07/05/2024 - Adecco Group AG: Q1 2024 RESULTS

Q1 2024 Results

2

Q1 FINANCIAL PERFORMANCE

1. EVENUES

First quarter revenues of EUR 5,717 million were stable on an organic, TDA basis (2 percent lower organic, 3 percent lower reported). Currency translation had a net negative impact of approximately 150 basis points, and working days had a net negative impact of approximately 150 basis points.

At the Global Business Unit ("GBU") level, organically and TDA, Adecco revenues were up 1 percent (2 percent lower reported), Akkodis revenues were 2 percent lower (6 percent reported), and LHH revenues were 5 percent lower (6 percent reported).

By service line, Career Transition grew 9 percent organically (8 percent reported), and Outsourcing, Consulting & Other Services revenues rose 7 percent (5 percent reported). In contrast, Training, Up-skilling & Re-skilling revenues were flat (1 percent lower reported), Flexible Placement was 3 percent lower (5 percent reported), while Permanent Placement was 16 percent lower (17 percent reported).

Q1 REVENUES (CHANGE YEAR-ON-YEAR)
Group, by growth	Group, by Global Business	Group, by Service Line
driver		Unit
			Reported	Organic,		Reported	Organic
				TDA
Organic, TDA	0%	Adecco	-2%	+1%	Flexible Placement	-5%	-3%
TDA	-1.5%	Akkodis	-6%	-2%	Permanent Placement	-17%	-16%
Currency	-1.5%	LHH	-6%	-5%	Career Transition	+8%	+9%
M&A	0%				Outsourcing, Consulting	+5%	+7%
			& Other Services
					Training, Up-skilling &	-1%	0%
					Re-skilling
Group	-3%	Group	-3%	0%	Group	-3%	-2%

GROSS PROFIT

Gross profit was EUR 1,130 million, 6 percent lower organically (8 percent reported). Gross margin, at 19.8 percent, was healthy, up 20 basis points sequentially and 100 basis points lower year-on-year, mainly reflecting current business mix and firm pricing. Currency effects had no impact.

By service line, on an organic basis, margin expanded 10 basis points in Career Transition. In Flexible Placement margin was 50 basis points lower, in Permanent Placement 40 basis points lower, in Outsourcing, Consulting & Other Services 20 basis points lower, while Training, Up-skilling & Re-skilling margin was flat.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A)

SG&A expenses excluding one-offs were EUR 978 million, 6 percent lower organically (7 percent reported). As a percentage of revenues, SG&A excluding one-offs was 17.1 percent, an improvement of 80 basis points. Average company-basedFull-time Employees ("FTEs") reduced 6 percent to 35,697.

As part of its ongoing G&A savings plan, the Group delivered EUR 26 million net savings in the quarter relative to the 2022 baseline period, representing a 13 percent reduction versus the Group's targeted 15 percent reduction.

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EBITA

EBITA excluding one-offs was EUR 157 million, 12 percent below the prior year period on an organic basis. The FESCO JV contributed EUR 5 million income, from EUR 16 million in the previous year period. The EBITA margin, excluding one- offs, was 2.8 percent, 30 basis points lower, or 10 basis points when excluding the impact from the timing of FESCO JV income.

One-off costs were EUR 13 million, from EUR 12 million in the prior year period, mainly reflecting restructuring charges taken to secure G&A savings.

AMORTISATION OF INTANGIBLES

Amortisation of intangible assets was EUR 22 million in the quarter, from EUR 28 million in the prior year period.

OPERATING INCOME

Due to the aforementioned items, the Group generated an operating income of EUR 122 million, 12 percent lower in constant currency.

NET INCOME AND EPS

The net income attributable to Adecco Group shareholders was EUR 73 million, which was 20 percent lower year-on- year, mainly reflecting lower operating income. The result also reflects:

• Interest expense of EUR 17 million, flat when compared to the prior year period.
• Other income/(expenses), net, of EUR 1 million, compared to EUR (1) million in the prior year period.
• Income taxes of EUR 33 million, compared to EUR 34 million in the prior year period.

The Group's effective tax rate, including discrete events, was 31 percent, compared to 27 percent in the prior year period.

Basic EPS was EUR 0.44, 20 percent lower. Adjusted EPS, which is the Group's net income excluding a total EUR 26 million, net, for amortisation of intangibles, one-off costs, and associated tax effects, divided by basic weighted-average shares outstanding, was EUR 0.59, 18 percent lower.

CASH FLOW AND NET DEBT

The Group delivered an outflow in Cash flow from Operating Activities of EUR 67 million in the quarter, compared to an outflow of EUR 116 million in the prior year period. Lower business income was more than offset by favourable working capital development of EUR 74 million above the previous year period. DSO was 53 days, one day more than in the prior year period. Capital expenditures were EUR 26 million in the quarter, from EUR 49 million in the previous year period. Free Cash Flow was EUR 72 million higher year-on-year, at minus EUR 93 million in the quarter, compared to minus EUR 165 million in the prior year period.

At the end of Q1 24, net debt was EUR 2,660 million. The Net Debt to EBITDA ratio, excluding one-offs, was 2.7x, in line with management expectations. The Group has a solid financial structure, with fixed interest rates on 79 percent of its outstanding gross debts, no financial covenants on any of its outstanding debts, and strong liquidity resources, including an undrawn EUR 750 million revolving credit facility.

Q1 2024 Results

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GLOBAL BUSINESS UNIT RESULTS

Unless otherwise noted, all growth rates in this section refer to the same period in the prior year, with revenues stated on an organic and trading days adjusted (TDA) basis and EBITA or EBITA margins stated, excluding one-offs.

AD E C C O

EUR millions, unless otherwise					Revenues			EBITA margin excl. one-offs
stated
		Q1 24		Q1 23	CHANGE (yoy)		Q1 24		CHANGE
						Reported	Organic, TDA				(bps, yoy)
Adecco	4,368	4,447	-2%	+1%	3.0%	(50)
France		1,179	-7%	-7%		(100)
1,097	2.4%
Northern Europe		536		579	-7%	-6%		0.8%		(100)
DACH				406	+5%	+7%				(70)
426	1.9%
Southern Europe & EEMENA		1,035	+5%	+8%		+20
1,083	5.7%
Americas		639		684	-7%	-1%		0.6%		+60
APAC				565	+4%	+14%				(200)
588	4.7%

Quarterly revenue and EBITA margin excl. one-offs for 2023 reflect new Company reporting policies, effective Jan 1, 2024

Adecco delivered strong relative revenue growth of +600 basis points in the period, taking share across most of its territories.

Revenues were 1 percent higher, a good result in challenging markets. Revenue growth was strong in APAC, Southern Europe & EEMENA and DACH. Northern Europe and France were weak, while the Americas were broadly stable.

Flexible Placement revenues were stable. Outsourcing revenues were up 6 percent organically, and Permanent Placement revenues were up 1 percent organically. On a sector basis, growth was strongest in retail and logistics. Autos demand was robust, while manufacturing was weak.

Gross margin was healthy, if below prior-year levels, reflecting the current geographic, sector, and solutions mix, while pricing was firm.

The EBITA margin, at 3.0 percent, was 50 basis points lower, mainly reflecting mix, and a lower contribution from the FESCO JV, equivalent to a 25-basis points impact, partly countered by G&A savings and better productivity. Gross profit per Selling FTE rose 2 percent while selling FTEs reduced 4 percent.

SEGMENT RESULTS

ADECCO FRANCE

• Revenues were 7 percent lower, reflecting a challenging trading backdrop, with notable weakness in manufacturing, logistics, chemicals, and retail. Growth in consulting was a highlight.
• The EBITA margin of 2.4 percent mainly reflects lower volumes in addition to costs associated with the exit of specific outsourcing contracts.

ADECCO NORTHERN EUROPE

• Revenues were 2 percent lower in UK & Ireland, 1 percent lower in Belux, and 12 percent lower in the Nordics, reflecting a tough market and regulatory change in Norway. The region performed well compared to competitors. In sector terms, financial services were weak, while manufacturing was soft.
• The EBITA margin mainly reflects adverse solutions mix and lower volumes partly mitigated by solid pricing and good cost management.

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ADECCO DACH

• Revenues in Germany were up 8 percent, strongly outperforming the market and supported by strength in logistics, autos, and professional services. In Switzerland & Austria, revenues were up 4 percent.
• The EBITA margin mainly reflects fewer working days.

ADECCO SOUTHERN EUROPE & EEMENA

• Revenue growth was strong, with Italy up 2 percent, Iberia up 17 percent, and EEMENA up 13 percent. All segments gained market share. In sector terms, logistics, autos, and food & beverages performed well.
• The EBITA margin expanded 20 basis points, reflecting positive mix, firm pricing, and growth investment.

ADECCO AMERICAS

• Latin America revenues grew 25 percent, led by Colombia and Brazil. Retail, metals & mining, and logistics were strong.
• In North America, revenues were 12 percent lower, outperforming competitors in a subdued market. On a sector basis, IT tech and autos were weak, while manufacturing and logistics were soft.
• The EBITA margin was 60 basis points higher, reflecting improved productivity, strong cost mitigation, and calibrated investment in the US network to drive future growth.

ADECCO APAC

• Revenue growth was strong, up 14 percent and ahead of the market. Japan was up 10 percent, Asia up 4 percent, and India up 12 percent. In Australia & New Zealand, revenues were 57 percent higher, boosted by a significant government contract. Retail, IT Tech, and Defence sectors advanced strongly.
• The EBITA margin of 4.7 percent mainly reflects a lower contribution from the FESCO JV. Excluding FESCO, the margin benefited from higher volumes, improved productivity, and G&A savings.

AKKODIS

EUR millions,			Revenues		EBITA margin excl. one-offs
unless otherwise stated
Q1 24	Q1 23	CHANGE (yoy)	Q1 24	CHANGE
			Reported	Organic, TDA		(bps, yoy)
Akkodis	928	992	-6%	-2%	5.8%	+100
North EMEA				-3%
South EMEA				+1%
North America				-14%
Akkodis APAC				+6%

Quarterly revenue and EBITA margin excl. one-offs for 2023 reflect new Company reporting policies, effective Jan 1, 2024

Akkodis' revenues were 2 percent lower (6 percent reported), challenged by the tough tech staffing market. Staffing revenues were 20 percent lower organically. However, Consulting & Solutions revenues were solid, growing 5 percent organically.

By segment:

• North EMEA revenues were 3 percent lower, reflecting weaker demand for software development expertise. Revenues in DataRespons were 8 percent lower, and in Germany, 3 percent lower. The latter was impacted by the repositioning of operations in the Smart Industry and elevated sickness rates.
• South EMEA revenues were 1 percent higher. Revenues in France were 1 percent lower, with strength in autos and aerospace, offset by easing demand in the financial services and telecoms sectors.

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• North America revenues were 14 percent lower, impacted by the continued downturn in tech staffing, particularly in permanent placement, although Consulting & Solutions grew 39 percent.
• APAC revenues rose 6 percent, led by Japan, which delivered 8 percent revenue growth. This result reflected strength in Consulting & Solutions, supported by high utilisation rates.

Akkodis' EBITA margin expanded 100 basis points to 5.8 percent, reflecting lower volumes, more than offset by favourable services mix, synergies, and good cost management.

LHH

EUR millions,			Revenues		EBITA margin excl. one-offs
unless otherwise stated
	Q1 24	Q1 23	CHANGE (yoy)	Q1 24	CHANGE
				Reported	Organic, TDA		(bps, yoy)
LHH	440	468	-6%	-5%	7.3%	+50
Recruitment Solutions				-16%
Career Transition & Mobility				+9%
Learning & Development				-10%1
Pontoon & Other				+3%

Quarterly revenue and EBITA margin excl. one-offs for 2023 reflect new Company reporting policies, effective Jan 1, 2024. 1 yoy organic

Revenues in LHH were 5 percent lower (6 percent reported) in the first quarter. By segment:

• Market conditions remained challenging for Recruitment Solutions, and revenues were 16 percent lower. In gross profit terms, Recruitment Solutions was 19 percent lower, with the US 20 percent lower. There were signs of stabilisation, sequentially, in US permanent professional recruitment activities.
• Performance in Career Transition & Mobility was strong on a demanding comparison period, with revenues up
  9 percent. The segment continued to gain share, with good growth across Canada, the US, the UK, and France in the quarter. Its pipeline remains solid.
• Learning & Development revenues were 10 percent lower organically, with General Assembly and Talent Development challenged in their end-markets. Ezra performed well, growing revenues by 64 percent organically and exiting the quarter with a substantial pipeline.
• In Pontoon, revenues were 8 percent higher, led by growth in Direct Sourcing. The tech sector downturn continued to challenge MSP/RPO activities.

The EBITA margin of 7.3 percent benefited from segment mix, mainly Career Transition & Mobility, good cost discipline, and protection of capacity in Recruitment Solutions to capture a future rebound in market activity.

Outlook

In the second quarter to date, volumes have been stable when compared to Q1 2024 levels. Revenue developments in Q2 2024 are expected to reflect a slightly tougher comparison period than in Q1 2024. The Group anticipates continued market share gain in a challenging macroeconomic environment while managing resources with agility, focusing on productivity and G&A savings. In Q2 24, the Group expects its gross margin to be broadly in line with Q1 24 levels. SG&A expenses, excluding one-offs, as a percentage of revenues are expected to improve modestly versus Q1 24, despite seasonality.

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More information

The Q1 2024 results press release is available on the Investor Relations website.The Q1 2024 results presentation will be available at 09:00 a.m. CEST.

A live webcast for analysts and investors is scheduled today, May 7, starting at 09:30 a.m. CEST (08:30 a.m. BST). The webcast can be followed via the Investor Relations section of the Group's website.

Analysts and investors can ask questions by telephone: UK/Global +44 (0)20 7107 0613; USA +1 (1) 631 570 5613; Switzerland +41 (0)58 310 5000. Once joined via telephone, please press * and 1 to enter the queue. Please registerat least 10 minutes before the start of the presentation.

A reply will be made available after the event.

Financial calendar

•	Q2 2024 / Half Year 2024 results	Aug 6 2024
•	Q3 2024 results	Nov 5, 2024

About The Adecco Group

The Adecco Group is the world's leading talent company. Our purpose is making the future work for everyone. Through our three global business units - Adecco, Akkodis and LHH - across 60 countries, we enable sustainable and lifelong employability for individuals, deliver digital and engineering solutions to power the Smart Industry transformation and empower organisations to optimise their workforces. The Adecco Group leads by example and is committed to an inclusive culture, fostering sustainable employability, and supporting resilient economies and communities. The Adecco Group AG is headquartered in Zurich, Switzerland (ISIN: CH0012138605) and listed on the SIX Swiss Exchange (ADEN).

Important notice about forward-looking information

Information in this release may involve guidance, expectations, beliefs, plans, intentions, or strategies regarding the future. These forward- looking statements involve risks and uncertainties. All forward-looking statements included in this release are based on information available to Adecco Group AG as of the date of this release, and we assume no duty to update any such forward-looking statements. The forward-looking statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations. Numerous factors could cause or contribute to such differences. Factors that could affect the Company's forward-looking statements include, among other things: global GDP trends and the demand for temporary work; changes in regulation of temporary work; intense competition in the markets in which the Company operates; integration of acquired companies; changes in the Company's ability to attract and retain qualified internal and external personnel or clients, the potential impact of disruptions related to IT; any adverse developments in existing commercial relationships, disputes or legal and tax proceedings.

For further information, please contact:
Investor Relations	Press Office
investor.relations@adeccogroup.com	media@adeccogroup.com
+41 (0)44 878 88 88	+44 20 4592 0646

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EBITA1) and EBITA margin excluding one-offs by segment

EBITA	Q1			Variance % 24 vs 23			% of EBITA2)
EUR millions	2024		2023		EUR	Constant	Q1 2024
		currency
Adecco France	27		40	-34%	-34%			12%
Adecco Northern Europe	4		10	-59%	-59%			2%
Adecco DACH	8		11	-24%	-24%			4%
Adecco Southern Europe & EEMENA	61		56	9%	9%			27%
Adecco Americas	4		-		n.m.	n.m.	2%
Adecco APAC	28		39	-27%	-27%			13%
Adecco	132		156	-15%	-15%			60%
Akkodis	54		48	13%	13%			25%
LHH	32		32	1%	1%			15%
Corporate and Other	(61)		(52)	19%	19%
Adecco Group	157		184	-15%	-15%			100%
	Q1
EBITA margin	2024		2023 3)		Variance
		bps
Adecco France	2.4%		3.4%	(100)
Adecco Northern Europe	0.8%		1.8%	(100)
Adecco DACH	1.9%		2.6%	(70)
Adecco Southern Europe & EEMENA	5.7%		5.5%	20
Adecco Americas	0.6%		0.0%	60
Adecco APAC	4.7%		6.7%	(200)
Adecco	3.0%		3.5%	(50)
Akkodis	5.8%		4.8%	100
LHH	7.3%		6.8%	50
Adecco Group	2.8%		3.1%	(30)

1. EBITA is a non-US GAAP measure and refers to operating income before amortisation and impairment of goodwill and intangible assets.
2. % of EBITA before Corporate and Other.
3. Recalculated considering the restatement of Revenues by segment.

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EBITA1) and EBITA margin by segment

EBITA	Q1			Variance % 24 vs 23			% of EBITA2)
EUR millions	2024		2023		EUR	Constant	Q1 2024
		currency
Adecco France	26		40	-36%	-36%			13%
Adecco Northern Europe	4		10	-61%	-61%			2%
Adecco DACH	8		11	-25%	-25%			4%
Adecco Southern Europe & EEMENA	61		56	9%	9%			29%
Adecco Americas	3		-		n.m.	n.m.	1%
Adecco APAC	28		38	-26%	-26%			14%
Adecco	130		155	-16%	-16%			63%
Akkodis	50		42	20%	20%			24%
LHH	26		29	-11%	-11%			13%
Corporate and Other	(62)		(54)	17%	17%
Adecco Group	144		172	-16%	-16%			100%
	Q1
EBITA margin	2024		2023 3)		Variance
		bps
Adecco France	2.3%		3.4%	(110)
Adecco Northern Europe	0.7%		1.8%	(110)
Adecco DACH	1.9%		2.6%	(70)
Adecco Southern Europe & EEMENA	5.7%		5.5%	20
Adecco Americas	0.5%		-0.1%	60
Adecco APAC	4.7%		6.6%	(190)
Adecco	3.0%		3.5%	(50)
Akkodis	5.4%		4.2%	120
LHH	5.9%		6.3%	(40)
Adecco Group	2.5%		2.9%	(40)

1. EBITA is a non-US GAAP measure and refers to operating income before amortisation and impairment of goodwill and intangible assets.
2. % of EBITA before Corporate and Other.
3. Recalculated considering the restatement of Revenues by segment.