Welcome to the ManpowerGroup's Fourth 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 fourth quarter conference call for 2021. Our Chief Financial Officer, Jack McGinnis, is on the call 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, then Jack will go through the fourth quarter results and guidance for the first quarter of 2022, and I'll 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 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. With another unique pandemic year behind us, we continue to see the global recovery progress, strong hiring levels and employer optimism persist across our geographies, even when the pace of recovery has been hampered most recently by the Omicron variant. Before I turn to our financials for the fourth quarter and full year, let me start by thanking all our people. Our resilience, agility, and innovation have continued to be tested during the last year and I am proud of and thankful to our ManpowerGroup team for their relentless pursuit of success and unwavering delivery of our People First commitment. Thank you for all you do every day, helping our clients navigate a challenging environment and delivering on our purpose by finding meaningful sustainable employment for millions of people. Turning to our financial results, in the fourth quarter revenue was $5.4 billion, up 9% year-over-year in constant currency, or 6% in organic constant currency. Our EBITA for the quarter was $177 million. Adjusting for the ettain transaction and integration costs, EBITA was $189 million, reflecting significant improvement year-over-year. Reported EBITA margin was 3.3%, and adjusted EBITA margin was 3.5%. Reported earnings per diluted share was $2.02 and $2.20 on an adjusted basis. Both were significantly above the prior year. Turning to full year results for a moment, reported earnings per share for the year was $6.91. Adjusted earnings per share was $7.24 and represented a constant currency increase of 93% year-over-year, or 88% organically. Revenues for the year increased 12% in constant currency, or 11% organically to $20.7 billion, and reported EBITA was $610 million. Adjusted EBITA was $634 million which represented a significant constant currency improvement year-over-year. Globally, we continue to be optimistic and well-prepared to benefit from the market opportunities ahead. We believe the pandemic has accelerated the impact of various trends we have been tracking for some time; notably talent shortages due to changing demographics and changing demands for skills due to digital transformation across industries and geographies. Employers are adapting to the new environment by transforming their business models, and their attraction and retention strategies for new skillsets; all of this against a backdrop of volatility. The strategic and operational flexibility that our clients need to transform and thrive aligns well to our own transformation; our shifting business mix, our investments in technology, and progress on our plans to Diversify, Digitize and Innovate, or DDI in short, which I will share more on shortly. In the fourth quarter, we saw increasing confidence and a stronger, dynamic labor market, even if the Omicron variant muted sentiment somewhat in the final weeks of the quarter. More people were returning to work and changing jobs than we have seen for quite some time, resulting in more of a mass reshuffle, in my view, than a mass resignation. Europe’s unemployment rates are now below pre-pandemic levels and the U.S. is catching up quickly as well. This optimism was further reinforced by our own data from our ManpowerGroup Employment Outlook Survey, which showed that across 40 countries and 40,000 employers, hiring outlooks were strong. For the first time since the pandemic began, all countries reported positive hiring outlooks. We are also seeing this strong demand across all of our brands, in both temporary and permanent hiring across sectors within Manpower, Experis and in our market-leading RPO and MSP businesses within Talent Solutions. Now, more than ever, companies need our help to source, upskill, and manage their workforce; to embrace bold thinking on where, when, and how work gets done in order to compete for scarce talent and offer what workers want, while balancing the requirements of their business.

Thanks, Jonas. Going back to the quarterly results on Slide 3, revenues in the fourth quarter came in at the top end of our constant currency guidance range. Gross profit margin came in above our guidance range. As I mentioned last quarter, due to the amortization associated with our recent acquisition, we have added EBITA, representing operating profit before amortization of intangible assets, to our financial information to provide additional information on underlying performance. Operating profit is also disclosed, but we will talk to EBITA. As adjusted, EBITA was $189 million, representing a 24% increase in constant currency from the prior year period, or a 12% increase on an organic constant currency basis. As adjusted, EBITA margin was 3.5% and came in at the top end of our guidance, representing 40 basis points of improvement, or 20 basis points organically. Breaking our revenue trend down into a bit more detail, after adjusting for the negative impact of currency of 3%, our constant currency revenue increased 9%. Due to the impact of net acquisitions of almost 4% and slightly fewer billing days, the organic days-adjusted revenue increase was 6%. Comparing to pre-pandemic levels, our fourth quarter revenues were below 2019 levels by 1% on an organic constant currency basis, which is a 4% improvement from the third quarter trend on this same basis.

Turning to the EPS bridge on Slide 5, reported earnings per share was $2.02, which included $0.18 related to ettain transaction and integration costs. Excluding these costs, adjusted EPS was $2.20, which was well above the top end of our guidance range. Walking from our guidance midpoint, our results included improved operational performance of $0.12, slightly lower weighted average shares due to repurchases in the quarter which had a positive impact of $0.01, and slightly better effective tax rate that added $0.03, and favorable other expenses which added $0.01. Next, let’s review our revenue by business line. Experis and Talent Solutions experienced organic constant currency growth versus 2019 in the fourth quarter, while Manpower significantly closed the gap to pre-pandemic revenue levels. Year-over-year, on an organic constant currency basis, the Manpower brand reported revenue growth of 4%, the Experis brand reported revenue growth of 14%, and the Talent Solutions brand reported revenue growth of 11%. Within Talent Solutions we saw record-setting revenue figures for the year in both our RPO and MSP businesses. In the quarter, RPO had revenue growth in the very high double-digit percentages and MSP in the double-digit percentages year-over-year. As we continue to experience a record low outplacement environment, Right Management saw double-digit percentage revenue decreases year-over-year. Looking at our gross profit margin in detail, our gross margin came in at 17.2%. Underlying staffing margin contributed a 40 basis point increase. The ettain acquisition added 30 basis points. 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 drove 30 basis points of GP margin reduction. Improvement from Experis solutions resulted in a 10 basis point margin improvement. Other items represented an additional 10 basis point improvement. Moving onto our gross profit by business line, during the quarter, the Manpower brand comprised 59% of gross profit, our Experis professional business comprised 26%, reflecting an all-time high contribution post ettain, and Talent Solutions comprised 15%. During the quarter, our Manpower brand reported an organic constant currency gross profit year-over-year growth of 9%. Compared to pre-pandemic levels, this was 2% below the fourth quarter of 2019. Gross profit in our Experis brand increased 25% on an organic constant currency basis year-over-year during the quarter. This represented an increase of 7% from the fourth quarter of 2019. Organic gross profit in Talent Solutions increased 15% in constant currency year-over-year. This represented an increase of 16% from the fourth quarter of 2019 on an organic constant currency basis. This was driven by the great performance in RPO and MSP discussed earlier, which was partially offset by the decreases in Right Management due to outplacement trends.

Our SG&A expense in the quarter was $760 million. Excluding the net impact of the ettain transaction and integration costs in the current year and restructuring charges in the prior year, SG&A was 18% higher on a constant currency basis and 13% higher on an organic constant currency basis. This reflects continued investment in the business. The underlying increases consisted of operational costs of $85 million, incremental costs related to the acquired businesses of $31 million, offset by currency changes of $17 million. Adjusted SG&A expenses as a percentage of revenue represented 13.9% in the fourth quarter. The Americas segment comprised 23% of consolidated revenue. Revenue in the quarter was $1.2 billion, an increase of 22% in constant currency or 3% on an organic constant currency basis, or 5% after adjusting for days. OUP was $54 million. As adjusted, OUP was $67 million and OUP margin was 5.5%. A lower mix of Right Management outplacement activity drove the 10 basis point reduction in OUP margin on an organic constant currency basis.

The U.S. is the largest country in the Americas segment, comprising 71% of segment revenues. Revenue in the U.S. was $861 million, representing a 39% increase, or 8% organically, compared to the prior year. As adjusted to exclude acquisition transaction and integration costs, OUP for our U.S. business was $53 million in the quarter representing an organic increase of 15%. As adjusted, OUP margin was 6.2%, or 5.2% on an organic basis. Within the U.S. the Manpower brand comprised 29% of gross profit during the quarter. Revenue for the Manpower brand in the U.S. increased 2% during the quarter. Aside from normal seasonality in December, we have seen our levels of associates on assignment build during the fourth quarter and again in early January as workers continue to return to the labor force.

The Experis brand in the U.S. comprised 43% of gross profit in the quarter. Within Experis in the U.S., IT skills comprised approximately 90% of revenues. Experis U.S. revenues grew 24% organically during the quarter and we anticipate continued strong double digit organic growth in the first quarter of 2022. The ettain business also performed well during the quarter and the early phases of the integration are proceeding on-schedule. We are encouraged by the current trends in our U.S. Experis business, including ettain, which has significantly increased our presence in the convenience market for IT professional services. Talent Solutions in the U.S. contributed 28% of gross profit and experienced revenue growth of 9% in the quarter. This was driven by RPO which continues to win new business and experienced record revenue levels during the quarter as hiring programs continued to strengthen. The U.S. MSP business continued to perform well and experienced record revenue levels in the quarter as well. Within Right Management, career transition activity continued to run off as the economy strengthens. In the first quarter, we expect ongoing underlying improvement and revenue growth for the U.S. in the range of 38% to 42% year-over-year, or 8% to 12% organically.

Our Mexico operation experienced a revenue decline of 60% in constant currency in the quarter. The decline was driven by the new labor legislation we discussed in the prior quarter. Although the impact of the legislation has had a more severe impact on the industry than originally anticipated, the fourth quarter trend reflects the stabilized impact. We anticipate a similar revenue decrease in the first quarter.

Southern Europe revenue comprised 43% of consolidated revenue in the quarter. Revenue in Southern Europe came in at $2.4 billion, growing 6% in constant currency. OUP equaled $117 million and OUP margin was 4.9%. France revenue comprised 55% of the Southern Europe segment in the quarter and increased 6% in constant currency. Compared to the same period in 2019, France revenues were down 6%, improving from down 10% in the third quarter. OUP was $64 million in the quarter and OUP margin was 4.8%. As we begin the first quarter, we are estimating a year over year constant currency increase in revenues for France in the range of 6% to 10%. Revenue in Italy equaled $467 million in the quarter reflecting an increase of 15% in constant currency. OUP equaled $33 million and OUP margin was 7.2%. We estimate that Italy will continue to perform very well in the first quarter with year-over-year constant currency revenue growth in the range of 13% to 17%.

Our Northern Europe segment comprised 22% of consolidated revenue in the quarter. Revenue increased 9% in constant currency to $1.2 billion driven by most of our major markets. OUP represented $29 million and OUP margin was 2.4%. As indicated in the notes to the segment results slide, during the quarter we had a modest restructuring charge in Germany which was offset by a one-time pension gain. Our largest market in the Northern Europe segment is the U.K., which represented 36% of segment revenues in the quarter. During the quarter, U.K. revenues grew 6% in constant currency. Our UK business is performing well and we expect flat to slight decreases in revenues in the first quarter reflecting the exit of certain low margin arrangements, replaced with higher fee-based margin opportunities.

These and other actions including permanent recruitment growth are driving significant improvement in the margin profile of our UK business. In Germany, revenues increased 9% in days-adjusted constant currency in the fourth quarter. We expect to see constant currency mid-single digit percentage revenue improvement year over year in Germany in the first quarter. As noted in our earnings release materials today, as part of our geographic portfolio strategy, we sold our Russia business which will operate as a franchise going forward. This will reduce our Northern Europe revenues by approximately $125 million annually and will have a favorable impact on our global gross profit and EBITA margins going forward.

The Asia Pacific Middle East segment comprises 12% of total company revenue. In the quarter, revenue grew 7% in constant currency to $623 million. OUP was $21 million and OUP margin was 3.3%. Revenue in Japan grew 16% in constant currency which represents an improvement from the 13% growth in the third quarter. We are very pleased with the performance of our Japan business which continues to lead the market in revenue growth and we expect continued strong revenue growth in the first quarter. I’ll now turn to cash flow and balance sheet. In full year 2021, free cash flow equaled $581 million compared to $886 million in the prior year. The prior year result included significant cash inflow from accounts receivable declines from the onset of the pandemic. Our fourth quarter free cash flow of $238 million exceeded the prior year period free cash flow of $201 million, representing strong current period cash collections. At quarter end, days sales outstanding was up 1 day year over year at 55 days. Capital expenditures represented $64 million for the year and $24 million during the fourth quarter. During the fourth quarter we repurchased 643,000 shares of stock for $60 million. Our full year purchases stand at 2.1 million shares of stock for $210 million. As of December 31, we have 1.2 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 ended the year with cash of $848 million and total debt of $1.12 billion, resulting in a net debt position of $271 million. On October 1st we utilized $800 million of cash to fund the acquisition of ettain. Our debt ratios at quarter-end reflect total gross debt to trailing twelve months Adjusted EBITDA of 1.64 and total debt to total capitalization at 31%. Our debt and credit facilities did not change in the quarter. We utilized $150 million of the $600 million revolving credit facility on October 1st in conjunction with the funding of the ettain acquisition. We are pleased to report that we have already repaid half of this amount after three months, and as previously indicated, we expect to pay down the remainder over the next nine months. Next, I'll review our outlook for the first quarter of 2022. Our guidance continues to assume no material additional COVID-19 related difficulties beyond those that exist today. On that basis, we are forecasting underlying earnings per share for the first quarter to be in the range of $1.56 to $1.64, which includes an unfavorable foreign currency impact of 10 cents per share. This does not include the impact of acquisition integration costs of $4 million to $6 million or the loss on disposition of our Russia business of approximately $8 million, which will be broken out separately from ongoing operations. Regarding revenues, the stabilized impact of the regulation in Mexico represents a year over year revenue loss of about 2% in the first quarter of 2022. Considering this, our constant currency revenue guidance growth range is between 6% and 10%. After adjusting for the acquisition of ettain and the disposition of Russia mid-January, our organic constant currency growth range is estimated between 3% and 7%. As billing days are only a minor increase in the first quarter, this results in an organic days-adjusted revenue growth rate of 5% at the mid-point. We expect our EBITA margin during the first quarter to be up 70 basis points at the midpoint compared to the prior year with ettain contributing 20 basis points of the improvement. We estimate that the effective tax rate for both the first quarter and the full year of 2022 to be 30%. This incorporates the final phase of the multi-year reduction in the France corporate tax rate and a continuation of the 2021 French Business Tax reduction. As usual, our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 54.6 million. I will now turn it back to Jonas. Thank you, Jack. A year ago, we updated you on our acceleration progress for DDI, Diversification, Digitization and Innovation. Reflecting on that update, we are pleased with our progress during 2021 and confident that these strategic choices and investments are strengthening our capabilities, differentiating our offerings, and providing the foundation for profitable growth and long-term sustainable value creation. We are making great progress on Diversification by improving our business mix, expanding the contribution of higher growth and higher value services, especially our Experis IT resourcing, Talent Solutions, and Manpower permanent recruitment. Specific to Experis, which makes up 26% of our GP business mix globally, we are proud of the successful completion, at speed, of our acquisition of the ettain group in recent months which is off to a great start with a full quarter of contribution during the quarter. Our increased presence in the IT convenience segment of the market positions us as an overall top-four IT resourcing and services provider in the U.S. market and serves to reduce the impact of revenue volatility occasionally associated with large enterprise clients’ shifts in demand. Talent Solutions also plays a critical role in our ongoing diversification as it includes our highest margin businesses of MSP, RPO and Right Management. As Jack mentioned, we are seeing record levels of volumes in both our MSP and RPO businesses which are driving an increased contribution from Talent Solutions overall. We expect the Right Management outplacement volume to stabilize in the quarters ahead and Right Management will then become a contributor in our diversification strategies as well. We are also making strong progress on the Digitization part of our strategy, moving at speed and scale. In 2021 we implemented PowerSuite applications, our leading cloud-enabled front office technology, in 22 markets. We are also improving efficiency and productivity via progressive moves to global SAAS platforms, shifting more of our data assets to the cloud, and using analytics to enable better insight, predict match and performance more accurately, and to drive new value creation. Lastly, we continue making great progress on Innovation. In Experis, this is notably through our investment in Experis Academy and leading tools, specifically Experis Career Accelerator for our professional consultants. In Manpower it is through MyPath, our innovative global associate upskilling program. Our DDI strategy also enables us to deliver on our ESG strategies. We believe this to be a clear differentiator as purpose and profit become increasingly interconnected for all organizations. Our MyPath program is a great example of how we are executing this strategy by significantly expanding the countries participating in the program, transforming the working lives of 150,000 individuals so far. We shared our ESG strategy when we published our Working to Change the World Plan, focused on Planet, People & Prosperity and Principles of Governance, reflecting the International Business Council’s Stakeholder Capitalist Metrics which we are already incorporating into our reporting. The recent validation from the Science Based Targets initiative, SBTi of our ambitious plans to drive positive climate action, is a demonstration of the urgency and speed with which we intend to lead our industry in this space. We have the talent, brands, technology, and purpose in place to capture fast-evolving opportunities in the market, and to build on the strong foundation of 2021. We are convinced that more companies will turn to us for expertise in finding, retaining, and reskilling diverse talent to enable them to accelerate their digital transformation and execute their business strategies. I'd now like to open the call for Q&A.

Thank you. Our first question is from Andrew Steinerman at J.P. Morgan. Your line is open.

Hi, it's Andrew. Could you provide more details about January and the previous month in the U.S.? What trends are you observing in both the Manpower and Experis businesses? Is Omicron having a positive, negative, or neutral impact on your U.S. operations? Also, considering Experis had strong organic revenue growth, do you think it's aligning with the market growth rate or simply benefiting from year-over-year comparisons?

Yes, Andrew thanks. Yes and maybe I'll start with the question you asked last and say that we're very pleased with how Experis is progressing. I would estimate that we're tracking to the market growth maybe slightly above and we feel very good about the progress we've been making in Experis U.S. organically over a number of quarters. So we're executing well and we continue to see great opportunities for Experis in the U.S. market. So you asked a bit about Omicron and the impact I would say is limited and manageable, certainly less impactful for white collar workers and our IT consultants because they have an ability to continue working frankly if they are not feeling great, so remote work is a positive factor in managing and mitigating the impact of Omicron. From a manpower perspective, it has clearly led to a difficult piece in finding people since absenteeism due to illness is high, I mean much higher than we would normally expect to see. Now the good news is, though that we're seeing it being a spike and that people are ill and when they come back into the workforce. So overtime we would expect this to subside and really normalize as the quarter moves on and overall we've been encouraged after the seasonal slowdown to see that the workers are coming back into the workforce and our Manpower business is continuing to do well, but Omicron is much more manageable than we see in the other variants and we feel good about our ability to progress with the business in both of our brands.

Andrew, this is Jack. I'll just add one additional point to Jonas' comment on Experis in the U.S. And certainly, the organic, the legacy Experis business performed very well at that 24% growth. And we commented that we expect very strong double-digit growth again in the first quarter, but I really wanted to talk about the acquisition ettain. So that performed very well in the fourth quarter as well and so at the midpoint of our guidance, I mentioned about $180 million and it came in a few million above that. And more importantly, they came in stronger on the EBITDA line about $1.2 million better than we anticipated in the guidance too. So ettain is off to a good start and we anticipate they're going to have a good first quarter as well as part of our combined Experis business.

Right? And Jack, I really asked about January. So I assumed, when you kind of say, what the fourth quarter was and what we're expecting in the first quarter is because January for the U.S. started out favorably, right?

Yes, January is looking very consistent with where we were ending the fourth quarter in terms of ongoing trends, Andrew. And as we did mention on the Manpower business, we are seeing the associates on assignment start to increase in the month of January as well week-over-week. So that's a good sign.

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

Thanks so much. Actually, I wanted to focus a little bit outside the U.S. You've talked about strong demand. We've seen your Manpower survey showing that as well. I'm just wondering about the tight labor market. We hear a lot about it in the U.S. I know there's a little bit of an Omicron issue, but beyond Omicron, are you seeing similar aspects in terms of tight labor supply in your major markets outside the U.S.? And if you could talk a little bit about where, that would be great?

We are observing tight labor markets overall, Jeff. We believe that some of this is a result of the pandemic because the full workforce hasn't returned. However, the U.S. stands out with its particularly tight labor markets, while we don't see the same factor outside the U.S. The U.K. is the closest in comparison, and both countries have experienced a significant number of individuals not returning to work since the pandemic, with about 3.6 million people respectively still absent. This situation is not mirrored in most other countries. You may have noticed that the unemployment rate in the Euro area is at a 20-plus year low, around 6% to 7%, indicating a strong labor market, which has been beneficial for us. Our progress in permanent placements reflects this strong demand for talent, and that demand is evident not only in the U.S. but globally. It is also stimulating the need for temporary staffing in most countries. In several of our major operations, we have seen demand and revenues surpass 2019 figures. For countries that have not yet exceeded 2019 levels, we expect them to make considerable progress towards that milestone quickly. Overall, there is a robust demand for both temporary and permanent placements across all our brands, which is evident in the significant achievements we've made in Talent Solutions, with RPO and MSP hitting record revenue levels.

Okay. That's really helpful. My followup question is about Brexit. I know you haven't had one of those in a while. But we've been hearing about a lot of the financial services firms that are and still in London really relocating a lot of their folks over to Paris. I know Germany was expected to be a big winner. I know there's some folks going over there, but Paris seems to be a big surprise. I'm just wondering if you're seeing any of that? And is it having any impact on your business there? Thanks.

Well, Jeff, that is actually fake news. The big migration of financial institutions away from the U.K. has not happened. Although there has been some new hiring occurring outside of London and the financial district, it remains a very vibrant labor market for financial professionals, IT professionals in the U.K. So the Brexit effect as it relates to that part of the workforce has really not come to pass. But what you might have seen instead is the tremendous shortage of truck drivers in the U.K., shortage of healthcare staff in the U.K. and those are directly linked to the impact of Brexit, new regulations making it harder for drivers to get in and out of the U.K., supply chain issues. So there are a number of parts of the labor market in the U.K. that are seeing significant shortages, and that's due to Brexit, but it's not in the financial sector because those moves have not really come to pass.

Jeff, I would just add, in the U.K., financial services is about 15% of our business there and actually, it's been the opposite. That business has been growing for us. We took on a very large bank client last year. That's been a good addition to the portfolio. So we've actually seen that side of the business actually increasing.

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

Yes, hi, good morning. My first question is just around labor inflation. Maybe just talk about your bill-pay spreads, what they look like today versus history? How do you think they'll trend in terms of your guidance? And then, just similarly on labor availability, does your scale help you today? I know not all of your employee base or candidates, I guess, can work remotely. Some can, but some of your peers have been talking about kind of national scale helping them, but most of their business can work remotely, so just any thoughts on labor availability and then labor inflation?

Of course, Hamzah. Maybe the best starting point is to look at the U.S. market, and that's where we see the highest degree of wage inflation. But as with anything, you want to be careful with averages because the average wage inflation could be between 5% and 6%, maybe a bit higher in some specific white-collar skill sets. But for the blue-collar workers, unskilled, semi-skilled workers, the wage inflation is much stronger and has been much stronger over the last 18 months. So that's where you can really see wage inflation kicking in and that level of wage inflation is unique to the U.S. Although wage inflation is stronger across the world generally and also in Europe, which is where we have a lot of our business, it's not as strong as it is in the U.S. In all cases, we have been able to match those wages through bill-pay increases so that our spreads are moving in the right direction. As we've talked on prior calls, wage inflation is generally a positive aspect for our business. And certainly, we have seen some very good evolution on our bill rates in the U.S. specifically, but also overall as we look at our business on a global basis.

And then Hamzah, I would just add to your second question on remote work and availability and how our footprint, so that is absolutely a huge opportunity for our Experis business. We're seeing it. As we've talked about, Experis for us is predominantly IT. And similar to the comments that you mentioned, that is a big benefit for us when we look at our global Experis business. And we talked about post the ettain acquisition, that $4.5 billion global business. And the U.S. is a big part of that and with our U.S. footprint with the ettain acquisition and the addition of our convenience market, we have a great footprint in the U.S., very broad and that's a huge opportunity for additional worker availability that are working remotely as well. So we see the same trends in our Experis business.

My follow-up question is about mergers and acquisitions. You have mentioned the ettain acquisition quite a bit, and it appears to be the largest deal you've made since the COMSYS acquisition in 2010. Are you becoming more aggressive with M&A? Is it simply a matter of timing for these deals? Are you noticing an increase in available opportunities? I know you have been strategically focused on enhancing higher-margin professional services and solutions as part of your long-term margin strategy, so any insights on this would be appreciated. Thank you.

Yes, Hamzah. From a capital allocation perspective, I would say there haven't been any significant changes. We've been clear that the professional side is an area of interest for potential acquisitions. The ettain acquisition was a strong fit for us. That said, we are cautious and will continue to follow our capital allocation strategy as we’ve outlined. Currently, our main focus is on integrating ettain, and I can report that this process is going very well, as indicated in our prepared remarks. Looking ahead, we will keep an eye out for additional opportunities that could serve as beneficial bolt-ons in the professional resourcing and services sector, particularly in IT, as we've previously mentioned. Similarly, on the Talent Solutions front, our leading MSP and RPO services represent ongoing opportunities. While we are experiencing solid organic growth right now, we will remain vigilant for promising prospects, although any future opportunities must align very well with our strategy, and we will proceed with caution in our analysis.

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

Great, thanks so much. Hi Jack or Jonas, could you provide some insights? It seems like you have several different efforts underway, such as the Russian disposition, some professional acquisitions, and initiatives on digitization. Can you discuss the impacts on both the gross margin and the operating margin over the long term? Jack, I feel this question might be more directed at you, as you appear to have a stronger focus in this area, which could lead to positive results. What are your thoughts on this?

The journey and the evolution that you're describing, Kevin, is really all encompassed within our DDI strategy. So diversifying the business into faster-growing, higher-margin business segments; moving all of the company on to cloud-based mobile SaaS applications for a modern infrastructure so that we can engage our people, engage our consultants, our associates and as well as our clients in great ways, as well as generate data and analytics and insights that benefit our clients and all of our stakeholders. And then finally, innovation initiatives where you've seen us really lean into the notion that in a labor-tight environment, which you are seeing right now, we are able not only to find and source the best talent in all of our brands, but we're also able to create the skills that the talent needs that may not have those skills and that's really the direction that we're taking strategically. So what you're describing and what you're seeing is also executing on our DDI strategies.

And I would just add to that, Kevin. I think that really just goes in line with what we've talked about in terms of our EBITDA margin financial target, so again, fully committed to the 4.5% to 5%. And these steps are the type of steps that you'd expect us to take as we're focused on that diversification part of DDI as Jonas mentioned. So ettain coming in at above 20% and you can see that coming through. We've been very open about the increase. You can see on the GP margin walk that added 30 basis points in the fourth quarter, which was great, a little higher than we actually guided to. They came in a bit better on the GP margin in the fourth quarter, as I mentioned a strong result. And as we look at the portfolio adjustments, it really is in line with our profitability hurdle rates that we look at that and the margin opportunity. And Russia was a very good business, but it was a commercial staffing business, lower margin. And really, that's going to be a great opportunity for us going forward as a franchise, where we collect franchise fees from the very strong management team there going forward. So you should expect that we're going to continue to focus on diversification going forward. And those are the types of steps that are improving our GP margin, and that's going to be a sustainable structural improvement over time.

Great, thanks. And then just real quick, Jack, is there any way to frame how much absenteeism impacted Q4, and what's in the Q1 guidance?

Yes, I'd say we've definitely saw some absenteeism in the bench countries and a to a broader impact in some of the other countries. But it comes through more in the bench countries because of the impact on the GP margin, so that's not new. We've always seen sickness in the winter periods in our bench countries like Germany and the Netherlands to some degree, and I'd say the Nordics as well with Norway and Sweden and that did tick up. So we are at higher levels than average and so if we look at sickness levels in a country like Germany that could be at a 6% type of average for this time of the year. That's probably ticking up to more like 9% at the moment. But as Jonas said, when we look at this, it's much more manageable than kind of what we were dealing with in the third quarter when we were seeing much more severe impacts from the Delta variant. And so it is a bit of a drag, but candidly, it's being overcompensated by the improvement we've been seeing in other markets when we look at the strong results in the U.S. and actually the U.K. and other markets that aren't impacted due to bench models. So it's been offset for the most part. We would expect that some of that's going to continue, certainly, and that's been factored into our guide. But I'd say at this point, Kevin, we're viewing it as relatively manageable.

Thank you.

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

Good morning and thanks for taking my question. You've mentioned that you've implemented PowerSuite in 22 markets. I was wondering if you could talk a little bit about what you're seeing in the markets that you've implemented PowerSuite in? Also, when we think about like more Manpower in France, what the impact has been there? And then what the rollout looks like across the rest of your operations across the globe? How soon should we expect that? And what sort of lift should we get from that?

The rollout of the PowerSuite technology is a significant initiative that we've discussed over the past couple of years, aimed at enhancing operations across all major areas of our company. We have been accelerating this effort, and in countries where adoption is well-established, we're observing increased employee engagement, improved recruiter productivity, quicker matches, and more accessible information for our associates and consultants at Experis. We are also capitalizing on the insights from our unified platforms worldwide. This allows us to gather data on reskilling and upskilling initiatives, which helps us predict the best matches between candidates and specific opportunities. Our goal is to continually enhance the matching process to achieve faster and more productive outcomes for both associates and consultants, ultimately benefiting our clients. We're very satisfied with our progress; France is currently in the deployment phase, which is substantial, and several major countries have successfully implemented PowerSuite in the past year. Overall, we are pleased with the early signs of productivity improvements and positive user experiences from our team and client feedback. We are providing valuable analytics that aid in optimizing workforce composition and retention rates, not just for our workforce but for our clients' entire teams in specific locations. This has proven to be a beneficial addition for many clients where we've launched these solutions.

Jonas, could you be a little bit more granular with regards to some of the productivity improvements? Like for example, in terms of recruiter productivity, does it go up by 50% or 100% post implementation? How do you look at that just in terms or fill rates or time to fill when you take a look at some of the key metrics?

I'd love to be able to say that we get 50% to 100% productivity improvements when we use the tools, but we were quite efficient and productive already before, as you can imagine, at our scale, Mark. So I think we're looking at productivity improvements in the high teens. We would be very pleased with the progress there. Sometimes it's more, sometimes it's less, but frankly, it's all to do with also the maturity. As you can tell, we've been on a very rapid deployment schedule and I don't think we've optimized the adoption levels yet. So there's more to come on productivity. And I think it translates exactly into the kind of measures you're discussing; more placements per recruiter, quicker placements per recruiter. And we have seen some very good improvements on speed to match when we're leveraging some of these new tools, which frankly, surprising and very positive to see. At our scale, all of this needs to be accomplished, which is why we have global platforms in various countries before we can begin to observe the effects on a global level. We are very encouraged by these new technology tools, not only in terms of productivity but also in the potential data and insights can offer to support our clients in reducing turnover, a significant issue in the U.S. Contrary to common belief, increasing wage rates significantly can also lead to a substantial reduction in turnover. Many of our client organizations are hesitant to raise their pay rates. However, if they increase their pay scientifically, considering all relevant data and the actions of other local employers, they can significantly reduce turnover. This type of insight, which often contradicts prevailing logic, is benefiting our clients and contributing positively to our growth in both margins and revenues.

Great. And then as a follow-up, obviously, these productivity tools, as you roll them out across the globe are going to be helpful. Then we also have an improvement with regards to mix, both in terms of solutions as well as Experis. And in contrast to last quarter, we're not talking about supply chain issues to the same extent. So it sounds like as we think about rolling towards the second half of this year, hopefully, by that point, some of the supply chain issues and Omicron are dissipated, how are you thinking about kind of the margin trajectory with all of the positives that you have going for you, helping you to move towards that 4.5% to 5% target that we discussed earlier?

Mark, this is Jack. I'll talk to that. So I would say, I like the way you frame that because that's the same way we're thinking of the opportunity. And we've talked about it a bit in our prepared remarks. But the more and more we talk to our clients, they're seeing more and more visibility on the supply chain timeline in terms of expecting that to start to work itself out in the first half of the year here, so that's been a positive. And as you can tell from the fourth quarter results, it's coming through as more and more manageable. So there's still ways to go, but more and more manageable by our clients. So it's helping them with their ability to schedule demand and so forth with us. When we think about the margin progression, I think the way to think about it is quarter in, quarter out we're very focused on margin expansion. So another quarter in the fourth quarter of good underlying margin expansion on the bottom line, the GP margin has certainly been strengthened by the strong levels of perm, but the staffing going up 40 basis points on an underlying basis point is really, really encouraging and I think that's what we're very focused on as well. So I'd say as we go forward, you should expect that from us. As we march towards those financial targets each quarter will be continued expansion on an overall basis. We'll certainly call out any unique items as part of that. But you should expect as the revenue levels come back, we will get more and more operational leverage. And we should note as part of this, we know that France has been a bit behind some of the other large countries in terms of versus 2019 levels. But it was really good to see in the fourth quarter that we projected, we were looking at them going from minus 10 to 2019 levels in the third quarter to minus 8 in the fourth quarter, and they came in at minus 6, so about 2% better. So that's going to be a big part of the improvement as we go forward; France coming back, our largest operation, adding more and more operational leverage as they get back to pre-crisis levels and as Jonas said, we expect that to happen relatively soon. We'll continue to march in that direction. So all of that will equate to a good ongoing EBITDA margin expansion year-over-year. So I think 2022 will be a great year of margin expansion for us on the bottom line. It's been a great year already for us on the top line. But as the operational leverage continues to come in, you should expect that we're going to make very good progress in 2022 as we approach that goal.

Great to hear, thank you.

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

Hi, thanks. Good morning. You indicated that your Mexico operation has started to stabilize after a decline due to new labor legislations. Can you elaborate on some of the trends you're seeing in Mexico in response to the legislation?

Well, George, it's still early days in Mexico. As you know, the impact of the legislation was really starting to be felt in late July and then more so in August and fully so in September. But I would say, based on the most recent trends we have seen, the significant decline of almost 60% has now stabilized. And we feel that we are seeing some normalization of the new markets and the new industry that we're operating in. We've been very successful and the Mexican team has been very good at creating a market-leading position. We have the most specializations approved by the Mexican government and that means we can operate in many different sectors, except the one broad-based general staffing, which is the one that was eliminated in the legislation. So we feel very good about our opportunity, but I would say it's still early days to determine what the opportunities are going to be, frankly. Many of our clients are still coming to grips with these changes and we think it will take time for them to get comfortable with the new situations, and then we'll start to see some improvement in our Mexican business. But so far, so good in terms of stabilization that we perceive to have happened in the market and then we'll take it from there going forward.

Got it. Very helpful. And then can you discuss the impact of ongoing supply chain disruptions on your business? And in which geographies and markets you're seeing the most impact?

Jack stated that the situation is becoming more manageable. Our clients are expressing increased optimism about seeing better times ahead. The challenges vary across sectors and industries rather than countries alone. The automotive sector has faced significant hurdles, especially for those relying on equipment with computer chips. However, in our conversations with clients, we are beginning to observe a stabilization regarding the timeline for improvements, which will vary by country and industry. It seems likely that conditions will return to normal throughout 2022. Germany is notable as the most significantly affected country, reflected in their GDP projections for the fourth quarter. They are among the hardest hit in Europe and potentially worldwide. Over time, we believe that improvements in the automotive sector will positively influence the broader economy in Germany.

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

Thank you. Could you speak to your existing productivity and where you're adding recruiters? You've already talked about productivity improvements, but if you could give us some color as to where you're adding recruiters now and if you are? Thank you.

Tobey, we are definitely leaning into what we think is a very strong growth environment. And as you can see, and some of our businesses are already over, but as come over 2019 levels and getting close as a whole. But in terms of resourcing and investment in our producers or recruiters and salespeople, we are already ahead of 2019 and we're anticipating a good growth environment, and we're staffing accordingly. Jack, maybe you have some further color on the question that Tobey asked?

Sure, Jonas. Just a little color around that. So we're up 5% in FTEs from pre-crisis levels. And so as we guided in the third quarter, we were going to be hiring in the fourth quarter. We did that, but that's been a trend over the last few quarters. So FTEs are up 5% from year-end 2019, they're up 17% in the fourth quarter. So we are clearly investing heavily in the growth and in line with our previous comments about the way we're looking at 2022 is a great opportunity for us. And to your point, where, Tobey, it's broad-based. I'd say the only large country we're not adding FTEs is Mexico due to the reasons Jonas just talked about due to the legislation there. But very broad-based that probably the U.S. is the most and the U.S., it's really all three Manpower, Experis and Talent Solutions brands are all growing nicely, so that's broad-based increase. The U.K. is adding very heavy amounts as well. And we talked about Italy has been progressively adding, Italy is a great perm market for us and France is adding as well. So it is broad-based across all of our largest businesses.

Thank you. My follow-up question has to do with RPO and MSP businesses and industry. Where are we in the adoption and the growth there? Trying to just get a sense for whether there's still room in terms of not only new clients, but sort of wallet share where your customers are just shifting that fixed recruiting expense into variable expense. Thanks.

I would say the U.S. is the most developed market, while Europe is trailing by about five to six years in maturity, with other regions following behind. In terms of growth potential, we still identify significant opportunities globally. While the U.S. is the most mature, we do not believe it is fully saturated and see many growth prospects. As we've mentioned, companies are increasingly seeking innovative RPO and MSP solutions that have significantly evolved in the last six to eight years in the U.S. This adaptability in our service offerings allows us to leverage data and insights from major global platforms to enhance our services and improve hiring accuracy. Additionally, we must keep in mind that unexpected volatility can occur at any time, so our ability to quickly scale up is a key strength that we will continue to emphasize. We anticipate substantial growth opportunities in the U.S. and internationally, based on the penetration rates of our offerings. The industry is undergoing transformation, and we are at the forefront of that innovation to ensure our services meet current demands while also preparing for future needs. Technology and data insights have been crucial in satisfying our clients and engaging talent in a very competitive labor market.

Thank you.

Excellent. That brings us to the end of our fourth quarter earnings call, and we look forward to speaking with you on our next earnings call. Thanks very much. Have a good rest of the week.

Thank you. And that concludes today's conference call. Thank you all for joining. You may now disconnect.