ManpowerGroup Earnings Call Balances Recovery With Headwinds

ManpowerGroup Inc. ((MAN)) has held its Q4 earnings call. Read on for the main highlights of the call.

ManpowerGroup Walks a Tightrope Between Recovery Signs and Legacy Weakness in Latest Earnings Call

ManpowerGroup’s latest earnings call painted a cautiously constructive picture: operational trends are clearly stabilizing and even improving in several markets, yet the shadow of a tough 2025 still looms over the numbers. Management highlighted organic revenue growth in the fourth quarter, better brand momentum, strong performance in Italy, Japan and the broader Asia-Pacific region, tighter cost control, scaled AI deployment, and a solid cash-flow finish to the year. At the same time, the company is still working through a 38% drop in full-year adjusted EPS and a 20% decline in EBITDA, margin pressure, and pockets of pronounced weakness—especially in Germany and its Experis business. The overall tone was one of disciplined execution and gradual recovery, tempered by near-term headwinds and ongoing transformation costs.

Fourth-Quarter Revenue Returns to Growth

Reported fourth-quarter revenue came in at $4.7 billion, translating to 2% organic constant-currency growth, a notable milestone after a challenging year. Including franchise operations, system-wide revenue rose to $5.1 billion, underscoring the scale of the network. While the growth rate remains modest compared with pre-downturn levels, the return to positive organic growth is a key indicator that demand is beginning to stabilize across the group’s staffing and workforce solutions businesses.

Sequential Demand Improvement Across Core Markets

Signs of demand stabilization were visible in several key geographies, particularly the United States and France. The Manpower brand, which anchors the company’s core staffing operations, grew 5% in the quarter, improving from 3% previously. In the U.S., the Manpower brand has now posted six consecutive quarters of growth, pointing to a more durable recovery in general staffing demand even as certain sector-specific and project-based volumes remain choppy.

Earnings Beat Guidance Despite a Challenging Backdrop

ManpowerGroup delivered adjusted EPS of $0.92 in the fourth quarter, coming in $0.09 above the midpoint of its guidance range. Reported EPS stood at $0.64, reflecting restructuring and transformation charges. The beat, though modest in absolute terms, signals that aggressive cost discipline and selective growth in stronger markets are helping offset lingering weakness elsewhere and providing some cushion against margin pressure.

Cost Discipline Tightens SG&A and Supports Margins

The company continued to lean heavily on cost controls to protect profitability. Adjusted SG&A expenses fell 4% on a constant-currency basis (3% on an organic constant-currency basis), driven by structural cost reductions and tightened discretionary spending. As a result, adjusted SG&A represented 14.4% of revenue in the quarter. While margins remain below historical peaks, this lower cost base provides “operating leverage” potential when demand recovers more broadly.

Regional Profitability Rebounds, Led by Northern Europe and Italy

Profitability trends were notably better in select regions. Northern Europe delivered a positive operating profit for the first time in five quarters, signaling that restructuring and portfolio adjustments are starting to pay off in what has been a tough region. Italy stood out as a strong performer, with Q4 revenue up 7% on a days-adjusted basis and an operating unit profit margin of 6.7%. These results highlight the geographic diversification of ManpowerGroup’s model and the ability of certain markets to drive earnings even as others lag.

AI and PowerSuite Rollout Gains Scale and Measurable Impact

ManpowerGroup’s technology and AI strategy is moving from pilot to scale. The PowerSuite platform now covers roughly 90% of the business, with front-office adoption at about 87% and back-office usage around 75%. The AI recruiter toolkit has been rolled out to more than a dozen markets and is already driving a 7% increase in placement rates, a meaningful productivity gain in a margin-sensitive industry. Meanwhile, SoFi.ai pilots are delivering workforce insights roughly 10 times faster and with 99% accuracy. Management framed these tools as key levers for future margin expansion and differentiation with clients.

Cash Flow Ends the Year on a Strong Note

After timing-related pressures throughout the year, ManpowerGroup closed 2025 with a strong cash performance in the fourth quarter. Free cash flow was a positive $168 million in Q4, improving the company’s liquidity position heading into 2026. While full-year free cash flow was still negative, the strong finish suggests that some of the earlier cash outflows were indeed timing-related rather than structural, and that the company can generate solid cash when revenue and working capital trends normalize.

Asia Pacific and Japan Deliver Robust Growth and Record Profitability

The Asia Pacific and Middle East (APME) region was a clear bright spot. Revenues in the region increased 6% on an organic constant-currency basis in the fourth quarter, with Japan growing 7% on a days-adjusted basis. The region also set an all-time profitability record in 2025, underlining the strength and resilience of the company’s franchise in these markets. This performance helps offset softness in Europe and reinforces the strategic importance of Asia and Japan in ManpowerGroup’s global mix.

Brand-Level Stabilization at Experis and Talent Solutions

Beyond the core Manpower brand, the company reported stabilization across its specialist businesses. Experis, which focuses on professional resourcing and IT, saw its year-over-year revenue decline narrow to 6% in the quarter from 7% in the prior period. Talent Solutions, which includes RPO and MSP offerings, improved from an 8% decline to a 4% decline. While still negative, the sequential improvement signals that the worst of the downturn in these higher-margin brands may be behind the company, even as certain client programs remain subdued.

Balance Sheet Management Remains Conservative

ManpowerGroup continues to manage its balance sheet conservatively despite a weaker earnings base. Net debt at year-end was $806 million, with adjusted gross debt to trailing 12-month adjusted EBITDA of 2.7x and total debt representing 35% of capitalization. The company also successfully refinanced a €500 million note, extending maturities and reducing near-term refinancing risk. This financial flexibility will be important as the company continues funding its transformation initiatives while navigating an uneven macro backdrop.

Full-Year Earnings and EBITDA Reflect a Tough Cycle

The full-year numbers underscore the magnitude of the downturn the company has been working through. Adjusted EPS for the year was $2.97, down 38% in constant currency versus the prior year, while adjusted EBITDA declined 20% to $337 million. Reported EPS for the year was negative $0.29, reflecting restructuring and transformation-related charges. These declines highlight why management is focused on rebuilding margins and reshaping the cost structure even as short-term demand indicators are improving.

Q4 EBITDA and Margins Still Well Below Historic Peaks

Fourth-quarter adjusted EBITDA was $100 million, a modest 2% constant-currency decrease year over year, but the adjusted EBITDA margin of 2.1% remains low relative to historical highs for the business. Management acknowledged that margins are still under pressure from mix, pricing, and transformation costs, and that a key objective is to progressively rebuild profitability as technology gains, cost actions, and a better market environment take hold.

Gross Profit Impacted by Permanent Recruitment Weakness

Gross profit in the quarter declined 3% on an organic constant-currency basis, a slight improvement from the 4% decline recorded in the third quarter. The gross profit margin came in at 16.3%, just below guidance. The shortfall was driven largely by weaker permanent recruitment activity in Europe, which shaved about 30 basis points from gross margin. Given that permanent placement tends to be higher margin than temporary staffing, a sustained recovery in this segment would be a meaningful earnings lever if hiring confidence improves.

Sharp Declines in Germany and Ongoing Challenges at Experis and RPO

Not all markets are stabilizing at the same pace. Germany remains a major weak spot, with fourth-quarter revenue down 22% on a days-adjusted basis and market conditions still described as difficult. Experis, despite sequential improvement, continued to face headwinds with Q4 revenue down 6%. Talent Solutions is also seeing softer demand in certain U.S. RPO client programs. These pockets of weakness weigh on the overall growth and margin profile and underscore the need for continued restructuring and portfolio optimization.

Full-Year Cash Outflow and Higher DSO Reflect Client Mix

For the full year, free cash flow was an outflow of $161 million, compared with an inflow of $258 million in the prior year, largely due to timing-related items. Day sales outstanding (DSO) increased to 55 days from 52 days, reflecting a higher mix of large enterprise clients, which typically have longer payment terms. While this shift can pressure short-term cash conversion, it also reflects success in winning larger, more strategic accounts, which can be stickier and more profitable over time.

Restructuring and Transformation Spending Continues

ManpowerGroup remains in the middle of a multi-year transformation aimed at improving efficiency and embedding its new technology platforms. Fourth-quarter adjustments included around $13 million of restructuring charges, with actions in markets such as Spain, France, the Netherlands, and Germany. The company is also incurring ongoing incremental expenses tied to its front-office and broader transformation programs, which management is treating separately from underlying results. These investments are expected to underpin future margin expansion but are currently a drag on reported earnings.

Near-Term U.S. Revenue Headwinds from Project Lapping

Looking ahead, the company flagged near-term revenue headwinds in the U.S. for the first quarter of 2026. Year-over-year revenue comparisons will be tougher due to the anniversary of unusually strong healthcare IT project volumes in 2025, which will not repeat at the same level. Management emphasized that if these lumpy projects are excluded, underlying U.S. trends appear more stable, but headline reported growth in the short term will be pressured by this unfavorable comparison.

Tax Headwinds Add an Extra Layer of Pressure

Tax considerations are another source of near-term earnings friction. Guidance assumes a full-year global tax rate of about 45%, driven partly by a proposed extension of a French corporate tax surcharge. In addition, a previously available U.S. tax credit has not been renewed and is therefore excluded from the outlook. While future legislative changes could provide some relief, the company is currently planning around a higher structural tax burden, which weighs on net income even as operating metrics improve.

Forward-Looking Guidance: Modest Growth, Slight Margin Lift, Higher Taxes

For the first quarter of 2026, ManpowerGroup guided to EPS of $0.45 to $0.55, including a favorable foreign-exchange translation tailwind. It expects constant-currency revenue to range from down 1% to up 3% versus the prior year, with the midpoint implying about 1% growth and equivalent organic days-adjusted revenue of roughly 1% at the midpoint. Adjusted EBITDA margin is projected to be about 10 basis points higher year over year at the midpoint, signaling early but modest progress on profitability. The company excluded restructuring and incremental front-office transformation expenses from its underlying guidance and assumed an effective tax rate of around 43% for the first quarter and approximately 45% for the full year, with a small potential reduction if certain U.S. tax provisions are reinstated. Management also outlined share-count and FX assumptions and reminded investors of the typical seasonal step-down in earnings from the fourth to the first quarter.

In summary, ManpowerGroup’s earnings call showcased a company in transition: demand is stabilizing, certain regions and brands are returning to growth, and technology and cost actions are starting to bear fruit, but the scars of the prior downturn are still visible in earnings and margins. Investors will be watching closely to see whether modest top-line growth and incremental margin improvement in 2026 can build into a more robust recovery, particularly as AI-driven efficiencies, regional strength in Asia and Italy, and ongoing restructuring efforts work against persistent weakness in Germany, pressure in Experis and Talent Solutions, and elevated tax and transformation costs.