Robert Half 2Q17 Earnings Call Notes

Harold Messmer – Chairman and CEO

Although GDP growth has been sluggish business outlook is positive

“Although GDP growth in the United States has been sluggish the business outlook is positive since the start of 2017 U.S. business leaders particularly owners of small and mid size companies have expressed confidence in their prospects. If GDP growth improves, we believe hiring activity should not be far behind. The Fed Reserve Beige Book report that economic activity expanded across all 12 Fed Reserve districts in June with the pace of growth ranging from slight to moderate.”

Improvement has been uneven, not happening in a straight line

“There was nothing earth shattering, Tim. It I mean, there are some give and take month-to-month. The improvement has been a bit uneven, it’s not happening in a straight line. That said, notwithstanding June and notwithstanding the early July, everybody standing by their guidance for the third quarter. Where generally speaking the United States included, things are getting a little better.”

Manpower 1Q17 Earnings Call Notes

Jonas Prising

Optimistic about overall outlook for Europe

“While we continue to be cautious on the UK and as they prepare to exit the EU, we are optimistic about the overall outlook for Europe and the favorable impact that it could have on demand for our services and solutions.”

Great deal of optimism in France

“We also see some improvement in the labor market outlook with a great deal of optimism in France, as President Macron has a clear mandate for reforms including labor market reform which should benefit that economy and stimulate better employment growth. We recently published our third quarter, ManpowerGroup employment outlook survey tracking forward-looking quarterly changes in employer sentiment and that survey is showing a similar trend of slowly improving employer hiring intent both in Europe as well as globally.”

Too early to say if UK weakness related to Brexit

“Just as we said last quarter, we think it’s too early to call whether our weakness in the UK is related to Brexit. We actually saw a bit of an improvement in the Manpower business during the second quarter, but we saw a number of large clients in the UK. On the Experis side, pull back. So, too early call whether these are early signs, but as you know well, when employers are operating under uncertainty and they have to make decisions they are going to be cautious on making investments in the UK based on the uncertainty and that’s something that we expect to see happen and we just don’t know when. `”

Manufacturing in US is stable but not improving at the speed we’d like

“So, I think the outlook is actually stable and it’s not likely improving in the areas that where we’ve seen weakness on the Manpower side for us in the UK – I mean, in the U.S. and the progress is directionally good, but the speed is not that what we would like of course. So, we are going to keep on working on it, but I do think that we have opportunities to continue to see improvements going forward for both Manpower and for Experis in the U.S.”

Macron gave green light

“So, Mark, on France, I think one of the notable changes that you may have seen as well is the improvement in the business confidence overall and in consumer confidence. So Macron’s election really gave the green light for France to return to action and just make some of the necessary changes, structure reforms that France has been needing for a long time.”

Jack McGinnis

Prolonged weakness in manufacturing in US

“As we have mentioned previously, the prolonged weakness in the manufacturing side of the U.S. economy has impacted the demand for our services over the past several quarters, and in recent quarters, our Professional Services has also experienced revenue declines.”

KornFerry FY 4Q17 Earnings Call Notes

Gary Burnison

Washington hasn’t impacted hiring yet, but it could

“Not yet, but if this continues to go like this where no major legislation is passed. It will impact confidence, there is no question about that.”

Hope in France, steady in Germany and uncertainty in the UK

“I met with many-many business leaders in Europe last week actually, I think there’s a great hope in France, but I think we all know it’s hard to take things away from people once they’ve been given it, and in the UK specifically I think there’s uncertainty. In terms of where this is going to shake out, so I would say it’s kind of hopeful in France, steady-as-she-goes in Germany and uncertainty in the UK.”

Robert Half 4Q16 Earnings Call Notes

Robert Half International’s (RHI) CEO Harold Messmer on Q4 2016 Results

Job market continues to tighten

“All indications are that the U.S. job market continues to tighten. Unemployment for college -degreed workers 25years and older is just 2.5% today. This is placing pressure on the labor supply, particularly at higher skill levels. And the number of temporary workers as a percentage of the overall U.S. workforce remains near an all time high, a sign employers are building flexible staffing options into their human resources plans with increasing frequency.”

Clients more optimistic but little sense of urgency

” As it relates to U.S. trends and toner business, on the one hand conversationally our people would tell you that client optimism, client sentiment has clearly and markedly improved. With that said when you look at their actual activity levels as we speak. There is a little sense of urgency, they are waiting for the perfect candidate, they take more time to that, more time to interview, it’s more a wait and see and show me as it relates to the more optimistic view that they have, as confirmed by the NFIB study that we cited, the University of Michigan Sentiment Index, the PMI services that came out today. So our clients clearly feel better, they are more optimistic but that’s in the future and they are waiting to see more activity in their business before their hiring activity reflects that.”

Orders are up but placements still sluggish

“Having said that, we would observe that our order levels have improved in the New Year, which would be expected following the holidays, which we have experienced again this year. So tone of business, the conversations are more upbeat, there is more optimism, but as far as actual hard making placements, getting starts on the temp side, it remains sluggish.”

Optimism will lead to hiring

“I think to some extent we are speculating, I’m personally not surprised that you haven’t seen a big pickup yet in terms of the NFIB report for example. Optimism has to precede hiring and if you looked at the fourth quarter through much of the quarter people seem to be in a very bad mood, negative about the election and so forth. At the end of the day our types of clients are the types that they want to, they are from [indiscernible], wait and see, show me and so forth. So I think that the good news is the optimism is up as they start seeing more activity and so forth among their own clients, I think their hiring levels will pick up they’ll move more rapidly our placement processes might get condensed. so if you want to be an optimist there is a lot to be optimistic about.”

Robert Half 3Q16 Earnings Call Notes

Robert Half International (RHI) CEO Harold Messmer on Q3 2016 Results

The election is definitely an elephant in the room

“Yes. I’d just add that I spend a lot of time talking to executives of other companies and many of our clients and the elephant in the room probably is the election. Nobody really knows exactly what the impact is. They just know it is much different. You couple that with anemic GDP growth this year, which has resulted in a tremendous cost consciousness on the part of many clients. It becomes very easy to drag your feet, drag out the hiring process, be very careful about expanding. I would like to think we’re going to see an improvement in the horizon here soon after the election. But only time will tell, we do not know for sure. We just know it’s a very unusual circumstance.”

Keith Waddell

Didn’t get the lift we usually do in September and Oct

“Now, on the pace of deceleration, I’d say that July, we actually ended July stronger than we began it, we were encouraged by that. August wasn’t bad. But then September, where we usually start getting a sequential lift in September, we didn’t see the lift we typically get, instead, it was sequentially about flat. And then again, traditionally we get even more lift yet again in October and we didn’t see that lift either. So it’s essentially sequential flattening starting in July, rather than the lift we typically see in September and early October.”

Clients clearly remain cautious with little sense of urgency

“The issue around clients taking more time, I mean, clearly they remain cautious with little sense of urgency. It’s in part due to macro uncertainty, impart due to election uncertainty. They cite budget pressures, they cite cost control measures. They therefore get even more selective, they only want your ideal candidates that in turn pressures candidate supply when they are only looking for the top tranche of the [indiscernible] you have. They spend more time vetting. They want to do more interviews.”

We have orders, but it just takes longer to get them started

“Its not that we have an absent of orders, its more that the orders that we do have, it just takes longer to get a start if we’re on the temp side or it’s longer to make a placement if we’re on the perm side. So frankly, markets it’s a continuation of what we’ve talked about for two or three quarters, notwithstanding the easier comps.”

While we are forecasting a downtrend, it’s not as abrupt as what we’ve seen in the early parts of past down cycles

“But one thing we did look at, we have not only bill rates, which by the way were up 3.5% this quarter year-over-year, which is down a bit – from I believe it was 4.8 last quarter. So we not only look at bill rate trends, but we also looked at ours bill trends. And while they’ve gone slightly negative and are projected to go slightly negative in the fourth quarter, if you look back at 2001 and if you look at back at 2008, they fell much more abruptly than what’s implied in what we forecast. So, if you just look back at Robert Half volume data, unit data, what we saw in the third quarter, what we’re forecasting to the fourth quarter would not be near as abrupt as what we’ve seen in the past in the early parts of a down cycle.”

There has not been the abrupt negative turn in volume

“Well, this has been a more sluggish recovery than what we’ve seen in the past. Some therefore surmise that if there is going to be a downturn, it will be less severe as well. But to the extent I compare this to 2001 and 2008 in the early periods of those downturns, it drops and drops fairly abruptly. And again, I’m talking hours billed, I’m trying to take rates out of the equation. We have not – nor are we projecting that kind of abrupt negative turn in our volumes.”

Our growth is now under the most pressure in tech

“Well, first of all on Robert Half Technology, let’s not forget the year ago comps, we grew 15%. So we do have tough comps, we’re comparing to in tech. That said, the general trends that I described also apply to tech and as respects to tech development which is where we had seen most of our growth, that’s now where our growth is most under pressure.”

Saw more softness in the accounting operations which would be consistent with softness in macro

“Well, I’d say Accountemps we saw more softness in the accounting operations positions and those are the ones that are typically more client demand sensitive, more client volume sensitive. So it’s consistent that if you were to see softness in accounting due to macro conditions you’d see it in accounting operations.”

We don’t usually track the external indexes on employment

“So, we never track that closely to the external index as you talked about. Traditionally they’ve been very commercial staffing, light industrial production staffing centric. So sometimes we’re better, sometimes we’re worse, but rarely do we take that much stock in those external indexes.”

Tough to say if the election is affecting anything

“It’s hard to parse uncertainty between how much of its macro, how much of its – my own client financials aren’t where I wanted them to be, and therefore I am more cost conscience versus the part that’s election. The election uncertainty certainly didn’t help. How much it impacted negatively, its hard to know. It’s certainly part of the discussions that have taken place with our staff and our clients. But precisely what its impact is, it’s hard to know, and I guess only time will tell. We look back to some prior election years and there was a little bit of impact in the quarter prior to the election. But quite frankly, I don’t think there has been any election like this election.”

Perm has performed poorly which isn’t surprising given GDP

“Well, given how anemic GDP growth has been, it doesn’t surprise us the way perm has performed. Perm is always more economically sensitive than is temp. We are seeing that as we speak. It was more impacted in the third quarter, albeit it was on tougher comps than temp. But I don’t believe that we’ve lost any meaningful share of placements to whether you want to call it technology platforms, other new competitor”

If we get 2% GDP we’d see that as an improvement

“Well, the trends would have to turn more negative. We’re talking about revenues being down 1% in our guidance. And you don’t take drastic headcount actions based on a 1% swing, frankly in either direction. So for us to get much more aggressive on the cost side, we would have to see much more negative trends than we’re seeing. And here again, if the world believes we’re going to get 2% plus GDP in 2017, we would see that as an improvement not a decline.”

Manpower 3Q16 Earnings Call Notes

ManpowerGroup’s (MAN) CEO Jonas Prising on Q3 2016 Results

Modestly improved growth rates in European businesses

“We have witnessed the continued slow growth environment with stable year-over-year growth trends during the quarter in many markets, such as the U.S. and France, with modestly improved growth rates in some of our European businesses. ”

Some uncertainty for UK, but not seen a significant impact on client behavior

“As discussed on the last quarter call, the UK Brexit decision has added some uncertainty, economic and employment growth prospects in the UK. And while this decision will play out over the next 2 years, it is safe to say that we have not yet seen a significant impact on UK growth or client behavior through the third quarter. Only time will tell what the effect will be for the UK as the final terms of the exit will not be known for number of years. ”

Saw Experis weaken slightly in teh US, but still reasonable demand

“So starting with Experis in the U.S., we saw the performance weakened slightly quarter-over-quarter, but we think that the overall demand in the U.S. is still reasonable, although we have seen it come down through the course of 2016. So we know that the Experis U.S. business still has some ground to make up to close the gap to market, but the market has also softened during the course of this year”

Slight acceleration in Northern Europe

“So in Northern Europe, there is some slight acceleration on an organic constant currency basis into the fourth quarter. It’s just you have this acquisition overlapping that makes it look like maybe the growth rate comes down, but in fact at the midpoint of our guidance, we are anticipating underlying growth to pickup [indiscernible].”

Manpower 2Q16 Earnings Call Notes

ManpowerGroup’s (MAN) CEO Jonas Prising on Q2 2016 Results

Market still uneven

“Our overall view of the external market conditions has not changed. We are operating in a global economy that has become somewhat softer over the course of the past year and while the market is uneven and economists now predict lower economic growth overall, it is still a market that presents us with very good opportunities.”

Effect of Brexit on EU is uncertain

“Despite the news of the U.K.’s Brexit decision likely affecting economic and employment growth prospects in that country in the short term, we believe the impact on the rest of Europe is less certain. Many of the countries in the EU and Euro zone are early in their economic recovery and still have significant room for labor markets to get back to where they were before the recession.”

US economy continuing slow growth mode

“The U.S. economy seems to be continuing its slow growth mode, parts of the economy performing well other parts less so, but overall, a stable economic environment and labor market where we can and should explore further opportunities for profitable growth as we have seen in our solutions and perm business. The situation in American markets is very mixed as far as economic growth prospects are concerned, although in a slow dynamic cases it is relative to pass growth rates that are still higher than in most developed countries.”

Brexit has added an additional level of uncertainty

“No doubt, the recent Brexit vote in the U.K. along with other recent geopolitical events has added an additional level of volatility really proceed to the global economic outlook. Some of these events that are primarily political in nature, financial market related, but both of these factors can easily affect the underlying economy and our employers think about workforce needs. I think it’s safe to say that no one knows for certain what the true impact will be in the U.K., Mainland Europe or the world economy.”

France is good example of choppiness

” France is a good example of that choppiness. A reasonable view of April and that’s what we guided to when we spoke at our last quarter call. And then a weaker May, and then slightly better in June, and then slightly weaker again in the first couple weeks of July.”

Overall US economy is doing well. IT slightly softer, healthcare still strong, financial markets not as strong

“overall we think the U.S. economy is doing well in some areas and not so well in others, and our Manpower brand is exposed to big global manufacturing companies that are not doing as well as you can see from the overall jobs reports and goods producing companies in the U.S. and in particular they would be also opposed to a strong dollar. On the Experis side, we did see some softening, and I think overall that is still the area where we have more work to do, because we have a gap-to-market that we’re working on. I think overall the market for IT is probably slightly softer, but there are segments within that SMB for instance or healthcare that are still strong, and financial markets probably not as strong, so we probably moved down a bit with the market to some extent, but that doesn’t change the fact that we’re still behind market and that’s exactly what we’re working on.”

There’s a lot of uncertainty in the UK, but so far no impact on the real economy

“Well, there is a great deal of uncertainty, that the question is how much have we seen percolate into the real economy? And I would say that, if you look at the U.K. market first you could see that job openings fell ahead of the Brexit but other than that we’ve not seen any real tangible examples of any change would possibly the only difference being some softness on the perm side. But in actual fact that you take away the business that we had in the big large client that we had, the U.K. improved a bit and was flat or a little bit better than flat in the second quarter, so no impact as yet in the U.K”

Manpower 1Q16 Earnings Call Notes

Jonas Prising

Global economy slightly softer

“Looking back over the past quarters, our view of the external environment is not significantly different. We are operating in a global economy that appears to become slightly softer for a variety of reasons over the past 12 months, but with continued good growth opportunities in a number of markets. We believe that the global economy will continue to be unease. And that is the environment we are prepared for both operationally and strategically.”

Don’t see signs of global downturn

“at this time we don’t see any signs of a broad-based global downturn. In fact, many companies expressed difficulty finding the right talent as evidenced by the findings of our 2015 talent shortage survey published late last year’

Market for IT skills is still healthy, but maybe slightly softer

” I would describe the demand for IT skills to still be healthy, maybe slightly softer. But, this is also been impacted by the increasing difficultly and tightness of the labor markets for those skills.”

France is on a recovery trajectory, but uneven

“we continue to believe that France is on a recovery trajectory. It is an environment that is uneven in France and you can see that although the economic growth is improving, it is improving from a very low level to frankly reasonably modest level at least according to the IMF forecast.”

Counting the number of billing days

“Sure. In terms of billing days overall, in the third quarter we are flat with it. We got the same number of days at right around 65 days both periods. And then, in the fourth quarter, 65, during the fourth quarter we actually lose a day. We are at about 63 versus about 64 in the prior year. So it was the impact from days. And then, the last part of your question, I’m trying to remember.”

Mike Van Handel

31% “constant currency” growth on 2% volume growth in Argentina

“Revenue in Argentina was up 31% constant currency. Our revenues were impacted by inflation; the underlying fundamentals of the business continue to show growth with volume growth up 2% from the quarter. Revenue growth of the other countries within Americas was up 20% in constant currency or 7% on an organic basis.”

US revenue impacted by sluggish manufacturing

“Revenue in the U.S. was $703 million a contraction of 3% compared to the prior year. As we mentioned in the last few quarters, we have seen weakness in the manufacturing side of the U.S. economy impact demand for our services. Encouragingly, this trend seems to have stabilized with ISO manufacturing index back up of 50 last month for the first time since September. While our business is still down in the first quarter it reflects an improvement from the 5% decline we reported in the fourth quarter.