Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential stabilization in Q2 revenues, indicating potential market recovery.
- Successful implementation of specialization framework across all markets, enhancing client and talent focus.
- Completion of digital marketplace rollout in the US, leading to faster client ramp-ups and higher fill rates.
- Positive growth in Southern European markets like Spain, Italy, and Belgium.
- Significant increase in commercial activities, with double-digit growth in client visits.
Negative Points
- Overall revenue decline of 7.5% year-on-year, reflecting challenging market conditions.
- Gross margin decreased by 40 basis points to 19.8%, impacted by service and geographical mix.
- Continued weak performance in key markets like North America, France, Netherlands, and Germany.
- High sickness levels and incidental impacts in Germany negatively affecting gross margin.
- Persistent macroeconomic uncertainty in Northern Europe, leading to subdued hiring levels.
Q & A Highlights
Q: You've spoken about your plans to reduce indirect costs in Q3. Are there any numbers that you could put around it? How should we think about one-off costs below the line, please?
A: We continue to address our indirect costs to protect field capacity and direct investments strategically. While it's difficult to specify exact levels, the Q2 levels are relatively high. Our teams know what's expected in terms of adaptability, aiming for a 30-50% recovery ratio.
Q: Paris Olympics, any benefits from that?
A: We are proud to partner with Paris Olympics for recruiting and temporary labor needs. While we have hired a significant number of people, the overall impact on revenues will be temporary and not substantial in the bigger scheme of things.
Q: On free cash flow, working capital is normally countercyclical, and yet despite the revenue declines, you are seeing negative working capital. What has changed in this cycle versus previous cycles?
A: There's nothing really changing. Our DSO and receivables are a function of the last three months' revenue. The seasonal pattern of Randstad typically shows cash flow generation in the second half of the year, and we see this behavior panning out.
Q: Your temp volumes were down 6.8% for the year. Is wage inflation now really fading away to a minimal amount?
A: Wage inflation is normalizing and becoming part of the normal trend we've always seen. It is still a labor market with mismatches, but overall, wage inflation is stabilizing.
Q: Can you talk about what's driving the higher gross margin outlook sequentially?
A: Q2 margin was impacted by incidentals, especially high sickness levels and public holidays. As we move into Q3, these factors will normalize, supporting an improvement in the gross margin.
Q: Can you talk more about the rationale behind the Monster move?
A: The job board market is very competitive and operating at scale is crucial. By combining CareerBuilder and Monster, we can realize significant synergies in technology, sales, and marketing.
Q: On the trend in July, could you clarify the current run rate?
A: The trends from Q2 are prolonging into July, with diverging trends geographically. Overall, we see a continuation of the Q2 trends.
Q: On the cost base, could you comment on the number of FTEs and branches trend into Q3?
A: We are investing in growth areas like Spain, Italy, and Japan. Overall, we decreased FTEs from Q1 to Q2. We are consolidating locations and choosing the type of accommodation needed in each market.
Q: Could you elaborate on the strategy for Torc?
A: Torc is a platform for engaging with technology talent for the long term. We plan to put our digital talent services business on the Torc platform, starting in North America and then moving to other parts of the world.
Q: Can you quantify the impact of high sickness rates in Q2?
A: In Q2, we had lower gross margins in Germany and Northern Europe due to prolonged sickness levels and public holidays. We expect these factors to recover in Q3, leading to a sequentially higher gross margin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
