Welcome to ManpowerGroup's First Quarter Earnings Results Conference Call. You'll be put in a listen-only mode until the question-and-answer time begins. This call is being recorded. If you care to drop off now, please do so. I would now like to turn the call over to ManpowerGroup's Chair and CEO, Mr. Jonas Prising. Sir, you may begin.

Welcome. Thank you for joining us for our first quarter 2025 conference call. Our Chief Financial Officer, Jack McGinnis, is with me today. For your convenience, we've 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, and Jack will go through the first quarter results and guidance for the second quarter of 2025. I will 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 concerning economic and geopolitical uncertainty, 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.

Thank you, Jack. This quarter, I spent time with many of our clients and leadership teams across our key markets in Europe, Latin America, and Asia Pacific, as well as here in North America. Broadly, the consensus is the quarter was of two halves. We began the year with a sense of optimism for economic growth in the U.S., particularly, and a greater acknowledgment among EU policymakers that Europe needed to do more to remain competitive. The last several weeks have impacted the sense of confidence, and the mood is significantly more uncertain and cautious as a result of recent trade policy announcements in the U.S., with ripple effects far beyond. At this stage, most of our clients are adopting a wait-and-see approach, and it is difficult to provide any concrete assessment of how significantly this might affect demand from our customers in our major markets around the world. As always, we're staying very close to our clients during this time and taking an industry and country-specific view as announced tariffs impact in different ways. We remain agile and are monitoring demand changes closely. At the same time, the benefits of a flexible workforce are highly visible during periods of increased uncertainty, and we know that those closest to their clients will win opportunities to deliver more flexible workforce solutions in the time of need. Our message to our organization and leadership teams in our 75-plus countries and territories around the world is clear: control what you can control, stay close to our clients and candidates, and build agility so we can act quickly to anticipate and respond to evolving client needs. There remain plenty of opportunities to win in the market and provide value to those we serve, and we are determined to be the partner of choice during unsettled times. Now to our results. In the first quarter, revenue was $4.1 billion, down 5% year-over-year in constant currency. Our reported EBITDA for the quarter was $36 million. Adjusting for restructuring costs, EBITDA was $52 million, representing a decrease of 32% in constant currency year-over-year. Reported EBITDA margin was 0.9% and adjusted EBITDA margin was 1.3%. Earnings per diluted share was $0.12 on a reported basis, while earnings per diluted share was $0.44 on an adjusted basis. Adjusted earnings per share decreased 51% year-over-year in constant currency. In the first quarter, we saw a continuation of a challenging environment in Europe and North America, while demand for our services in Latin America and Asia-Pacific Middle East remained good. Staffing margin was solid, reflecting business mix changes and ongoing disciplined pricing. However, permanent recruitment softened further, and we saw reduced outplacement volumes, which impacted our margins. We took further cost actions to mitigate these trends, and we will continue to adjust as needed as the environment evolves. But we have seen a period of volatility relating to the tariff announcements and uncertainty is elevated right now. Underlying economic indicators, including labor markets, continue to be relatively stable. Based on what we see today, we expect employers to continue to cautiously look at hiring select talent, particularly though with in-demand skills that enable their businesses to transform. Indeed, as AI accelerates, we expect to see a greater focus on skills development as organizations seek to guide their workforce to a period of transition and prepare them to work alongside AI. This is supported by our most recent Experis CIO report, which found that more than half of the companies are planning on upskilling existing talent with AI skills and one in three are hiring people with the ability to collaborate across functions to solve business challenges.

Thanks, Jonas. U.S. dollar reported revenues in the first quarter were impacted by foreign currency translation and after adjusting for currency impacts, came in above the high end of our constant currency guidance range. Although conditions remain challenging, our revenue trends demonstrate we continue to perform well in the market. Following various recent sale and franchise arrangements, our revenues from franchise offices are significant and are included within system-wide revenues, which equaled $4.5 billion for the quarter. Additional information on franchise offices can be found in our press release financials. Gross profit margin came in just below the low end of our guidance range, driven by weaker permanent recruitment. As adjusted, EBITDA was $52 million, representing a 32% decrease in constant currency compared to the prior year period. As adjusted, EBITDA margin was 1.3% and came in just below the low end of our guidance range, representing a 50 basis points decline year-over-year. Foreign currency translation drove a 2.5% unfavorable impact to the U.S. dollar reported revenue trend from the constant currency decrease of 4.5%. Organic days-adjusted constant currency revenue decreased 1% in the quarter, which was favorable to our guidance. Turning to the EPS bridge. Reported net earnings per share was $0.12. Adjusted EPS was $0.44 and came in $0.03 below our guidance range. Walking from our guidance midpoint of $0.52, our results included a lower operational performance of $0.09, a foreign currency impact that was $0.04 favorable to our guide, and interest and other expenses, which was $0.03 unfavorable. Higher tax charges from a French law change imposed for a one-year period for 2025 and updated country earnings mix for the current environment represented $0.06 and restructuring costs represented $0.26, resulting in the reported EPS of $0.12. Next, let's review our revenue by business line. Year-over-year, on an organic constant currency basis, the Manpower brand declined 2% in the quarter. The Experis brand declined by 5%, and the Talent Solutions brand declined by 2%. Within Talent Solutions, our RPO business experienced a slight year-over-year revenue decrease. Our MSP business recorded a strong double-digit revenue increase compared to the prior year. While Right Management experienced a year-over-year revenue decline in the quarter as outplacement activity continued to slow. Looking at our gross profit margin in detail, our gross margin came in at 17.1% for the quarter. Staffing margin contributed a 10 basis point reduction due to mix shifts and lower bench utilization in select countries, while pricing remained stable. Permanent recruitment was weaker than expected and contributed a 10 basis point GP margin reduction as permanent hiring activity in the first quarter decreased year-over-year. Right Management career transition within Talent Solutions contributed a 10 basis point reduction as outplacement activity decreased in the quarter. Other items resulted in a 10 basis point margin decrease. Moving on to our gross profit by business line. During the quarter, the Manpower brand comprised 59% of gross profit. Our Experis Professional business comprised 24%, and Talent Solutions comprised 17%. During the quarter, our consolidated gross profit decreased by 6% on an organic constant currency basis year-over-year, representing a sequential step down from the 4% decline in the fourth quarter. Our Manpower brand reported an organic gross profit decrease of 2% in constant currency year-over-year, a slight improvement from the 3% decrease in the fourth quarter. Gross profit in our Experis brand decreased 11% in organic constant currency year-over-year flat from the 11% decrease in the fourth quarter. Gross profit in Talent Solutions decreased 5% in organic constant currency year-over-year, representing a step down from the fourth quarter increase of 7%. MSP saw continued year-over-year gross profit growth in the first quarter, while RPO and Right Management gross profit declined due to the end of select client projects and lower outplacement volumes. Reported SG&A expense in the quarter was $670 million. SG&A, as adjusted, was down 4% year-over-year on a constant currency basis and down 3% on an organic constant currency basis. The year-over-year SG&A decreases largely consisted of reductions in operational costs of $18 million. Corporate costs continue to include our back-office transformation spending, and these programs are progressing well with expected medium- and long-term efficiencies. Dispositions represented a decrease of $8 million, and currency changes contributed to a $15 million decrease. Adjusted SG&A expenses as a percentage of revenue represented 15.9% in constant currency in the first quarter. Adjustments represented restructuring costs of $16 million. The Americas segment comprised 25% of consolidated revenue. Revenue in the quarter was $1.1 billion, representing an increase of 5% year-over-year on a constant currency basis. OUP was $25 million, and OUP margin was 2.4%. The U.S. is the largest country in the Americas segment, comprising 65% of segment revenues. Revenue in the U.S. was $689 million during the quarter, representing a 2% days-adjusted increase compared to the prior year. This represents an improvement from the 1% decline in the fourth quarter as Manpower and Talent Solutions had revenue growth, while the rate of decline improved in Experis. OUP for our U.S. business was $11 million in the quarter. OUP margin was 1.6%. Within the U.S., the Manpower brand comprised 25% of gross profit during the quarter. Revenue for the Manpower brand in the U.S. increased 7% on a days-adjusted basis during the quarter, which represented strong market performance and an improvement from the 2% increase in the fourth quarter. The Experis brand in the U.S. comprised 42% of gross profit in the quarter. Within Experis in the U.S., IT skills comprised approximately 90% of revenues. Experis U.S. revenue decreased 2% on a days-adjusted basis during the quarter, an improvement from the 6% decline in the fourth quarter. The improvement in the first quarter was driven by seasonal health care IT go-live projects and the remaining business was relatively stable from the previous quarter. Talent Solutions in the U.S. contributed 33% of gross profit and saw a revenue increase of 3% in the quarter, a decrease from the 16% increase in the fourth quarter, driven by RPO and Right Management. RPO experienced a modest revenue increase in the U.S. during the quarter following the completion of higher volume seasonal projects in the previous quarter. The U.S. MSP business executed well during the quarter, posting strong double-digit revenue increases, while outpacing activity within our Right Management business was down year-over-year as our placement activity slowed. In the second quarter of 2025, we do not anticipate the seasonal Experis health care IT projects to be significant, and we expect the overall U.S. business to have a low single-digit year-over-year revenue decline. Southern Europe revenue comprised 45% of consolidated revenue in the quarter. Revenue in Southern Europe was $1.8 billion, representing a 5% decrease in constant currency. As adjusted, OUP for our Southern Europe business was $54 million in the quarter, and OUP margin was 2.9%. Restructuring charges of $3 million primarily represented actions in Spain and Portugal. France revenue comprised 53% of Southern Europe segment in the quarter and decreased 8% on a days-adjusted constant currency basis. France has historically managed our Morocco business as a small component of their overall business. In line with regional management changes, beginning with this 2025 reporting cycle, we have reclassified Morocco to other Southern Europe and have restated prior periods to reflect like-for-like year-over-year variances. That said, we saw an improvement in the rate of revenue decline in France from January to March. In March, the largest month revenue decreased 7.5%. As adjusted, OUP for our France business was $21 million in the quarter. Adjusted OUP margin was 2.2%. Activity to date in April is similar to the month of March, and we are estimating the second quarter trend to be similar to the month of March trend.

Thank you, Jack. We are confident in our strategic plan to diversify, digitize and innovate. In our next call, we will share more detail on the progress of our technology roadmap, and how we're implementing AI and Agentic AI. We're preparing to showcase this at VivaTech in Paris in May, one of the world's largest tech conferences. We'll be sharing how we're partnering with best-in-class platforms to build tailored solutions with candidate experience and data privacy front and center. We know our approach to buy best-in-class and build to differentiate will set us apart, and we are focused on ensuring we have a strong foundation of data and aligned global systems that enable us to scale, drive efficiencies and create even more value for our clients and candidates. Executing our diversification, digitization and innovation strategy at speed and scale requires process convergence across our global enterprise and continued discipline to manage costs at the center for the benefit of our brands and countries where business is done. In our last call, we shared that we had evolved our organizational structures to align our global brands Manpower, Experis and Talent Solutions within the strength and global commercial function to drive profitable revenue growth. In Q1, we continued this progress expanding alignment of our global functions, advancing the centralization and standardization of finance, technology, marketing, people and culture, and legal across countries and regions. This is already enabling us to better leverage subject matter expertise for greater global consistency and efficiency. Because we help our clients build workforces with the best specialist talent, we need to attract and retain the best people. And to that end, we're delighted to have been named a world's most ethical company for the 16th time. We know this accolade matters to our people and to our clients. It is one of the reasons talent and organizations choose ManpowerGroup and its family of brands, Manpower, Experis and Talent Solutions. In closing, we have been through uncertain times before and are confident in our ability to manage the business for short-term performance and long-term success. We are committed to being nimble and taking actions as needed, adjusting our cost base and adding resources to respond to demand opportunities. We continue to transform our business at pace, investing in technology, process and talent across our brands to serve our client needs globally, all while maintaining a strong local presence in every market we serve. Finally, I want to thank our dedicated teams around the world for supporting our clients who place their trust in us, and for guiding millions of people eager to contribute their skills and talent to make organizations successful. I would now like to open the line to Q&A.

Our first question comes from Andrew Steinerman with JPMorgan. Your line is open.

Jonas, I definitely heard ManpowerGroup's second quarter guide does not include the prospective impact of pending tariffs. But I was trying to think about if there was a resolution of U.S. tariffs that was considered a kind of reasonable for trade between U.S. and Europe, what kind of rebound might ManpowerGroup anticipate in that scenario?

Andrew, thank you, and that's a great question. As you could tell from our earnings release, the first quarter really progressed as we had anticipated with one exception. Actually, revenues came in a bit stronger. We saw good and positive revenue growth in the U.S., Italy, Spain, and, of course, continued strong performance in Latin America and Asia-Pacific Middle East, but we had weakness in perm, most notably in France, and in a couple of other European countries, and that's the GP that we were missing really in terms of what we had planned to execute for the quarter. Now some of that perm hesitation or slowing, we believe, came from continued caution by employers. And that's really what we're guiding to – a continued trend of stability with operations continuing more or less with the trends that they have. But we know that there's a lot of caution. Now, if you look at this from uncertainty level, the cause of this uncertainty is a U.S. trade policy that's been communicated across the world, which is not great in terms of our visibility. But the good news with that is as quickly as it came on, it can, when this gets removed, lead to a very quick change going the other way. And that, coupled with the optimism that we talked about in our last earnings call around what Europe needs to do to become more competitive. And I think those conversations are continuing. In our biggest market, France, last time we spoke, there was still budget uncertainty. Today, we have a budget that's been approved by the legislator. We think that's positive. As you can tell, our U.S. business is actually seeing growth in all of our – in Talent Solutions and in Manpower for three consecutive quarters. And we have a number of European countries that are big for us. Italy, for instance, that is moving forward with good growth and good profitability as well. So, when a policy that's disrupted gets to a good resolution in a reasonable way, there is a path to an actual quick turnaround in terms of employer confidence because in the end, it's all about employer confidence, what they think could happen and how they feel about the future when it comes to increasing their workforce.

Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.

Just a couple of things. Jonas, if I could follow up on the comment on the permanent weakness that you're seeing. It sounds like most of it is just the freezing acquiring decisions, but I was just wondering if you're starting to see any signs of layoffs? And I don't know if it's an early indicator or something, as you've seen in prior cycles of what happens in that area typically?

I would say it follows our discussion in our prepared remarks, when employers adopt a wait-and-see approach they become more cautious. And in the first phase of that caution, they pull back on their temporary staffing. As you can tell, in many countries, we have stabilized. And in some, we've actually seen an improvement when we – before we saw a more pronounced pullback. So, what then happens is they move to their permanent hiring. But I would provide this color, though, that I think is an interesting element that we also talked about in our prepared remarks, which is that the pullback on the perm is primarily focused around lower skills. We are still seeing good demand on more specialized skills, more technical skills within manufacturing, in logistics, other parts of our client segments. And I think that distinction tells you that this notion of employers are uncertain, but they're holding on to their workforces. They are not letting go of workforces to any major degree. They're also not hiring to any major degree. They are, however, when we are – when they need any workforce, they are coming to us, which you can see reflected in a number of our countries actually performing with better revenues than what we had anticipated when we gave our guidance for the first quarter. So, it is a pretty traditional dynamic when employers get cautious later on. They will pull back on perm, but the distinction here is more specialized skills are still very important as companies are in full transformation mode in many areas of their businesses, and it's the skills that are easier to replace at a later point that we're seeing a little bit more weakness.

Okay. Got it. That's helpful. And just one more. You talked about how uncertainty is typically a benefit for kind of your services. But I think there's always that level like when it gets too uncertain, which is probably what it is now, it isn't. And my question is more, when do you start deciding that you need to resize your cost base and workforce even more than perhaps what you've already done?

Well, it's something that we're looking at on an ongoing basis, and it very much depends on where – which country we're talking about. What we anticipate in terms of the demand? What are we seeing coming in terms of the future pipeline? So, it's a balance that we're managing in each country on a continuous basis. As you've seen in our results in the first quarter, clearly, we've taken some significant additional action in Northern Europe because there is a clear dichotomy in Europe; Southern Europe is performing much better. Northern Europe continues to struggle. A lot of that is tied to their economic outlook in terms of the country. We're seeing that reflected in our business, and then we take actions. But we try to do this in a balanced way because we want to protect our ability to deliver great service to our clients and drive increased performance in terms of our market share. And I think our results this quarter illustrate that we're managing that quite well. The revenues came in higher, and I think that is a testament to competing well in the market across the world.

Our next question comes from Alexander Sinatra with Baird. Your line is open.

This is Mark Marcon. I had to dial in through Alex's line; there was a little snafu. Jonas, you started your presentation by mentioning that you had been to Europe recently and met with both your clients and your leadership teams. And I'm wondering if you could communicate to an even greater extent, what is the mindset of some of those clients? Are they in this belief with regards to the tariff policy? Is there expectation that it's going to settle down and potentially go back to the way it was, or are they in the early stages of trying to prepare for a new reality?

Mark. Well, I would say, as we mentioned in our prepared remarks, first of all, no one is making any big moves right now. They are adopting a wait-and-see approach. If their business is progressing, we're seeing good staffing trends in those countries. If our business isn't, they're more cautious. Overall, as I just mentioned, from a term perspective, we're seeing a little bit more softening, but most of them anticipate that this is a negotiation tactic to change the trade dynamics, but that ultimately, this will result in a settlement that is different than what was announced on April 2. So that is the belief in the vast majority of client conversations that we've had. Now the uncertainty comes from each country is different. The application of this trade policy is different country by country, industry by industry. And I think that is what's causing a greater degree of uncertainty. But there is a pretty uniform view that this is going to be part of a negotiated settlement. Most of them don't anticipate that it's going to be exactly the way it was before. They accept that there's going to be changes but they believe that the changes or they hope, I should say, that those changes are going to be manageable and different from what was announced on April 2. Now some of the regions, as I mentioned in my prepared remarks, I was in Latin America recently. That's a region that has seen relatively mild changes in tariff arrangements. And so there, clearly, they are not seeing this as that much of an obstacle and are feeling much better about the outlook. But overall, the sentiment is the sooner that this gets sorted, the better it is because there are opportunities, and there is a belief that we can see good growth come back or accelerate if we just get past this policy hurdle.

Great. And then you took some actions in Northern Europe. Can you describe the savings that you may get from those recent actions and how we should think about it? And then secondly, can you also describe what the outlook is in terms of the French taxes for the balance of the year, how we should think about that? And is this a one-year deal, or could it continue into '26 as well?

Mark, this is Jack. I'd be happy to talk to that. So specifically on the restructuring charges. So, you can see for the quarter overall, we took $15.8 million. As Jonas said, if you look at our Northern Europe slide, you can see that's where we've been experiencing the most pressure. That's where the majority of our actions are happening. So, at the top of the list would be the Nordics, about $5 million of the total charge is Nordics. Next would be Belgium in the U.K., about $2.5 million to $3 million each. You can see in the U.K., continue to see very difficult conditions there. And I'd say, lastly, the Netherlands continues to be a market we're focused on rightsizing as well based on current demand levels and a bit in Spain as well. So, the rest were relatively small. In terms of your point, Mark, on payback, generally, when we look at the majority of the actions, the majority of them are FTE related. So, we see a pretty quick payback. And there are a small number of office optimization efforts there as well. But generally, our overall payback is about nine months. So, we will start to see that improvement coming through in Q2. And I should say also, we did restructure, of course, in the second half of 2024. And you see some of that coming through now, particularly in Northern Europe, where we took very significant actions we're taking more now, but we took some good actions last year that are actually helping improve the sequential profitability in that region. And we're very focused on getting Northern Europe back to breakeven and then profitability, which you can see through these actions. So, that's what I'd say about the restructuring activities. In terms of your question on the France tax rate, yes, it is enacted as a one-year increase. So that is the legislation as – and you can see in our materials, we estimate that about a 5.3% increase in our, I should say, 5.6% increase in our overall tax rate that we guided at the beginning of the year. And then you add the country mix update to that, which is about 3.2% on top of that. So that gets us to the new effective tax rate that I've guided to. In terms of France and whether or not there will be any changes beyond this year, I would say everything we've seen from the administration is they're very, very focused on the competitiveness of France, and for that reason, we believe at this point that this is a one-year increase as they enacted, and for them to increase it further, they would have to do that through new legislation and through a new budget at the end of the year. And at this stage, we just don't see any signs that would indicate that, that is a probability. So, we do – we are viewing this as it's been enacted in the law as a one-year change. And as we go forward, as I mentioned previously, we would also expect some of the countries where we have valuation allowances to start to see significant tax benefits as we move forward, and we rebound in those markets back to profitability, and you'll see the tax rate improve pretty significantly once that happens in the future.

Great. And then one last one, just perm as a percentage of gross profit and what your expectations are as it relates to the second quarter for perm?

Yes. So, perm as a percentage of GP in Q1 was 16.4%. Because Q1 is our lowest quarter of earnings and GP dollars, that's a bit inflated generally because the staffing base is a bit lower in Q1. As we ended the year last year, we were at about 15.5%. So, I think that's a reasonable guideline as we go forward. I think perm overall, to Jonas' point, that we talked about, that really was the key factor in the earnings this quarter. As we ended the year last year, we actually saw the year-over-year term trend really come in line with what was happening with staffing at that time. So, perm was down about 3% organically, and we saw staffing GP down around four – a little bit higher than that, but very closely aligned. And as we walked into the first quarter, we saw perm step down further year-over-year. So, perm was down about 8% year-over-year in the first quarter, and that really was what drove the lower. We had seen some good stabilization. But as Jonas said, this stepped down a bit further in the first quarter. So, as we go forward, I think we're being cautious, as you heard me say in the guide, and I think our perm expectations for Q2 are pretty much aligned to what we just experienced in Q1.

Our next question comes from Kartik Mehta with Northcoast Research. Your line is open.

I wanted to ask you a little bit of a bigger picture question. And I know temporary staffing fundamentals have been under stress for almost three years now. But have you seen any impact from other technology that might be impacting temporary staffing, whether it's LinkedIn or other apps, or is there any pressure on the business from kind of secondary competitors?

As we assess the global landscape, it's important to note that despite facing challenges over the past three years, two regions have consistently shown growth in revenues and improved profitability, specifically Asia Pacific and Latin America. In contrast, Europe has faced significant economic hurdles, with the PMI remaining under 50 for nearly three years and Germany experiencing a recession for the same duration. The standout region has been the U.S., which has seen steady growth and strong employment, although both are beginning to soften. Nonetheless, our industry has recorded negative growth throughout these three years. This raises the question of why this is occurring. We believe a significant factor is the strong hiring right after the pandemic, which led to some over-hiring as companies struggled to find skilled talent, resulting in them retaining their workforce longer than they might have otherwise. This phenomenon of labor hoarding has contributed to the challenges faced by our industry. Currently, we see no evidence that these issues are driven by technological or structural shifts. Instead, we attribute them to anomalies arising from the pandemic which we expect will normalize, allowing traditional industry dynamics to resume. If there is any indication of technological change, it appears to be in specific areas, particularly within the technology sector concerning programming roles. The advent of AI has significantly increased efficiency in software coding and programming, reflected in the unemployment rate for software programmers in the U.S., which currently stands above 7%, compared to the national rate of 4.2%. This indicates a clear structural change in demand for a specific role where technology, especially Gen AI, has enhanced productivity.

As a follow-up, Jonas, I know this might be a challenging question. You mentioned France and the time around when the budget was passed. Did you notice a decrease in demand when the budget was passed and the tax rate was increased? I understand this might be complicated with all the tariff issues happening, but I'm curious if this led to reduced demand and whether things might improve once the budget is implemented.

It definitely could. I think the current uncertainty around the trade policy clearly now causes more hesitation on the part of employers. But just as we said at the top of the call, as quickly as this trade uncertainty came on and was really solidified on April 2, if it is negotiated and settled at a reasonable level, it could turn around the sentiment pretty quickly because companies feel that Europe is on the path of becoming more or wanting to take steps to become more competitive along the lines of the five pillars of the Draghi plan, which talks about productivity, better innovation and technology adoption, reducing regulation, things like that, which would be good for business. You've also seen a surge in defense spending and announced willingness, especially in Germany, to finance for their part, greater investments in that area, which, from our perspective, could be really good because we have a very strong position in aerospace and defense across all of our brands and especially exposure into Manpower, which is our biggest brand in Europe. We think that could be very good. So, you're absolutely right. If the current overhang of the trade policy enactment gets resolved, things and sentiment could change pretty quickly.

I would just add to that, Kartik. In France, we actually saw that play out, that uncertainty around the budget impacted the month of January specifically. So, January was down the most in the quarter. And as that budget was passed and moved forward in February, we started to see demand improve. And it actually ended the quarter at probably the best part of the average for the quarter overall, and we take that guide into Q2. So, we did see it play out to some degree in Q1, and we're now seeing trends that are more aligned with where we were early in the fourth quarter.

Thank you. Our next question comes from Josh Chan with UBS. Your line is open.

I guess you mentioned that the perm weakness was primarily in France and a couple of European countries. Is there any insight that you can give as to why those countries are weaker in terms of perm because I would think the trade costs, the uncertainty, would really impact the globe, really, including even the U.S.

I think as Jack just talked about, in France, there was a greater deal of uncertainty with the budget not having been passed, and once that started to improve, we saw some improvement in our trends in France. I also think it depends on the composition. You heard me talk earlier about how specialized skills, that perm pipeline and sales and revenues actually holding steady and stable, but it's the lower still where companies are making specific decisions. So, I wouldn't read too much into it in terms of the various countries, but rather say, overall, there is stability with accepted weakness in some countries and that we're being cautious looking into Q2 because we know hiring is highly dependent on employer confidence and when the uncertainty is increasing, employers hold back a little bit more. And at this stage, that would impact perm to a greater degree than anything else. So, I think that would be our take on the perm trends. But overall, many countries held up well, and we saw stability in many countries and actually good performance in a number of them as well.

Okay. Great. And then maybe one question on cash flow. I think Jack suggested that it may be kind of timing related. Could you give us a little bit more color on what happened in Q1 and kind of your confidence that cash flow can bounce back over the rest of the year?

Josh, this is Jack. I'd be happy to address that. As I mentioned earlier, we often experience lower cash flow and net outflows in the first half of the year, and that has been true for both 2024 and 2023. The first half typically shows net outflows, followed by significantly stronger cash flows in the second half. We observed a similar trend last year. We expect this pattern to repeat this year as well. Regarding our payables, we have a very large, market-leading managed services provider business, and managing the associated spending significantly impacts our balance sheet and payables. Consequently, there can be some volatility in the timing of payables due to the MSP business, which was a factor in Q1. However, this situation usually resolves itself over the course of the year. These are the key points to consider regarding our free cash flow.

Our next question comes from Trevor Romeo with William Blair. Your line is open.

First one I had was just kind of two quick ones on the U.S. Manpower brand. I think in the quarter, it was up 7%, nice improvement back into positive territory. What were some of the drivers of that improvement? And are you seeing any influence from changes in U.S. immigration policy there? And then, I guess, over the medium term or the long term, who knows what will happen with the tariffs. But if we do actually see reshoring in domestic manufacturing activity increase, any way to think about how much of a benefit that could be for the Manpower brand.

Well, so Trevor, let me start with your last question – with your questions in reverse order. So, on the first one, it's really hard to tell in terms of what impact and to what degree the – I mean, to what dimension a trade change would impact manufacturing and thus subsequently how much that would impact our Manpower business. But suffice to say that any increase in manufacturing employment will be good news for the country and will be good news from a Manpower brand perspective. From an immigration perspective, right now, as we all know, immigration really drove a lot of the economic growth that we've seen over a number of years. But as it relates to our business today, we're not seeing any impact that we can directly relate to a tougher immigration policy. So, that's not been impacting our numbers. And then lastly, I would say the U.S. team and Manpower has done an excellent job. We've really been working hard at innovating our offerings. You've heard us talk about our branch openings in Walmart, which we think is a great innovation in terms of being where our candidates come and also where clients come to. So that's very encouraging. We've also been very strong in building a pipeline of client opportunities across various industry verticals. And finally, we are seeing the very positive early signs of our investments in our data analytics and our technology investments, which we now leveraging AI used to provide really unique and differentiated workforce insights to our clients, help them optimize cost. And we can do this down to a very granular level. We can go into a particular worksite look at the overall wage levels surrounding a client's location analyze with the help of data and AI the implications of their current workforce strategy and what we think can be an optimal workforce strategy that will result in cost optimization, productivity improvements, things of that nature. And so, we can predict changes in outcome with the data that we have collected in the U.S. and, frankly, leveraging our global database. We believe we have the biggest global database in the world as we are now collecting data points from our digitization, our technology infrastructure in a way that is really starting to pay off for us in our client engagements in the U.S. So, the team has done a really nice job, and we're very encouraged with these early indicators of what can happen when we apply technology and AI to drive better outcomes for our clients.

Jonas, that's really helpful. And actually, a good segue into my other question, which was I think for Jack, you had mentioned the back-office transformation spending in your prepared remarks. I was just wondering if you could give an update on how much of that spend is currently flowing through the P&L? And then how much of, I guess, a margin benefit you'd expect whenever those investments are completed and the timing of that as well?

Trevor, I'm glad to address that. You can observe that much of the spending related to our transformation programs is reflected in our corporate SG&A. As I previously mentioned, those expenses have been elevated as we proceed with our transformation. Regarding our overall progress, we are advancing very well. Jonas has previously highlighted the front office and the progress of the PowerSuite front office, with over 80% of our revenues now utilizing our new cloud-enabled, market-leading PowerSuite front office, which will yield benefits as we regain operational leverage. We're already seeing significant improvements in recruiter productivity, but the impact will become more apparent once operational leverage is restored. On the back-office front, we are also performing well with PowerSuite, having about 50% of our revenues processed through the new platform. We have implementations launching this quarter in several of our largest countries, and we feel optimistic about that. Additionally, our processes are becoming more standardized along with our shared service centers, showing strong progress. We currently have seven countries utilizing our shared service operations, with another four to five in progress. This effort will continue this year and into 2026, at which point we expect to see savings from these programs. As I've previously mentioned, the impact will be significant with a decrease in overall spend on these programs as they are completed, paired with an increase in efficiency that will positively affect our bottom-line margin. I estimate the efficiency gains to be around 25 basis points, and the reduction in spending will add another 15 to 25 basis points. This will represent a notable improvement in our overall efficiency as we continue with these initiatives.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Jonas Prising for closing remarks.

Thanks, everyone. We look forward to speaking with you again in our second quarter earnings call later on in July. Have a good rest of the week.

Thank you for your participation. This does conclude the program. You may now disconnect. Good day.