, 2023 and 2022 Consolidated revenues for Q1 2023 decreased by 7.6% year-over-year, with gross profit margin improving by 80 basis points to 18.2% due to a favorable business mix, but operating profit margin declined by 20 basis points to 2.5% as expenses did not decrease proportionally Consolidated Operating Results Summary (in millions) | Metric | 2023 | 2022 | Variance | Constant Currency Variance | | :--- | :--- | :--- | :--- | :--- | | Revenues from services | $4,752.3 | $5,143.3 | (7.6)% | (2.2)% | | Gross profit | $863.1 | $897.1 | (3.8)% | 1.3% | | Operating profit | $117.9 | $138.7 | (15.0)% | (7.4)% | | Net earnings | $77.8 | $91.6 | (15.1)% | (7.4)% | | Net earnings per share – diluted | $1.51 | $1.68 | (10.4)% | (2.3)% | - Gross profit margin increased by 80 basis points, primarily due to improved staffing/interim margins, a favorable business mix towards higher-margin outplacement services, and positive currency effects[116][117] - Restructuring costs of $6.6 million in Q1 2023 unfavorably impacted diluted EPS by approximately $0.10, net of tax[120] Segment Operating Results All geographic segments reported revenue declines on a reported basis, with Americas revenues falling 6.1% and Southern Europe 1.4% in constant currency, while APME grew 7.3%, and Operating Unit Profit (OUP) margins varied across regions - Americas: Revenues decreased 9.7% (-6.1% constant currency), with the U.S. down 13.4%, and OUP margin fell to 4.3% from 5.8% due to lower permanent recruitment business and decreased operating leverage[122][125] - Southern Europe: Revenues decreased 5.7% (-1.4% constant currency), with France seeing a 1.9% reported revenue decline but a 2.5% increase in constant currency, and the segment's OUP margin remained flat at 4.3%[127][130] - Northern Europe: Revenues decreased 11.6% (-3.9% constant currency), with the UK down 18.9% (-10.5% constant currency), and OUP margin slightly increased to 0.5% from 0.3%, helped by the anniversary of the Russia business sale loss[131][135] - APME: Revenues decreased 2.0% but increased 7.3% in constant currency, with Japan growing 12.7% in constant currency, and OUP margin improved to 3.5% from 3.1% due to higher gross profit margin[136][139] Liquidity and Capital Resources The company maintains strong liquidity with $706.7 million in cash and significant credit facility availability, generating $124.6 million from operations, repurchasing $30.0 million of common stock, and declaring a semi-annual dividend of $1.47 per share, while remaining in compliance with all debt covenants - Cash provided by operating activities was $124.6 million in Q1 2023, up from $70.6 million in Q1 2022, mainly due to a decline in working capital needs as revenues decreased[149][151] - As of March 31, 2023, the company had $706.7 million in cash, $599.6 million available under its revolving credit facility, and was in compliance with its debt covenants (Net Debt-to-EBITDA ratio of 0.96 to 1)[157][159][161] - During Q1 2023, the company repurchased 0.4 million shares for $30.0 million, with 1.6 million shares remaining authorized for repurchase as of March 31, 2023[163] - On May 5, 2023, the Board of Directors declared a semi-annual dividend of $1.47 per share, an increase from $1.36 per share in the prior year[162] Item 3 Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the market risk disclosures previously provided in the company's 2022 Annual Report on Form 10-K - There have been no material changes to the information on market risks affecting the company since the 2022 Annual Report on Form 10-K[169] Item 4 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting identified during the quarter - 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 covered by the report[170] - 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[171] PART II OTHER INFORMATION Item 1A Risk Factors The company's operations continue to be subject to the risk factors previously disclosed in its 2022 Annual Report on Form 10-K - The company refers to the risk factors disclosed in the 2022 Annual Report on Form 10-K, indicating no new significant risk factors have emerged as of the filing date[174] Item 2 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity for Q1 2023, with 486,873 shares purchased in total, including 368,594 shares under the publicly announced plan at an average price of $81.39 per share, leaving 1.6 million shares authorized for repurchase Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Plan | Max Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | :--- | | Jan 1 - 31, 2023 | — | $— | — | 1,984,318 | | Feb 1 - 28, 2023 | 118,279 | $— | — | 1,984,318 | | Mar 1 - 31, 2023 | 368,594 | $81.39 | 368,594 | 1,615,724 | | Total | 486,873 | $81.39 | 368,594 | 1,615,724 | - As of March 31, 2023, there were 1.6 million shares remaining authorized for repurchase under the 2021 authorization[175] Item 6 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits include required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Securities Exchange Act of 1934 and U.S.C. ss. 1350[180][181]