Welcome to the ManpowerGroup Third Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode until the Q&A session of today's conference. This call will be recorded. If you have any objections, please disconnect at this time. And now, I will turn the call over to ManpowerGroup Chairman and CEO, Jonas Prising. Sir, you may begin.

Welcome to the third quarter conference call for 2021. Our Chief Financial Officer, Jack McGinnis, is on the call with me today. And 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, then Jack will go through the third quarter results and guidance for the fourth quarter, and I'll then share some concluding thoughts before we start our Q&A session. But before we start, Jack will now cover the Safe Harbor language.

Good morning, everyone. This conference call includes forward-looking statements, including statements regarding the impact of the COVID-19 pandemic, 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. Following our announcement and special investor call in late August, we are very pleased to recently announce the successful and timely completion of the ettain group acquisition. ettain was one of the largest privately held IT resourcing and services providers in North America. And since October 1, is now operating as part of our Experis business. In addition to expanding our IT services in the financial and health care sectors, this acquisition also improves our geographic diversification in the U.S. and increases our strength in the digital workspace and business transformation practice areas. I will talk more about the good progress of the diversification component of our DDI strategy, Diversification, Digitization and Innovation, a little later in this call. Turning to our financial results. In the third quarter, revenue was $5.1 billion, up 11% year-over-year in constant currency. Our operating profit for the quarter was $151 million. Excluding Mexico restructuring and ettain acquisition transaction costs, operating profit was $162 million. Operating profit was up significantly year-over-year as the pandemic had a significant financial impact in the prior year. Reported operating margin was 2.9%. And after excluding Mexico restructuring and acquisition costs, operating profit margin was 3.2%. Reported earnings per diluted share was $1.77 and $1.93 after excluding Mexico restructuring and acquisition costs, and both were significantly above the prior year. The global economic recovery continued in the third quarter. As vaccine rollouts progress in many countries and pandemic-related restrictions ease, we continue to see very strong hiring demand. This strong demand is again evident in our Q4 ManpowerGroup Employment Outlook Survey of more than 40,000 employers in 43 countries. All countries are reporting improved hiring intentions year-on-year. And in 14 of the 43 countries, employers are reporting hiring intentions at the highest levels in more than 10 years. That said, during the third quarter, we have also seen some levelling off in the rate of recovery in some markets. Concerns about the Delta variant contribute to parts of the workforce not coming back into the labor market and exacerbating worker shortages in many industries and markets, making it more difficult to meet the strong demand for workers. The impact related to supply chain challenges caused by the pandemic has also become a more visible factor impacting many manufacturers in various industries. As we discussed on our second quarter earnings call, we view supply chain challenges and the impact of the Delta variant as transitory factors. And we remain optimistic and confident in the demand outlook once the effects of the pandemic normalize. Companies all over the world need access to skilled human capital to meet their business objectives and fully participate in the economic global recovery. With our operational and strategic workforce solutions and services, we help them meet the strong demand for their goods and services today and into the future.

Thanks, Jonas. Revenues in the third quarter came in just below our constant currency guidance range driven by a slowdown in the rate of improvement in France due to supply chain disruptions, notably in the automotive sector and Delta variant disruptions. Gross profit margin came in well above our guidance range. As adjusted operating profit was $162 million, representing a significant increase from the prior year period, which was heavily impacted by the pandemic. As adjusted operating profit margin was 3.2%, which was at the top end of our guidance. Breaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 1%, our constant currency revenue increased 11%. Due to the impact of net dispositions and slightly fewer billing days, the organic days adjusted revenue increase was 12%. Comparing to pre-pandemic levels, our third quarter revenues were below 2019 levels by 5% on an organic days adjusted constant currency basis, which is slightly lower than the second quarter trend on this same basis due to the impact of new regulations in Mexico and the exiting of a low-margin arrangement in Australia. Turning to the EPS bridge on Slide 4. Earnings per share was $1.77, which included $0.07 related to Mexico restructuring costs and $0.09 related to acquisition transaction costs. Excluding these costs, adjusted EPS was $1.93, which exceeded the midpoint of our guidance range. Walking from our guidance midpoint, our results included improved operational performance of $0.02; slightly lower-than-expected foreign currency exchange rates, which had a negative impact of $0.03; a slightly better-than-expected effective tax rate that added $0.02; and favorable other expenses, which added $0.02. Looking at our gross profit margin in detail. Our gross margin came in at 16.6%. Underlying staffing margin contributed 20 basis point increase. Permanent recruitment contributed an 80 basis point GP margin improvement as hiring activity was strong across our largest markets. A lower mix of Right Management career transition business this year drove 30 basis points of GP margin reduction. Other and accrual adjustments included a 10 basis point margin improvement from our Experis managed service business in Europe, and a 10 basis point improvement from consulting and MSP services, partially offset by a 10 basis point reduction from lower direct cost adjustments in the current year as favorable direct cost adjustments in Latin America were less than the prior year favorable adjustments in France. Next, let's review our gross profit by business line. During the quarter, the Manpower brand comprised 63% of gross profit. Our Experis Professional business comprised 22%, and Talent Solutions comprised 15%. During the quarter, our Manpower brand reported an organic constant currency gross profit year-over-year growth of 15%. Compared to pre-pandemic levels, this represented a decrease of 4% from the third quarter of 2019 on an organic constant currency basis. Gross profit in our Experis brand increased 24% on an organic constant currency basis year-over-year during the quarter. This represented a flat trend from the third quarter of 2019 on an organic constant currency basis. Talent Solutions includes our global market-leading RPO, MSP and Right Management offerings. Organic gross profit increased 16% in constant currency year-over-year. This represented an increase of 14% from the third quarter of 2019 on an organic constant currency basis. Our RPO business posted high double-digit GP growth during the quarter on significant hiring activity. Our MSP business, which has grown through the entire pandemic, continued to experience double-digit growth in gross profit in the quarter. As the recovery strengthens, our Right Management business continues to see significant run-off in outplacement activity, primarily in the U.S. and experienced a reduction in gross profit of 42% year-over-year. Our SG&A expense in the quarter was $703 million and represented a 6% increase on a reported basis from the prior year. Excluding Mexico restructuring charges and acquisition costs in the current year, and restructuring charges and a loss from dispositions in the prior year, SG&A was 13% higher on a constant currency basis. This compares to an increase in gross profit of 17% in constant currency and reflects investment in incremental recruiters and sales talent based on increased market activity as well as ongoing technology initiatives. The underlying increases consisted of operational costs of $78 million and currency changes of $6 million. SG&A expenses as a percentage of revenue after excluding restructuring and acquisition costs represented 13.4% in the third quarter. The Americas segment comprised 19% of consolidated revenue. Revenue in the quarter was $1 billion, an increase of 8% in constant currency. OUP was $41 million. Excluding Mexico restructuring costs and ettain acquisition costs, OUP was $52 million, and OUP margin was 5.2%. The U.S. is the largest country in the Americas segment, comprising 65% of segment revenues. Revenue in the U.S. was $645 million, representing an 11% increase compared to the prior year. Excluding ettain acquisition costs in the current year and restructuring charges in the prior year, OUP for our U.S. business is flat year-over-year at $34 million in the quarter as decreases from Right Management's career placement run-off were offset by improvements across all other businesses. Excluding the acquisition costs, OUP margin was 5.3%. Within the U.S., the Manpower brand comprised 33% of gross profit during the quarter. Revenue for the Manpower brand in the U.S. increased 9% during the quarter. While the U.S. Manpower business continues to recover, the labor shortage experienced in the second quarter continued into the third quarter through the summer months. The Experis brand in the U.S. comprised 33% of gross profit in the quarter. Within Experis in the U.S., IT skills comprise approximately 80% of revenues. Experis U.S. revenues grew 17% during the quarter, and we anticipate continued strong double-digit organic growth in the fourth quarter. We are encouraged by the current trends in our U.S. Experis business and the recent acquisition of ettain, which significantly increases our presence in the convenience market for IT professional services. Talent Solutions in the U.S. contributed 34% of gross profit and experienced revenue growth of 9% in the quarter. This was driven by RPO, which experienced record revenue levels as hiring programs continue to strengthen. The U.S. MSP business continued to perform well and experienced double-digit revenue growth in the quarter. Career transition activity continued to run off as the economy strengthens, which contributed to revenue reductions in Right Management in the U.S. In the fourth quarter, on an organic basis, we expect ongoing underlying improvement in revenue growth for the U.S. in the range of 1% to 5% year-over-year. This represents a 1% decline compared to 2019 levels using the midpoint of our guidance. Separately, we estimate ettain revenues within a range of $175 million to $185 million in the fourth quarter. Our Mexico operation experienced a revenue decline of 46% in constant currency in the quarter. The decline was driven by the new labor legislation, which prohibits certain types of temporary staffing not considered specialized services. The actual reduction in demand from our clients from the regulation was more severe than originally anticipated. The restructuring actions we have taken in the third quarter have quickly right-sized this business for the impact of new regulations. Although this will result in significant revenue reductions over the next few quarters, we believe the mix shift towards more specialized staffing will improve the margin profile of our Mexican business over time. We also believe there may be additional revenue opportunities over time as clients adjust their workforce strategies. We estimate that fourth quarter revenues in Mexico will decrease by approximately 55% to 60% year-over-year. Mexico represented 2.8% of our 2020 revenues. Revenue in Canada increased 15% in constant currency during the quarter. Southern Europe revenue comprised 46% of consolidated revenue in the quarter. Revenue in Southern Europe came in at $2.4 billion, growing 12% in constant currency. OUP equaled $111 million, and OUP margin was 4.6%. France revenue comprised 55% of the Southern Europe segment in the quarter and increased 8% in constant currency. Compared to the same period in 2019, France revenues were down 10%. Automotive supply chain constraints and the Delta variant slowed the rate of recovery in the third quarter for our French business. OUP was $62 million in the quarter, and OUP margin was 4.7%. As we begin the fourth quarter, we are estimating a year-over-year constant currency increase in revenues for France in the range of 2% to 6%. Comparing estimated fourth quarter revenues to pre-crisis levels in constant currency, this represents an 8% decline compared to 2019 levels in the fourth quarter using the midpoint of our guidance. Revenue in Italy equaled $456 million in the quarter, reflecting an increase of 28% in days-adjusted constant currency. Through the third quarter, revenues in Italy continued to exceed 2019 levels. OUP equaled $31 million, and OUP margin was 6.7%. We estimate that Italy will continue to perform very well in the fourth quarter with year-over-year constant currency revenue growth in the range of 7% to 11%. Revenue in Spain increased 1% in days-adjusted constant currency from the prior year, and revenue in Switzerland increased 21% in days-adjusted constant currency. Our Northern Europe segment comprised 23% of consolidated revenue in the quarter. Revenue increased 19% in constant currency to $1.2 billion driven by all major markets. OUP represented $17 million, and OUP margin was 1.4%. Our largest market in Northern Europe segment is the U.K., which represented 37% of segment revenues in the quarter. During the quarter, UK revenues grew 26% in constant currency. We expect continued growth in the 4% to 8% constant currency range year-over-year in the fourth quarter. In Germany, revenues increased 13% in days-adjusted constant currency in the third quarter. We expect to see ongoing revenue improvement in Germany in the fourth quarter. In the Nordics, revenues grew 19% in constant currency. Revenue in the Netherlands increased 5% in constant currency. Belgium experienced days-adjusted revenue growth of 10% in constant currency during the quarter. The Asia Pacific Middle East segment comprises 12% of total company revenue. In the quarter, revenue grew 4% in constant currency to $611 million. OUP was $23 million, and OUP margin was 3.7%. Revenue in Japan grew 13% in constant currency, which represents an improvement from the 10% growth rate in the second quarter. Our Japan business continues to lead the market in revenue growth, and we expect ongoing high single-digit revenue growth in the fourth quarter. Revenues in Australia were down 29% in constant currency, reflecting the exit of a low-margin client arrangement during the second quarter. I'll now turn to cash flow and balance sheet. During the first nine months of the year, free cash flow equaled $343 million compared to $685 million in the prior year, reflecting significant accounts receivable declines in the prior year period. Our third quarter free cash flow of $172 million exceeded the prior year free cash flow of $108 million, representing strong current period cash collections. At quarter end, days sales outstanding was flat year-over-year at 58 days. Capital expenditures represented $40 million for the nine-month period and $15 million during the third quarter. During the third quarter, we did not have any share repurchases. Our year-to-date purchases stand at 1.5 million shares of stock for $150 million. As of September 30, we have 1.9 million shares remaining for repurchase under the 2019 share program and 4 million shares remaining under the share program approved in August of 2021. Our balance sheet was strong at quarter end with cash of $1.61 billion and total debt of $1.07 billion, resulting in a net cash position of $547 million. On October 1, we utilized $800 million of cash to fund the acquisition of ettain. Our debt ratios at quarter end reflect total gross debt to trailing 12 months adjusted EBITDA of 1.63 and total debt to total capitalization at 30%. Our debt and credit facilities did not change in the quarter. Although our revolving credit facility for $600 million remained unused at September 30, we did draw $150 million on October 1 in conjunction with the funding of the ettain acquisition. As we previously indicated, we intend to pay this down over the next 12 months. Next, I'll review our outlook for the fourth quarter of 2021. Our guidance continues to assume no material additional COVID-19-related difficulties beyond those that exist today, including incremental supply chain disruptions, additional variants and the emergence of adverse trends impacting our clients in any of our largest markets. On that basis, we are forecasting earnings per share in the fourth quarter to be in the range of $1.99 to $2.07, which includes an unfavorable foreign currency impact of $0.04 per share and a positive $0.13 impact from ettain. This does not include the impact of acquisition transaction costs of approximately $9 million or integration costs of $4 million to $6 million, which will be broken out separately from ongoing operations. Our constant currency revenue guidance growth range is between 5% and 9%. And after adjusting for ettain, our organic constant currency growth range is estimated between 2% and 6%. The midpoint of our constant currency guidance is 7%. A minor decrease in billing days in the fourth quarter and the impact of net acquisitions driven by ettain impact the growth rate, resulting in an outlook for organic days-adjusted revenue growth of 4% at the midpoint. This would represent a fourth quarter organic constant currency decline in the range of minus 2% to minus 4% compared to 2019 revenues, representing an improvement from our third quarter trend. Although final purchase accounting for the ettain acquisition will be finalized in the months ahead, we currently estimate that intangible asset amortization will be approximately $24 million annually. Since amortization will be more significant going forward, we are also disclosing operating profit before amortization, or EBITA, to help assess underlying financial performance. We estimate that EBITA margin during the fourth quarter will be up 30 basis points at the midpoint compared to the prior year, with ettain contributing 20 basis points of the improvement. We expect our operating profit margin during the fourth quarter to be up 20 basis points at the midpoint compared to the prior year, with ettain contributing 10 basis points of the improvement. We estimate that the effective tax rate in the fourth quarter will be 32%. As usual, our guidance does not incorporate restructuring charges or additional share repurchases. And we estimate our weighted average shares to be 55.3 million. I will now turn it back to Jonas.

Thank you, Jack. The acceleration of digitization and investment in technology by companies during the pandemic means organizations are requiring new skills and capabilities for the future. While hiring intentions are at some of the highest levels we have seen in years, it is unlikely employers will be able to fulfill all these intentions as a result of the labor market shortages for many skills. Our most recent global Talent Shortage survey found that shortages are at a 15-year high for the second consecutive quarter, with 69% of employers stating they cannot find the talent they need. In response, organizations are looking ahead, focusing on strengthening workforce and reskilling, upskilling and building the capabilities to ensure their existing and future workforce has the skills to remain competitive. We believe this is an opportunity for us. And through our diversification strategy, we are sourcing the talent they are looking for through the offerings in our Manpower, Experis and Talent Solutions brands. We're also investing in innovation to create the talent pools with skills and capabilities at scale. Our successful Manpower MyPath program has impacted over 129,000 lives to date and is a great example of this. Through MyPath, we're building the talent pool of the future and providing clients access to our high-potential associates. Another recent example of innovation is our Experis Career Accelerator, launched at the global Viva Tech conference in Paris earlier this year and now active in six markets. Experis Career Accelerator is our AI-driven platform developed in partnership with FutureFit AI. Using machine learning and dynamic data to scan the market, it can match our Experis consultants to IT learning pathways and in-demand roles. We are attracting, developing, upskilling our consults by providing curated learning and technical training content from the world's leading tech clients and accredited learning partners and preparing our people with the skills tech employers need most. Machine learning is also helping us grow our own people's expertise. So they're even better at assessing and predicting performance to provide a better job match than either humans or machines could do on their own. That's an example of how we continue to innovate in our brands to invest in our capability to both find and create the best talent pipeline in the market for the benefit of the organizations we work with and for the benefit of the individuals for whom we provide sustainable and meaningful careers and employment. This investment in our people's skills is also reflected in our recent internal Annual People Survey, where we are pleased to see higher employee engagement levels year-over-year despite the challenges experienced by many of them during the pandemic. We are proud and very grateful for the strong culture of our organization. And we see this as a competitive advantage with opportunities for even further improvement, positioning us very well for future growth. I'd now like to open the call for Q&A. Operator?

Thank you. We will now begin the question-and-answer session. Our first question is from Andrew Steinerman at JP Morgan Chase. Your line is open.

Hi, Jonas. It's Andrew. You're very clear in your final comments of how Manpower will continue to help companies during this ongoing and really medium-term skill shortage sort of regardless of the near term. But my question really is about the near term, and it's about U.S. labor supply. Do you feel the U.S. labor supply at the lower wage levels will improve near term? And if so, why and when?

Good morning, Andrew. And the answer is yes. We do feel that the labor supply will improve. Now when you say near term, it's of course very hard to judge what near term is, but we clearly feel that these are transitory effects of the pandemic. And you can see that the lack of talent that we see across industries is really reflected on hesitations around COVID-19 and the Delta variant surges that we've seen, the child care school issues. So people can't get back to the workforce and in some cases, choose not to get back because they are still in the phase of being able to use some of the government support programs that were implemented during the pandemic. Having said that, we're pleased to see that from September onwards, we've seen actually an improvement over week over week into the middle of October, where the improvement in associates has been gradual. And we take that as a promising sign that the labor market is slowly coming back to a normalized supply situation with regards to workers.

And how much is that assumed in the fourth quarter guide for the U.S., about U.S. labor supply?

Yes. So, we assume a gradual improvement during the fourth quarter, Andrew. So, I'd say on the Manpower side, gradual improvement to Jonas' point. So, we have been encouraged by the step-up in recent weeks. We've estimated that continuing through the fourth quarter. I think the other part of the U.S. business that we addressed in our prepared remarks was the Experis business and very, very strong growth in the third quarter. And we anticipate very good double-digit growth into the fourth quarter as well.

Thank you. Our next question is from the line of Jeff Silber of BMO Capital Markets. Your line is open.

Thank you so much. As a follow-up to Andrew's question, I wanted to talk about wage inflation. I know it may differ in every country. But generally, can you talk about what the wage inflation trends have been? And how easy or difficult has that been to pass through to your clients?

Morning, Jeff. Yes, as you've seen that we've been able to increase and improve our gross profit margins quite significantly on the staffing side. And as such, we've been able to provide the value of our capabilities of finding the people to our clients. And wage inflation has been strong, and in particular, strong in the U.S., less so in Europe, although it is robust there as well. And we've been able to pass those wage inflation trends on to our customers. And as we've mentioned in prior calls, wage inflation generally for us is a good thing because we are able to price that in and to pass it on to our customers.

I would like to emphasize that one of the key indicators is the staffing margin, particularly in relation to our ability to pass costs through. In our overall analysis, we noted that the underlying staffing margin increased by 20 basis points. To provide some context regarding our major markets, the U.S. showed a significant year-over-year increase in staffing margin. The UK also experienced an increase, while Germany improved as we moved past some previous bench utilization challenges. Sweden saw similar positive trends. Overall, we are observing solid, widespread improvement in staffing margins, which suggests that we can successfully pass wage inflation on to our clients.

That's great to hear. You mentioned in your prepared remarks about increasing investments in recruiters and sales talent. Are there specific countries where you're making those investments compared to others? Is this in anticipation of continued demand in those countries?

Overall, Jeff, we feel good about the global recovery. And we're clear that some of the recovery in a number of markets is delayed due to these effects of the COVID-19 pandemic effect as well as the supply chain issues, but we feel very good about the global recovery. And as such, our investments in recruiters and salespeople, is pretty broad-based because most of the markets still have opportunity to grow. And we know demand is going to continue to be strong into 2022, and we want to be ready and take advantage of those growth opportunities. So clearly, we feel very good about the major markets, be they the U.S., France, Italy, the UK as well as Japan. So those are the biggest markets where we feel good. But I would say, generally speaking, we are confident and optimistic looking ahead. And that's why we're making sure that we have the talent in place to take advantage of those opportunities.

Thank you. Our next question is from the line of Hamzah Mazari of Jefferies. Your line is open.

Good morning. My question is just on the supply chain issues. I know you mentioned automotive in France. Any other areas that you would call out in terms of your customers seeing supply chain issues? And I know you mentioned that it's transitory. Any thoughts as to when that normalizes for you?

Thanks, Hamzah. It's hard to tell, of course, when the supply chain issues will sort themselves out in terms of chip shortages. Clearly, that's impacting automotive manufacturers, but also a lot of other industries. And I think the main issue around this is that the pandemic caused a surge of demand, and that's why we're seeing the supply chain issues. So overall, it's a positive indicator of economic growth. It's just that the supply chains got overloaded with the big surge in demand. So this will take some time to work itself through, and I'm sure it will be different for different industries as well as different products. But over time, we expect this to normalize. And that's exactly what we're preparing for in terms of our business and being able to take advantage of the opportunities that come from that.

And I would just add to that, Hamzah. If you look at our industry verticals, we've updated that in the last page of our earnings release. You can see auto has come down a bit based on what we've been seeing in this trend. So you can see that in overall about 5% of our revenues. And as we've talked about in the past, some of the markets where auto is a bigger percentage, of course, Germany, but France as we've mentioned in our prepared remarks. But I'd say if you look at the other manufacturing verticals and some of the bigger ones like pharma, and you can see construction broken out separately. We haven't seen those same issues from a supply chain at this stage. So I'd say predominantly focused on the automotive sector, and we continue to watch it.

Very helpful. And just my follow-up question is just if you're seeing any changes in the competitive dynamic out there. And the only reason I ask is it looks like one of your European peers has much higher growth relative to yourself and your other European peer. I guess you have two. And so, I'm just curious if there's anything to read into there? Or you're not really seeing any changes in the competitive dynamic out there?

We're not really seeing any changes in the competitive dynamic. It's all related to the business mix, both geographically as well as within industries or in industries within the country. But overall, competition as always in our industry is intense, but rational. And we're not seeing any major changes.

The only thing I would add to that is I would look at the mix from some of our competitors, and that could be a driver, specifically logistics. Some competitors may be a bit over-weighted compared to us on logistics side. That could explain some of the near-term differences. But with that being said, what we're very focused on is GP margin opportunities. So, we're very careful regarding how much low-margin work we want to take on as well.

Thank you. Our next question is from the line of Kevin McVeigh of Credit Suisse. Your line is open.

Jonas, I'm sorry. I was on mute. I apologize for that. Thanks so much question. Is there any way to think about what level of wage would help draw some of the kind of supply constraints that you're seeing from a labor perspective? Or is it more just the run-off of the benefits? Because obviously, there's been a lot of debate around rising wages in the U.S., things like that. Jonas, is there any way to think about what level of wage do you think helps free up some of that incremental labor supply?

Kevin, I think it really depends on where you are in the world and where you are in the U.S. And it's very local in terms of what other competing industries are you trying to attract talent from. And so, I don't think it's very practical to think about a certain wage level. If you recall, for instance, the idea that $15 of minimum wage was needing to be legislated and you look at where pay rates are today, fast forward just two years or three years from that discussion, you can see that the market has adjusted. I think the transparency around wages is very high. So workers know exactly what they're being paid today and what opportunities they have nearby that would pay more. And that's why you see this increase in quit rates because workers are looking at the opportunities. They know the labor market is good, and they're changing jobs and getting paid higher wages somewhere else. Now we know that some of this is driven by the supply or the talent shortages that we are seeing in many labor markets. And we expect that this effect and this surge in wage increases as well will be a transitory effect on that. Wage increases will normalize as we go forward, and the labor supply increases more than what we've seen over the last quarters. And as we mentioned in our prepared remarks, we fully anticipate that this pandemic effect over time and with the runoff of the unemployment benefits in many states will make it easier, but there are still going to be the concerns around child care, elder care and people's own health that will delay this somewhat. But over time, we think that the millions of people that are still on the sidelines will come back into the workforce and help ease the shortages that we're seeing right now.

Very helpful. And then just real quick, Jack. I don't think you bought any stock in the quarter. Was that because of ettain? Or just anything else, any thoughts on capital allocation?

No, that's exactly why, Kevin. Because of the ettain acquisition, we pulled back on share repurchases in anticipation of the acquisition. And as we said at that time, we did tap the revolver for about $150 million. Our priority from a capital allocation perspective will be to pay down that incremental debt. We feel really good about that. We said we plan on doing that over the next 12 months. And I did say that we do plan on covering dilution through share repurchases in early 2022. But beyond that, I think our focus will be on paying down the incremental debt. And then I think you should assume that we'll resume a more traditional capital allocation strategy.

Thank you. Our next question is from the line of Mark Marcon of Baird. Your line is open.

Good morning, Jonas and Jack. Wanted to talk a little bit more about IT services. Obviously, Experis looks like it's doing a lot better, which is very encouraging. I am wondering, if you can just talk a little bit, first of all, with regards to ettain, you gave us the revenue figures for this coming quarter in the $175 million to $185 million. Can you give us the gross and operating margins associated with that? And then, how should we think about that over the course of the year? And what is the plan for integrating ettain within Experis? How will those melt together? How will that improve your competitive position within the growing IT services market?

Thanks, Mark. This is Jack. I'll start with that one, and then I'll let Jonas talk a little bit in terms of the Experis brand overall. But in terms of giving you a little bit more color. So that guide for ettain revenues basically $180 million at the midpoint. As we said before, their GP margin is in the range of between 20% and 25%. And basically, that equates to an EBITDA of about $17 million. We did update the amortization impact. So that's lower than we originally anticipated, which is good. So, all of that equates to an operating profit of about $11 million. So that would put that in line with what we announced at the deal announcement of about a 9.5% approaching 10% EBITDA margin on an overall basis. So that's kind of the rundown in the numbers. We feel really good about the business. Its early days, just a few weeks, but we've had some great integration meeting so far with the business. And we're off to a great start. I'll let Jonas comment a little bit further.

Yes. Thanks, Jack. And Mark, it's been good to see the improvement with Experis, our Experis business globally over a number of quarters. And we think the opportunity in many markets is still very significant. And of course, as you've seen, it has a very good impact on improving our mix in terms of staffing margin. And as it regards the U.S. business, I had the opportunity just last week to meet the new combined leadership team of our one Experis team. And it's really exciting to see. As we talked about in our special call, investor call a number of weeks ago, we feel very good about how the ettain acquisition fits in with our overall Experis strategy, how there's very limited overlap both in terms of clients, how ettain brings great strength in a number of industry segments as well as in our practices, and of course, also that they are very strong on convenience. And as you know, that is one of the areas that we are now also on our organic Experis business seeing some very strong progress just as we did before the pandemic. And that's what's coming through into the numbers. So, we feel very good about the acquisition so far and the combined Experis business here in the U.S. and frankly, globally as well.

Great. And then just a numbers question. With regards to the fourth quarter guide, what's the impact, the incremental impact with regards to Mexico relative to if it had just performed in a constant manner without any sort of legislative change? Just what would you ballpark that at?

Yes, Mark, I'd say we did say that we see the revenue trend year-over-year down about 55% to 60%. I think as we mentioned earlier, Mexico is a lower-margin country for us. So the impact on the bottom line is not as significant as it is on the top line for us. So I'd say it's manageable. I'd say in the low-digit millions of dollars. So, quite manageable on an overall basis, so not that significant of a headwind from an operating profit perspective.

Thank you. Our next question is from the line of Tobey Sommer of Truist. Your line is open.

Thought I'd ask a question about your MSP and RPO businesses. Is there an opportunity for you to deploy capital in acquired businesses to further that growth? And could you comment about what you're hearing from clients that's driving double-digit growth in those lines of businesses and kind of what you expect growth to look like in the future over time? Thanks.

Thanks, Tobey. As you have noticed, our Talent Solutions business is performing exceptionally well, especially in RPO and MSP, which continue to show strength. MSP notably did not decline during the pandemic year and continues to expand. We have observed a significant increase in demand for our RPO solutions. Conversations with clients reveal their urgent need to find talent globally across different markets, which highlights the value of our RPO business in catering to clients not just in the U.S. and Europe, but worldwide with a unified offering. This approach resonates strongly with our clients. Our team has also improved their productivity and efficiency while leveraging data insights from both MSP and RPO, allowing us to provide valuable data feedback to our clients and recommend better business practices. It is encouraging to see RPO's progress, and as indicated in previous calls, we have a robust pipeline of wins and implementations, which is reflected in our growth numbers. This gives us confidence looking ahead, as we believe the operational and strategic capabilities of our RPO and MSP offerings are crucial now and in the future. We anticipate continued positive progress and growth in both of these areas.

As a follow-up, could I ask just the wage inflation outlook and environment and as well as the short labor supply, particularly in the U.S.? Are those influential factors in the outlook for RPO and MSP?

They are driving some inflation in terms of our fees because some of them are dependent on the wages that are being paid. But frankly, part of the reason that we are such an attractive solution to our clients is that through the use of RPO and MSP, you do mitigate the impact of the wage inflation because we have such scale and visibility across the market that, that is part of the value that we provide to our clients to mitigate in as much as it's possible and to still guarantee the supply, the wage inflationary effects of the wages for our clients.

Thank you. Our next question is from the line of Gary Bisbee of Bank of America Securities. Your line is open.

Good morning, everyone. You mentioned a slight revenue miss in France compared to your previous outlook. However, it seems like the situation is broader than that, with most segments falling short of expectations. Can you provide more insight into what is driving this? Specifically, I’m curious about the extent of labor shortages affecting the approximately 3% revenue delta, the impact of the supply chain, and if there are any other significant factors to note, like the situation in Mexico. Additionally, how are these factors influencing your outlook for Q4?

France was definitely a significant factor in the difference from our guidance. Specifically, we expected a stronger recovery in Q3 following the easing of curfews and restrictions at the end of Q2, but it did not happen as quickly as we had hoped. Additionally, supply chain issues became more apparent and played a larger role. However, France did show improvement from Q2 to Q3, improving from a 12% decline in Q2 to a 10% decline. We expect this trend to continue into Q4, with predictions of an 8% decline versus 2019 levels, indicating steady gradual improvement. The main adjustment to our expectations was due to the current disruptions. We are basing our outlook on the trends we are observing in October, with continued activity expected through the end of the year. We remain optimistic about the recovery in France beyond the next quarter. Regarding our guidance, Mexico was more challenging than we initially thought. Our early discussions with clients shaped our original guidance, but once implementation occurred, we observed a more cautious approach from our clients than originally communicated, affecting demand. Those were the two primary factors. On the Manpower side, there was slight softness towards the end in the U.S. market, but we began to see improvement in mid-September into October. We are factoring that into our Q4 guidance. In the UK, the Manpower business faced some unexpected softness, but this was largely offset by strong performance in the Experis business. Overall, these are the main factors influencing the revenue trends we are witnessing.

Okay. Great. And then I just wanted to clarify on the amortization from the acquisition. You said $24 million is now your expectation for the annualized expense there. And I guess as part of that, is the $4 million or $5 million that had been running before that, does that continue? So the new number is more like high 20s. Is that fair? Thank you.

Yes. So on the amortization, the new rate is $24 million annually based on our preliminary purchase accounting. We will finalize this in the months ahead. But right now, we think that's a pretty good number. So basically $6 million a quarter, if you want to straight line it on an ongoing basis and that is an improvement from our initial guide where we were closer to about $9 million a quarter or so. So yes, you can use that as your ongoing modeling for 2022 from an amortization perspective. And I'd say, generally, the other metrics I gave about ettain are basically holding in line with our original announcement as well.

Okay. So, the $6 million includes both the acquisition and what you had previously? That's the total number.

No, no, no. I'm sorry. The $6 million is just the ettain amortization, and then our previous run rate will continue as well. So that was more modest. So if you look at our amortization in Q3, it was $4 million.

Thank you. Our last question is coming from the line of George Tong of Goldman Sachs. Your line is open.

Hi, thanks. Good morning. I wanted to explore the supply chain dynamics you're experiencing. The supply chain shortage is certainly not new, but what occurred in the quarter that you consider was the tipping point for these trends to become more apparent in your results? When do you anticipate the recovery will begin, and how many quarters do you think these challenges might continue? What do you expect the recovery will look like?

George, this is Jack. I believe the situation with the supply chain isn't new, but in previous quarters, it was overshadowed by the strong performance of other sectors driven by increased demand. However, in the third quarter, as we reflected on the significant recoveries from the previous year, the effects of the supply chain challenges became much more apparent, especially in the automotive sector. This is why we mentioned it more prominently; it became clearer as we compared it to last year's substantial growth rates. The ongoing situation also started to show a more significant impact. Those are the main reasons we highlighted it in our remarks. Regarding the timeline for resolution, it's difficult to predict. Economists have varying opinions on when these supply chain issues will improve. From our discussions with customers, we believe these issues are temporary, and as Jonas mentioned, they are a response to robust demand. The demand remains strong, and we will continue to collaborate closely with our clients to monitor how the timeline evolves over the next quarter or two.

I would just add that in all our conversations with clients, they view this as a delay rather than a decrease in their demand or outlook. They remain very optimistic and are keen on keeping us engaged, indicating that while they are unsure of when the recovery will happen, they believe it is coming, so we need to be prepared. This perspective is part of what fuels our confidence and optimism as we look forward, as the components of a traditional recovery are present. We see some temporary pauses in key markets that we believe will ultimately benefit us significantly going forward. In certain markets, we are performing very well, such as in France and with Manpower in the U.S., along with continued strength in the UK. We are managing the situation effectively, and despite the delay and a slight slowing in the rate of recovery, we feel quite positive about the future opportunities.

Got it. Very helpful. In Australia, you mentioned that revenues declined due in part to the exit of a lower-margin client arrangement. Can you perhaps discuss what the characteristics of that loss was, and if there are any patterns that you noticed with that customer loss that could potentially be seen elsewhere in the business?

Thanks, George. No, on that one, that one is actually pretty straightforward. We had an arrangement with the client that we were able to renegotiate with a new contract that had improved terms. And as a result of that, we moved to a net fee arrangement. So it's a continuing client, very good business for us. And with that change, we were able to improve the margin. But that did result in a net treatment in terms of net fees as opposed to a gross up, which it would have shown previously. So I wouldn't say that, that's indicative of any other trends or anything like that. It really was a bit of a one-off with that one client, and it's really straightforward.

Thanks, everyone, and that brings us to the end of our third quarter earnings call. Thank you for joining us today. And we look forward to speaking with you next on February 1, 2022, which will be our fourth quarter earnings call. Until then, thank you, and look forward to speaking with you soon.

Thank you for participating in today's conference. You may now disconnect.