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Operator: Hello. Welcome to the Randstad Q2 2025 Results Conference Call and Audio Webcast. [Operator Instructions] I will now hand over the word to Mr. Sander van 't Noordende, CEO, please go ahead.
Alexander M. van't Noordende: Thank you very much, Elba, for that kind introduction, and good morning, everybody. I'm here with Jorge and our Investor Relations team to share our Q2 results. The market environment in the second quarter was again influenced by geopolitical and economic uncertainty, which, frankly, we and many of our clients see as the new normal. Against this backdrop, I'm pleased with the performance we delivered and the strategic progress we made. We achieved revenues of EUR 5.8 billion and EBITDA of EUR 171 million with a margin of 3.0%. We continue to benefit from our focus on operational excellence, and most importantly, we are seeing the benefits of our strategy coming through in our performance. We've seen a mixed picture across our markets with different trends and dynamics at play. We continue to deliver good profitable growth in Italy and Spain. We had growth returning in APAC, where India and Japan are doing particularly well. We saw sequential improvement in North America with year-over-year growth in our operational and digital business. Northwest Europe continues to face weakness in hiring confidence affecting permanent recruiting and our professional businesses the most. Looking ahead, we expect economic uncertainty to stay at current levels. In that context, client confidence will still be a challenge, and we might see more demand for temporary work and soft activity on the permanent hiring side. Of course, we are managing the business with operational discipline you expect from us, and we are staying extremely close to our clients and talent. In the meantime, we are building a better and stronger Randstad for the future. As said in our Capital Markets Event, we've been focused on executing our partner for talent strategy. Specialization at scale is now a fact at Randstad. And this is important because specialization is key for our differentiation and our competitiveness in the marketplace. Clients want to talk to someone who understands their business. Talent wants to talk to someone who knows about the field, and our people get the opportunity to focus their career on a specialization and do an even better job than they did before. And we know that this works. In RPO, for example, we see strong demand across our markets as more clients turn to us to be the dedicated partner for talent. We continue to win new clients, but equally important, we see more interested in recruiters on demand at existing clients. In digital, we see increased demand for AI skills, especially for Gen AI and Agentic AI capabilities. In the U.S., we are ramping up AI-related projects in financial services, health care, consumer goods and technology. And we provide these AI roles from our global delivery center in India. Think about machine learning engineers, data scientists and cloud engineers. We're also becoming more and more digital first. In Q2, more than 700,000 shifts were directly selected by the talent on our digital marketplaces, a double-digit increase over Q1. We continue to build scale and specialization in our talent and delivery centers, resulting in higher productivity and fulfillment. Focus works. So in summary, great progress and exciting work to be done. We're becoming more specialized and more digital with a better experience for clients and talent. All in all, we're absolutely on the right track. Jorge, over to you.
Jorge Vazquez: Thank you, Sander, and good morning, everyone. So I'll bring back a little bit on last year around this time, we talked about, let's say, from Q1 to Q2 about the return on seasonality. And this year, we even see a step-up. So from Q1 to Q2, we saw a more pronounced return in seasonality, more employees working, more people at work compared to last year and at the group level. And therefore, our organic revenue declined by 2.3%, so not an inflation yet, but still an improvement of 2% versus Q1 even against a slightly tougher comparables. Second, we'll go through the results in more detail, very importantly, at the consolidated level, once again, like in Q1, our gross profit and OpEx were aligned, allowing us to protect relative profitability despite the lower top line. And like we discussed in the last CME, we see the impact of our strategic progress. We see it in specialization and growth segments. We see it in Q2 with a step-up in productivity in GPP field. So basically being able to increase our productivity in the field and how we do it. And lastly, we see the impact of structural cost savings with a strong focus on indirect costs. Let's see how this pans out in our results and starting with Page 8 with North America. We saw good progress this quarter, like Sander just highlighted. In the U.S., in particular, our operational business grew 1%, continues to perform ahead of the market. We are becoming more efficient, like we discussed before, and we have less FTEs serving more employees working again this quarter. Digital also building on Q1, grew 2% this quarter as we see client wins and demand increasing, like Sander just highlighted. The Professional Solutions and permanent hiring do remain subdued as hiring confidence somehow still remains low, declining by 16% and 24%, respectively. In Canada, we also saw good underlying improvement. And as you can see in the chart, a return to growth already in this quarter. The EBITA margin for North America, therefore, came in at 4.1%, up 70 basis points year-over-year, showcasing productivity gains. Now moving on to Northern Europe on Slide 9. In Northern Europe, we do continue to see mix trends. Temp proves to be more resilient as agility is seen by our clients with sentiment on the perm side more still uncertain. From a sector perspective, we see sequential improvement in industrial pockets supporting our operational business, but at the same time, automotive continues to be subdued. In the Netherlands, and zooming in now in the Netherlands, growth sequentially improved from minus 5% to minus 5% from the previous minus 7% in Q1. Adaptability was good despite, let's say, the adverse, and we've discussed it before. It's a quarter impacted heavily by holidays, working days and long weekends, but adaptability by and large, was good. Operational was minus 3% for the quarter, improving again versus Q1 as we see the impact already of several client wins over the last few months. Professional, though, is facing a challenging environment as the broader market is slowing down. We see this also reflecting, obviously, in the subdued permanent hiring. On the other hand, remember, our health care acquisition in Zorgwerk, helped to a certain extent or to a large extent to offset a large part of the headwinds we face in the broader professional talent solutions specialization. Moving on to the East Germany. So Germany saw a modest sequential improvement as decline rates eased to minus 7%, but still mostly on easy comparables as here, the lever market environment remains unchanged. Digital and minus 5%, while operational still down 8%, where automotive obviously remains challenging. This quarter, again, remember working days and holidays significantly impacted profitability due to the nature of the contracts. In Belgium, we see a slightly stand still, but still very good adaptability. Operationally, is growing 1%, reflecting underlying industrial improvement in Belgium. But like under non-European countries, Professional remains challenging. Remember, here, we're #1 and quite exposed to all the different specializations. As we mentioned during our Capital Markets Event, we saw this quarter the first self-service shifts through the digital marketplace, and we are quite excited and pleased to see the initial adoption of our digital marketplace. Moving on to the broader and Northern European subregions, we are back to growth. Poland, 17% already on top of strong growth last year and Switzerland, 9%, leading the pack, while Nordics, as mentioned, remains subdued. Growth is also profitable as we expanded margin by 40 basis points year-over-year. And moving on now to the segment, Southern Europe, U.K. and LatAm on Slide 10. Let me start with France. So in France, we can almost say that we see similar trends as we saw and we just discussed in Northern Europe. Somehow an easing of decline rates, a better Q2 than Q1 after a slow start of the year. This improvement was mostly notable in the operational business, now down 3% versus 6% in Q1. Our on-site business is growth and is doing particularly well here. Professional, though, slowed to minus 18% and also Perm, again, 20% down still year-over-year. Digital, while still slightly negative has sequentially improved, mainly on the back of our strong aerospace and the aerospace industry. The EBITA margin was 4.1%, and France did a good job and showed solid control and adaptability. Now Italy, again, now on top of growth, Q2 last year was a very strong growth for quarter for Italy, continues to see good growth and is still doing well for many quarters in a row. Operation was up 2%, and our investments in growth segments such as IT and health care are paying of,f, as professionals also grew 3%. Profitability remains strong, and we continue to invest in our business and excited for the times to come. Iberia also grew 4%, here, primarily driven by Spain, as we continue to see good momentum, growing at 6%. This is mainly driven by strong performance in its operational and Enterprise Talent Solutions. Again, here, we remain investing in growth segments with many opportunities to grow further. Furthermore, in broader in the region, revenue and profit performance were mixed across other Southern European countries, U.K. and LatAm. The U.K. labor market continues to soften, and we were down 15%. On the other hand, in Latin America, again, on top of solid growth last year, we continue to grow 7% with all our countries showing growth. Moving on to Asia Pacific. The Asia Pacific region continues to do well and is now as a region, back to growth with good profitability. Japan demonstrated solid growth, 6%, combined with strong profitability, a good example of the impact of leaning in on specialization. Remember, Japan, as we discussed before, is one of the countries that operates talent centers at scale already, well embedded in our ways of working our talent service models, supporting solid growth in our operational business. Digital continues also to do well. We continue to invest, and we are ideally positioned to support clients and talent in a very [indiscernible] scarce market. Moving south, Australia and New Zealand also improved another market that is accelerating the rollout of our digital marketplace. With over in this quarter, 200,000 shifts in the quarter alone running through the marketplace already. India grew double digit, and we continue to invest in the right growth segments here. Overall, the EBITA margin for the region was 4.3% in the second quarter, showing strong operational discipline, while remember, continuing to invest in growth. And that concludes the performance of our key geographies. So let me now walk you through our financial performance on Slide 13. First, let me start from a specialization point of view. Sander alluded to it in the beginning and conclude that with the exception of Professional, all specializations made a significant step-up with operational typically early cyclical, and enterprise close already to last year levels this quarter. Once again, this quarter, our gross profit, and you can see and OpEx were aligned, we'll talk more about it later. And that way, the quarter EBITA margin was 3%, similar profitability margins last year despite lower revenue and adverse FX impact. Underlying EBITA was at EUR 471 million. And let me unpack a little bit the items until net income. Starting with integration costs and one-offs. In this quarter, this amounted to EUR 35 million, mainly related to reorganizations in Germany, the Netherlands and France. In the line, amortization and impairment of intangible assets, nothing really relevant. It's just the regular accounting treatment of the purchase price allocation of our acquisition of Zorgwerk. Net finance costs, though include this quarter the write-off of all the remaining value of the seller notes of our loans towards Career Builder and Monster joint venture to the extent of EUR 32 million. The effective tax rate for the first 6 months was 30%, impacted in general by the low taxable income following a change in profit mix and lower earnings. Our '25 guidance is a notch higher, therefore to somewhere between 29% and 31%. And mainly reflecting this current country mix. Adjusted net income was EUR 84 million. With that, let's continue and look now in more detail at our gross margin bridge on Slide 14. Gross margin came in line with our expectations, albeit at the lower end, driven by FX, in particular, and subdued perm. Now first of all, remember, like-for-like, we need to remove 60 basis points of the impact from the divestment of Monster in HR Solutions. So year-on-year, and starting with the left, our temp margin is down 40 basis points. And here, geographic and client mix continue to have a very large impact. This is where the market is today. Penetration rates are stable in many markets, seasonality is returning and large clients are up high single digits, and we expect this trend to continue. In addition, idle time linked to light quarter and holidays impacted especially, as I mentioned before, Northern Europe. Sander mentioned, I also mentioned it before, uncertainty continues to weigh on perm, and agility solutions are doing better, but the permanent side is not. So to the extent that today, even compared to Q1, we lost sequentially EUR 5 million in fees alone. This weighs on the margin, and it had an impact of approximately 10 basis points versus original expectations. Contrary, though, to the subdued transactional perm, RPO, so companies, again, outsourcing our recruitment processes continues to do well, and we're actually growing 8%. We're finding new ways to revenue in RPO, either it being in mid-market, in new clients and new activities. Therefore, HRS, the overall HRS, excluding Monster has a positive 30 basis point impact, which now brings me to the OpEx bridge on Slide 15. And remember, this one is sequential, is how we compare versus Q1. Our underlying operating expenses came in at EUR 923 million, broadly stable sequentially as FX offset seasonality and timing in the year of strategic investments. Total costs decreased 4% year-over-year or EUR 35 million less, and directly aligning with a 4% organic gross profit decline. As discussed at the CME, we're making strides in building a stronger, more resilient and profitable Randstad. This quarter, we've seen both a 1% increase in fuel productivity compared to last year as we continue to implement new service models, and our indirect costs have continued to decrease structurally year-over-year while still protecting our strategic investments. Similar to Q1, we have successfully maintained our EBITDA margin year-over-year, resulting in an organic recovery ratio of over 60%. We also incurred one-offs, primarily in Northern Europe and France, we discussed it before. We continue to roll out structural optimization cost savings. This will either ensure we have a minimum level of profitability in every market we operate, or we'll continue to free up resources simply from better ways of working and rolling out our strategy. Now linking it back to our CME and Q1 publication, with these additional efforts in one-offs and restructures in the first half of the year, we are now on track to deliver north of EUR 100 million net structural savings for 2025. And with that in mind, let's move on to Slide 16, which contains our cash flow and balance sheet remarks. Our free cash flow for the quarter was positive EUR 82 million, reflecting good working capital management. DSO was 55.7 days, still up sequentially. And here again, the very same client mix that we discussed before on margin, puts also upward pressure with most of the impact accounted by few large clients. Our leverage ratio is 1.8%, and remember, it typically peaks in Q2 according to seasonality of earnings, cash flow and dividend payments. And that brings me to the outlook on Slide 17. And let me start with the current momentum. So volumes in early July, so on these first 2 weeks are in line with June. If we then look at our gross margin in Q1 and Q2, we saw our gross margin down approximately 90 basis points year-over-year. And remember, this includes 60 basis points from Monster deconsolidation. Therefore, looking ahead to Q3, we expect broadly a similar decline with minor puts and takes as Monster was also deconsolidated as of mid-September last year, and FX will continue to play a role. If we look at operating expenses, we expect them to be modestly lower on the back of the continued cost savings, and the typical seasonal dip in OpEx we have from Q2 to Q3 from the treatment of holidays. Balancing this, we expect a step-up in profitability in the second half of the year, broadly in line with the regular intra-year pattern. So to summarize, let me wrap it up. Q2, we see a step-up, not an inflection, and we keep doing what we do. We will continue to, one, focus on profitable growth by having better propositions and focusing on structural growth segments; two, continue to be laser focused in delivering better, more scalable talent service models and we that free productivity and scalability on the field; and three, we'll strive to keep improving and reduce our indirect costs. In short, we continue to progress in our growth algorithm by rolling out our agenda to deliver experience at scale in line with our partner for talent strategy. And that concludes our prepared remarks, and we look forward to taking your questions. Elba, please?
Andrew Charles Grobler: This is Andy Grobler from BNP Parabas Exane. Just to start on the U.S., if I may, so good progress in the business. Can you just talk through how the trends in terms of large clients and SME have gone through the quarter and what you're hearing back from those clients in terms of their confidence at this point?
Alexander M. van't Noordende: Yes. Let's say, Andy, thank you very much for that question. I think as I said, there's still uncertainty in the market. But that's, as we also say, is the new normal. Also clients are still experiencing that. I don't think they're ready for big decisions, whether it's investments, in infrastructure, technology or people, they take it one step at a time. Having said that, we've made some very good progress, especially in our digital business with some of the big banks and the retailers where we have had nice upticks in activity. We have had some good new wins in our RPO business, which is primarily focused on North America, of course, with some of the tech companies with some of the banks as well. So all in all, I would say the mood music is ticking up slightly, but I wouldn't go a whole lot further than that, Andy.
Andrew Charles Grobler: And just a follow-up again on North America. If you look at the number of placements per a member of corporate staff. It grew very sharply during the quarter, up 18%. The rest of the world was a bit more modest. Is that kind of level of growth, kind of the shape of things to come as you continue to roll out your digital platform?
Jorge Vazquez: Andy, you're breaking out. What grew through the quarter? Sorry, just to make sure we address your question.
Andrew Charles Grobler: Sorry, the number of placements per member of corporate staff.
Jorge Vazquez: Absolutely I alluded to that. So as we continue to roll out -- well, in the case of the United States, already the digital marketplace. That's the only way we operate in operational. But combined with talent centers and delivery centers, we continue to see the benefits of that, not only from a better proposition, but also given to self-service, given everything we can do to accelerate and have immediate propositions, and increase in productivity from the field. So on the back already of a few quarters, this quarter a pronounced, we see, indeed, the ability to generate more placements with less FTE. And that will basically continue to feed how we monitor the productivity and the gains we have in our field.
Operator: We are ready for our next question. Please go ahead.
Simon LeChipre: Simon LeChipre speaking from Jefferies. Could you comment on the June exit rate at the group level? And if you could flag any countries benefiting from a particularly good exit rate?
Jorge Vazquez: Yes. So normally, Simon, we don't necessarily disclose the exit rates for the country, but let me just help you a little bit. So one is, if you look at most of the numbers we published as well on the [indiscernible] the step-up from Q1 to Q2 is broad-based. So practically in every country, we have return on seasonality and a step-up, let's say, number of employees at work. So the growth rates are broad-based and improvement on average around 2%. If you look at, let's say, at the exit rate of the quarter, obviously, we left Q1 with approximately minus 4%. We said on average, April was in line with March in Q1. So things have improved throughout the quarter. It's a very difficult quarter to have an exact number because you have a lot of public holidays and long weekends. So it's very difficult to say. But we are quite comfortable when we say July started in the same fashion as we exit June and the quarter.
Simon LeChipre: And a quick follow to this. Assuming this improving trends continue, do you expect at some point in Q3 to return to flat organic growth on a year-on-year basis?
Jorge Vazquez: Let's say, country by country, but that's 1 or 2 things. Indeed, we see a step up. I also started by saying seasonality was more pronounced this year even than it was last year. The only other of, let's say, point that we have to offset is, of course, we are now starting to face more difficult comparables. Give or take between Q2 last year to Q3 last year, we were at 1% to 1.5%, let's say, improvement. So yes, on one hand, you have an improving trend, and we've been seeing that throughout the last 6 months that we'll face. On the other hand, a slightly headwinds from comparables. The net impact, I'll leave it to you, but indeed, that's the 2 things combined.
Operator: We are ready for our next question.
Suhasini Varanasi: This is Suhasini from Goldman Sachs. I just wanted to get some more color on the U.S., please. The temp staffing data obviously tells you one thing, but your top line trends something else. So can you maybe help us unpack what was maybe self-help, maybe the digital aspect that has helped you versus what the underlying market conditions are?
Jorge Vazquez: So I mentioned as well, and if you don't want to say much about specific client trends or something. But let's say, if we look at the largest segments, Suhasini, I think it's probably easy to start there. What we see is primarily with, let's say, penetration rates stabilizing overall. We see clearly an uptick on large clients. So a lot of the agility needs and the entry, let's say, the seasonality, agility demand from our clients. And that is particularly expressed in our large client segment. So we're doing particularly well there. It is clearly also supported by the rolling out of our digital marketplace. So in many clients, large clients in the United States, we share from a procurement perspective as it relates to suppliers. If we have a better proposition, if we are able to have immediate talent availability, we can do well in terms of procurement rate, we can do well to basically be the first one to have talent available for our clients. Overall, that segment, in particular, is enabling us to support growth above markets.
Alexander M. van't Noordende: And you can add our digital -- North America digital business. U.S. digital has shown some nice growth in the quarter as well, Suhasini. So it's a story of operational and digital, I would say.
Suhasini Varanasi: That's very clear. And just a quick one on the outlook on gross margins and SG&A. When you say slightly lower gross margins and modestly lower SG&A, could you just help us quantify that impact?
Jorge Vazquez: Yes. So both, let's say, on both, if you typically look at normal years, so let's forget COVID and, let's say, all that ups and downs. But if you look at normal years, we typically have a seasonal dip in terms of margin. Let me start with the margin, Suhasini, from Q2 to Q3. There's a few reasons. You remember we have more student business. We have certain more hospitality business. There's also bench in some countries. So typically, our margin goes down from Q2 to Q3, normally around 20 to 30 basis points. At the same time, we have -- we had, let's say, this quarter, and we expect still to face it in Q3 given how things are entering in, let's say, unfavorable FX impact on the gross margin. So bright in line, let's say, the current trends year-over-year, we expect to continue. Also because these larger clients, I mentioned before, they have, let's say, lower market they have a larger -- they are growing high single digits. That has an impact in our margin. It's the market as it is today, larger clients, seasonality returning, and we're able to grow. Now the opposite, almost a mirroring fact of this is in OpEx. So normally as well, our OpEx from Q2 to Q3 takes a step down, typically because of holidays and the treatment of that. Also, we've been continuing to do cost savings. So this will continue to materialize throughout the year. And remember, when we talk about large clients increasing in the mix, right, so we find growth in large clients more than we find growth in SME, that also comes at a different, let's say, cost-effective talent service models. So we are also in the mix of our operating expenses to be able to do it more efficiently. And last but not the least, again, the mirroring effect FX will be supporting. So let's say, less OpEx in Q3 to be expected just because of OpEx -- of FX. Now you put all of this together, I think probably the best way to look at this is and set the tone for Q1 and Q2. Normally, we see an uptick and last year, if I'm not -- it was EUR 10 million to EUR 15 million in profitability. So we have, on one hand, gross margin going down. On the other hand, OpEx also going down. So the net impact of that profitability perspective is EUR 10 million to EUR 15 million. We've been striving to not lose ground in profitability versus last year. So we'll do everything we can to again in the second half of the year, have an uptick in profitability and profit in line with what we did last year.
Operator: We are ready for our next question. Please go ahead.
Remi Rene Grenu: Good morning. This is Remi Grenu from Morgan Stanley. So yes, just a question on the professional weakness that you're calling, which seems to be the only specialization, which has deteriorated a bit sequentially. Can you give us a little bit more flavor there? You're flagging the uncertainty, but keen to understand if this is something that you've seen in previous cycles as well. Is it something that you would consider normal given the context and your experience and historical precedents? And if there is any other potential impact and I'm thinking they are more structural versus the cyclicality that we are using that we discussed on the call.
Alexander M. van't Noordende: Remi, good question. I think it's fairly straightforward. In times of uncertainty, if you need people to run your business or to deliver packages or whatever, because you have business, you take them. If you're looking to hire that marketing experts, that HR person and things are not so certain, you say, well, maybe I'll give it a quarter or until we hire that a person until we have a bit more certainty under our belt for where this market is going. I think that is the challenge in professional with a notable exception, by the way, for digital. Because our digital business, specifically in North America has seen a nice uptick, especially in retail and financial services. So I think it's as simple as that.
Remi Rene Grenu: Understood. And one additional question, if I may. Just making sure I got that right on the gross margin guide for Q3. So you're saying that you expect a similar decline year-on-year, so about the minus 90 bps versus Q3 last year, which I just making sure I'm using the right base. So that was 19.5% right?
Jorge Vazquez: Yes. So indeed, we've been having 90. Now remember, this includes the EUR 60 million from the deconsolidation of Monster. Now we deconsolidated around half 14%, 15% September last year. So there is a slight, let's say, improvement in that respect. Now you also have to take puts and takes. We need to see how the mix evolves in terms of FX, in terms of perm, the impact of FX. But in general, the same delta year-over-year with a slight benefit from having deconsolidated Monster already at the end of the half of September.
Operator: We are now ready for our next question.
Unidentified Analyst: This is [indiscernible] from Kepler Cheuvreux. I have a question on operating working capital. It showed improvement compared to last year. Can you please give me a bit of color on what drove the reduction this quarter compared to last year and what we can expect for the rest of the year?
Jorge Vazquez: Yes. So there is -- I mean, first of all, when we look at the operating working capital, and I mentioned it, I say, well, it surprise is good on is, let's say, less, let's say, good in terms of what expectations have been. I'm not a fan of looking at it on a quarter specifically. So ideally zooming out helps. A few things. So I mean, we mentioned it, our DSO remains impacted, let's say, by a larger development on the larger clients. At the same time, we're doing a lot of work on our own improvement in terms of time to invoice and overdues. Our overdues are at the lowest historically ever. So there's a lot of good work in our team in that respect. This quarter, in particular, now suggest we look at the first 6 months, you have an impact from liabilities. So that's just basically a reflection on timing and proactive working capital management. So just making sure that we manage as well as we can on our working capital. But I suggest we look at the first half and not just a quarter in particular.
Operator: [Operator Instructions] We will now take our next question.
Alexander M. van't Noordende: Thank you very much, Elba. If there are no further questions at this time, I think we're going to wrap up the call by seeing a big, big thank you once again to our more than 600,000 talent. And of course, the Randstad team members for all the hard work for executing our strategy and running the business with rigor and discipline. We appreciate it a lot and see you all next quarter.