ManpowerGroup Inc. (MAN) Q2 2013 Earnings Report, Transcript and Summary

Welcome, and thank you for standing by. [Operator Instructions] And I would like to turn the meeting over to Mr. Jeff Joerres. Sir, you may begin.

Good morning, and welcome to the second quarter 2013 conference call. With me is our Chief Financial Officer, Mike Van Handel. I'll go through the high-level results for the quarter. And then Mike will spend time going through the details of the segments, as well as forward-looking items for the third quarter. Then I'll discuss a bit more of our progress in the simplification efforts. Before moving into the call, I'd like to have Mike read the Safe Harbor language.

Good morning, everyone. This conference call includes forward-looking statements, which are subject to known and unknown risks and uncertainties. These statements are based on management's current expectations or beliefs. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements can be found in the company's annual report on Form 10-K and in the other Securities and Exchange Commission filings of the company, which information is incorporated herein by reference. Any forward-looking statements in today's call speaks only as of the date of which it is made and we assume no obligation to update or revise any forward-looking statements. During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include a reconciliation of those measures, where appropriate, to GAAP on the Investor Relations section of our website at manpowergroup.com.

Thanks, Mike. We had a very solid second quarter, particularly with the backdrop that Europe, while it has become a bit less volatile, clearly has not righted itself. Despite that, we were able to achieve solid results. Our initiatives to take the correct revenue, broaden our Solutions business and recalibrate our costs are all ahead of schedule. And as a result, you are seeing the improved second quarter over what we had originally anticipated. Our revenue for the quarter was $5 billion, down 3% in constant currency, as well as in U.S. dollars. Contributing to the less than expected revenue decline was a better-than-expected performance in Southern Europe. Pricing discipline remains a key focus within the organization but also, at the same time, we must be careful that we are not positioning ourselves out of the market. Based on our revenue from a macro perspective, as well as revenue by country, we feel confident that our strategy for pricing is on track, and that we will continue to build momentum in the marketplaces that are showing a more positive disposition for growth. We are still experiencing moderate gross margin pressures, particularly in Northern Europe. And while we are maintaining our discipline, it underscores the importance of focusing on our efficiency and recalibration efforts. Our gross margin in total across all countries has stabilized for the most part. But as I mentioned earlier, we are still experiencing difficulty in Northern Europe. It doesn't mean where we are not under price pressure in other parts of the world, rather it's more of the normal competitive pricing environment that we've seen over the last several months and a few years. We have worked diligently at managing our business mix, with ManpowerGroup Solutions continuing to grow, which is having a favorable impact on our overall gross margin. Our operating profit for the quarter was $128 million or 2.5%. Excluding restructuring charges, our operating profit was $148 million at 2.9%. A very large impact and effect on this was our recalibration of costs, which both Mike and I will talk about more as we get further into the call. Our earnings per share of $0.87 was up 71% on a year-on-year basis. And before restructuring, it was $1.05, up 38% over last year. And now for additional information on the segments, I'd like to turn it over to Mike.

Thanks, Jeff. As Jeff mentioned, we had a strong performance in the second quarter. Earnings per share before restructuring charges was $1.05, which significantly exceeded our guidance range of $0.84 to $0.92 per diluted share. In comparing our reported results to the midpoint of our guidance, $0.16 of the $0.17 outperformance was solely attributable to our operations. This was partially due to revenues contracting only 3% in constant currency, which was at the favorable end of our guidance range but more importantly, to cost recalibrations under our simplification plan that exceeded our expectations. The outperformance is also broad based geographically, which -- with each of our operating segments exceeding their forecast. Other expenses were slightly lower than expected, which added $0.01 to the quarter and the income tax rate was slightly lower, which also added $0.01. Currency was unfavorable by $0.01 in the quarter and we were forecasting it to be flat. This resulted in earnings before restructuring charges of $1.05. Restructuring charges incurred in connection with our simplification plan were $20 million. This was at the higher end of our guidance range as we're able to identify more savings opportunities than anticipated. Restructuring charges amounted to $0.18 per share, which results in the second quarter reported earnings per share of $0.87. Of the $20 million in restructuring, about 2/3 relates to employee severance costs and about 1/3 to lease costs from office consolidations. These restructuring costs impacted each of the operating segments and therefore, as we review these segments, it is important to consider OUP and OUP margins, excluding these restructuring charges. Restructuring charges were incurred in each of the segments with the Americas at $4.4 million, Southern Europe at $3.3 million, Northern Europe at $9.3 million, Asia Pacific Middle East at $0.4 million and Right Management at $2.6…

Thanks, Mike. The second quarter was a very strong quarter. Given the economic backdrop, I am very pleased with the results of the organization and the quality of actions that we took throughout the second quarter are even more satisfying. We have not only far surpassed our goal in recalibration, we have very much reset the marker for the organization when it comes to, if you will, our per-unit cost. This allows us to have a quite positive view as we look to improving our operational leverage. We have talked about this several times that we wanted to bring down our leverage points so that we could enhance our leverage in a potentially slower growth environment, and we are well on our way to achieving that. No doubt, there remains a lack of clarity regarding some of economic challenges ahead throughout the Euro area and for that matter, even in some areas of Asia. Having said that, the conversations that we've had with our clients and prospects would lead us to believe that there is a more positive sentiment even though we haven't seen that show up in our numbers yet. We did improve our overall revenue from the first quarter which is seasonally typical. Europe, which accounts now, in this quarter, for 64% of our business, had revenues of $3.2 billion. We are seeing some leveling in that marketplace as average daily revenues were down about 6% in constant currency, similar to the first quarter. Within Europe, we saw some improving year-over-year declines in France and Italy, suggesting that we may start a bounce off the bottom of where we were. The new labor laws, which have yet to really have a sizable impact on us, we believe, over time, will continue to drive towards a more favorable secular…

[Operator Instructions] Our first question is from Sara Gubins, Bank of America Merrill Lynch.

Just as a follow-up on the comment that you just made about claims in France. It sounds like those are related to historical matters. But I'm wondering if there are other more sort of competitive discussions with clients where they're trying to get some of the savings from the tax credit, which might not be a legal matter but might be a competitive matter.

Right. So you're right, those are 2 different issues. So I'll try to just put a little bit more texture on both of those. When you look at some of the liabilities of the past, as you would say historic tax subsidies, what we experience right now is most of this is coming from third-party contingent fee organizations that are looking for ways to try to get some money back for their clients or even prospective clients. And we, as I've said in the prepared comments, we feel good about our ability to say, "Look, that's not what they were intended for." Now in a market like France, we're down on down from a revenue perspective and there is a lot of challenge within the marketplace. Now clearly, customers are looking for lots of different avenues to get the better pricing. When it comes to the CICE, really, our view is, is that, that is for us, that's the way it was written. We will be investing in employee development projects. There's no cash that comes in for a period of time. And we are very much are staying steadfast on the fact that this is -- we're using it the way it was intended to be used. Now having said that, does it find its way into some competitive bids because the industry or some of our competitors are looking at it as enhanced margin and therefore might get more aggressive on some of the pricing? It's hard to tell, but we're probably seeing some of that. We're seeing that a little bit more in the small-, medium-sized business, but we've seen that in a few large accounts where we were a bit surprised at where they went to and the only way they could really get there would be to count some of that CICE. But it, actually, at this point, not -- it hasn't been in any kind of a large quantity. So right now, we're feeling confident in how we're able to keep the integrity of the CICE. But as this rolls out over the next few quarters and even in the next year, there may be some modification to that.

All right. And then separately on costs, it sounds like the efforts there are going much better than expected. Could you talk about where you -- where the positive surprises have come, and if there are any areas in particular where you see further opportunity? And along those lines, Mike, at the Investor Day earlier this year, you talked about needing $3 billion more to get to the 4% EBITDA margin target on the original cost savings. And I'm wondering if you recalculated that to see where -- what kind of incremental revenue you would need given the lower cost base.

So I'll answer the first and Mike can take the second. So in the 4 areas of what we're doing in the simplification plan of the organization programs, technology and delivery, what we've been able to do is to make sure that what -- and it was never the intent, was to say we're going to cut the x percent to -- if you can just do the calculation, 6.6% out of the first half expenses because that's a blunt instrument approach. We really went after this and said, "How do we do the appropriate trade-offs?" And when we did the organizational trade-offs and the program trade-offs, we made a lot of decisions about where would the priorities be, how do we streamline decision making, how do we make a more agile organization, how do we make sure the field is spending time on client contact and not maybe driving some of these great programs but doing them in a different way. And the surprises in there is that we're able to -- by taking that attitude and reconstructing basically how we make decisions in the company and who's making decisions and driving that into a different place, we were able to take out a lot more than we had anticipated. From a technology perspective, we were caught a bit between 2 models. Where we had global support, regional support and country support, we found that there's a fair amount of duplication. And as a result, we said, "We can't afford and shouldn't have that duplication because it also slows us down." So we found some there. And as I mentioned in my prepared remarks, as we drive that accountability into the countries, I'm confident we are going to get more out of the countries and improve their ability to do IT and drive more applications. But the holy grail of this is delivery and we are doing some very clever and innovative things in delivery strategy. And as I mentioned, it's being able to have multiple channels to line up more what that client is looking for with requirements and price. And as a result, we think that there's more left in there, but we're going to do that very carefully because that's touching revenue head on. So we've done it in 3, 4 markets and it's going well, we'll expand it. But I would say, there's some more left in there. Mike, you want to cover the other part?

Sure, yes. So just to put into context for everyone, so at the February meeting, we had mapped out our journey to 4% EBITDA margin and we finished 2012 at 2.4%. So as we mapped that out, the simplification plan was a big part of that. We had identified 60 basis points of improvement there. Gross profit margin, 30 basis point of improvement and a lot of that gross profit margin improvement was coming off of higher-valued solutions and higher-margin business growing, as well as increased permanent recruitment, which we see very good opportunity when the economies improve from a secular standpoint, as we see clients looking at how they're buying those services differently. So we think that's a good opportunity there. But inherent in there was the assumption that the core staffing gross margin would stay flat overall as we did that. And then to your question, Sara, the $3 billion of revenue, we think we can get very good incremental margins with a little bit of growth and that could add 70 basis points just in the view of the operating leverage that comes from that. So we feel quite good about the journey, the path we're on, of course, the simplification plan has gone extraordinarily well and we'll get -- we'll make very good progress towards that 60 basis points by the time we exit this year. And so I think we're ahead of schedule there. I would say the GP side, I still feel very good about the opportunity there. I think there's a little bit of risk from the underlying assumption that the staffing gross margin would be flat. So to the extent that there's a little of risk there, I'm sure will make it up on the SG&A side, if not by a little bit. And then we still have the revenue leverage. So at this point, I wouldn't back off on what I think we need in terms of incremental revenue of $3 billion above where we were in 2012. I think that's still a good marker to keep in mind and we'll see how this evolves and see how we can drive. But I feel very confident on the SG&A and I think we can likely deliver a little bit more on that parameter within this roadmap given the progress we've had out of the box so far.

Our next request now is from Andrew Steinerman, JPMorgan Chase. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Mike, if you could adjust the guidance that you gave on a constant currency basis to average day basis, that would be great. And Jeff, if you could make a comment on the U.K. temporary market, which edged positive, not just for Manpower but other staffing firms, so the first European market to return to positive, albeit low positive growth. Does that help us understand the timing of when some other European markets might edge back to increases?

I can go first. So on the U.K. temporary market, yes, it is having a bit more energy to it, but we don't want to overstate that. When we talked to clients and I had an opportunity to be there last week, there is a more positive feeling, particularly in the London area, to get into. Some of the Midlands, it's a little bit more difficult. So we are hearing and are experiencing a slightly more positive. But there's still more positive talk than positive numbers. To your point, it's just up barely. So is that the precursor to more? We'll look at that trend closely. We would suspect it's going to start trending up. Now does that then give us a look at what would be happening in Europe? In some countries, I believe that's true. When we see some of the things going on in Sweden, some of the more recent numbers that we've seen in the Netherlands, they're trending nicely, not overly exuberant but nicely. And as a result, we do believe that there could be an inflection point, but it is far too early to call, especially because you have the summer now coming. So it's going to be really important when we get into September, first, second week of September, to see how fast business comes back when everybody's off the summer holiday and then how that flows into October. So we are more positive than negative, but very cautious about the magnitude of it moving up because we do believe it will be a slow move up, not a real big hockey stick.

Sure. Then in terms of just impact on Q3 from average daily sales in the guidance forecast. So we have a couple of markets that have an extra billing day, but not all markets. So in average, that will add, we estimate, revenue of about 0.8% of additional revenue as a result of some of the billing days that we have in those countries. When you take that down to the bottom line, it's hard to get an exact precise calculation on that, Andrew, but I would say it would be on the order of probably $0.03 to $0.05, something in that range. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Right. But again, the 0.8% you just gave is for the total company or just in select markets?

That's for the total company. So I've averaged -- weighted average the whole thing.

Next request from Paul Ginocchio of Deutsche Bank.

Jeff, you touched on the last -- sort of the last question. But could you just talk about maybe what G&A looked relative to the rest of the quarter and if you can make any comments about these first few weeks of July, that would be great. Just about maybe about exit rate of the second quarter plus what you're seeing.

I'll just cover a few things and Mike can maybe add a little texture to it. We do for a fair amount of markets -- get some weekly data and received some this morning. In general, very much in line with what we've been seeing as we came in towards the end of the quarter and into July, which is we're not seeing any further deterioration. There is some little bump up here or there. But of course, weekly is sometimes a little hard to look at. So we -- it's not like we exited the -- it's not like we got to the quarter through a fairly weak April and a strong June. Actually, as you look to the quarter, there was not a lot of change going on. If you took out the additional billable days in there, as Mike had said, there was some flatness though, a little improvement. So we are seeing this kind of inching of improvement as opposed to, wow, we exited the quarter pretty strong and we're feeling pretty good. That is not what we're feeling. We're exiting the quarter stable from where we began with some 4 or 5 countries looking a little bit better in Europe.

Yes. I think that really covers it. I think as we -- as Jeff said, as we went through the quarter there, there was some modest improvement in terms of year-on-year when you look at it on an average daily basis, take the billable days component out of it and just look at average daily, some slight improvement as you went from April to May to June, but nothing dramatic. And so that seems the big path that we're on.

And this these or 5 countries, is that U.K., France, Spain, Italy? Who am I missing?

Well, France is feeling a little bit better in the last 4 or 5 weeks, but kind of on the margin. Yes, a little bit around the U.K. Definitely, you saw Italy. And then the Netherlands was a little bit better.

And our next request from Tobey Sommer from SunTrust.

I was wondering if you could take -- just comment about the divergence between kind of your own reported results in the U.S. and some other public competitors and the kind of data that we see on temp jobs coming out of the BLS. I'm just curious how you reconcile the difference in those reported rates of growth.

Yes, I don't think the BLS is -- data is that great. And it's been a challenge and a struggle that goes back 5, 6 years because -- how much is being included in there. And basically, our industry, when you include health care, you include some of the other ones, you get somewhat distortion in there. Now does it point on kind of a macro trend basis correctly? Probably. Now we look at this market down at the market level. So we look at what are we doing in specific markets? What are the -- that market's penetration and then what's our penetration on that based on our business? So we clearly are and have been a bit more selective, which is why I talked early on about this notion of price inelasticity and we've got to make sure that we're not pricing ourselves out of the market. And I would say we're not, but that also means that we're being very cautious. So even just on the last 30 days, which will affect as we go into the third quarter, we made a difficult, but I believe, right decision on a very large center to say, "Look, we are just going to not do it at that price" And they've got somebody else to do it at that price and we'll see our profitability increase. So we feel as though and our data shows inside, we're in line with the market we compete with. The BLS numbers have contained some staffing companies that are not driven off of this or not as correlated to us when it comes to growth rates. That's how I would explain it.

I think you do have to focus on what we've been trying to do around the margins. As Jeff said, we've been more selective. And when you look at what we've been able to do, what the U.S. organization have been able to do from a profitability perspective, quite strong in the quarter, reporting $34 million of profit, which is an increase of 40% over the prior year and an increase on OUP margin of 4 points of -- 140 basis points to 4.6%. So when you look at all of that, we'll trade a little bit of market share for profitability if we have to. We've got to be -- we've got to move the business in the right place, not just chase every opportunity that's out there because there are some opportunities that frankly don't fit with what we're looking to do.

Jeff, I missed your perspective on health care staffing in the U.S. and whether you are looking at getting some exposure on the clinical side. And also, what is your experience with Experis in terms of the hospital marketplace?

So we'll keep an eye on the health care side. We have not seen anything that would compel us to get into that. There's a lot of forces that affect that. And therefore, we like to see that shake out a little bit more. Where subsidies or taxes or Affordable Health Care Act drives it, we find it to be pretty tenuous time to get into that. And when we look at the P&Ls of those organizations while they work, they're not overly compelling to say, "I've got to get into that in order to get a really good business mix." So we'll continue to look. But right now, I would say, pretty cautious at getting in there. Now on the hospital business side, particularly medical records, hospital digital systems, the epic programmers, I mean, that is a nice piece of our business, there's no doubt about it. And on the Manpower side, even medical transcription, which would not fall into the classic health care side, but the hospital business and our Manpower business in the U.S., that is one of our focal -- our focus industries. And on the Experis side, the IT augmentation that's required to keep up with the changes happening in health care, it's great opportunities for us and we're benefiting from them.

Kevin McVeigh of Macquarie.

I want you to give us a sense, Jeff, of what end markets you're kind of leading the charge this time as you start to see some green shoots out there, particularly in Europe and across the U.S.

Well, it's fairly classic in that it depends a bit on the country. So Italy, with midsized manufacturers, anytime there is demand, we're seeing it come and being satisfied by us, which is why that's occurred. So what we would -- what I would say is in Europe, whether it be the U.K. or Netherlands or Sweden, the U.S., in Asia, this is not a -- the tide is lifting at this point. This is -- there are companies out there that are doing a bit better either because they have a better mousetrap or that industry is now suddenly -- automotive is still doing well. So second, third tier suppliers of automotive still doing pretty well because of the automotive build. It's that sort of thing. And in fact, in the U.S., it's interesting. I could pick a city out of the hat and one of them would be up 30%. I pick another city and it's down 30%, and it has to do with this lumpiness based on -- the economy isn't so strong that all boats are getting lifted. So it's really fill in demand, which is a good secular trend for us. Fill in any demand that I have with your people because we want to stay agile, I want to stay alert. Manufacturing is feeling pretty good, call centers, transaction processing centers, life cycles of companies where they say, "I no longer want to do this. I want to shed this, so you guys do that for us." But it's pretty much across industry. It's very spotty.

Got it. And then as you think about kind of penetration rates, I definitely think we see prior peak in the U.S. Any thoughts around kind of France, Jeff, or any other areas in Europe as we think about, again, penetration relative to overall nonform.

Sure. So if we took Italy and France, I think it'd be very logical to think that we would get past the previous penetration rates. Part of that is some law changes that have occurred, which makes it more appealing to use us as opposed to what we would call basically independent contractors. But in order to get there, we're going to need a little bit of GDP growth. We're going to need to get some of that coming through. But if you look at where clients are, how some positive things have been changed regarding the labor reform of both Italy and France, it would lead to a pretty good story. That said, we'd be able to surpass previous peaks in both of those countries. When we get to some of the other countries, Germany, with some of the CLA things going on right now, it's a little bit more muddled, so I'm not sure if we'd get past the peak. I don't know if we have to because there might have a growing labor market, which means we can still grow even though the percent of the pie is about the same. Netherlands will probably off that peak for a little bit of while and Sweden, I think, will start to surpass that peak if they see some growth as well.

Our next question, Jeff Silber of BMO Capital Markets.

I just wanted to go back to the cost calibrations. You had mentioned the $3 million revenue goal to get to the 4% EBITDA margin. Did the incremental margin change based on what you told us back in February, considering the better-than-expected results so far?

So on the $3 billion revenue, the incremental margin, did that change, Jeff? I think that's the question?

Yes.

Well, I think the -- I still think that, that's still a safe number. I'm not sure that I would change it dramatically. I mean, I think we clearly have recalibrated the cost in, cost out, I think, in terms of how we think about those costs coming on. I think it probably -- we still think we can be much more efficient as we drive more business through the organization. But I'm not sure incrementally we're thinking more aggressively than we were back in February. I think back, we're looking at low double-digit type incremental margins on that first $3 billion. I think that still is sensible and I'm not sure we're ready to slice the sausage any thinner than that right now to be any more precise. I think that's probably still a good number to use.

Okay, great, that's helpful. And then just a couple of quick numbers-related questions. Debt-to-cap ratio, now that, that's come down, I'm just wondering how comfortable you are raising that number in terms of taking down more debts maybe from acting [ph] acquisitions, et cetera. And in terms of the delay of Obamacare implementation, are there any potential cost savings for you now that, that's been delayed a year?

Okay. So in terms of the debt-to-cap, I mean, certainly, we're comfortable with a little bit more leverage on the balance sheet. So if an opportunity would arise for us, we think we do have capacity and we like to have that capacity on the balance sheet, so that we're able to finance the debt markets if we need to and certainly, the debt markets are at a good rate these days. So I think there is opportunity there if needed. And then in terms of -- from a cost saving standpoint, I don't see anything significant there. We weren't looking at a dramatic change. Certainly, there would have been costs that would have came in a little bit from the administrative side for us and then certainly, some costs related to our associates, which our intention was to pass on to our clients anyway. So it's...

But the fact that we now don't have to worry about passing on 100% should not affect the -- if we would view that as a net positive as opposed to a net negative that it's been delayed.

Because we likely would have, even passing on the impact of Obamacare, would have probably had some -- a little bit of a lag to it, would be my guess, and some administration costs. So I think netting it out is probably a bit of positive for us.

Tim McHugh of William Blair. Timothy McHugh - William Blair & Company L.L.C., Research Division: Just on the cost cutting, are we at a point where most of the cost savings will be reflected in this second half run rate that you described or given that you're still making additional cuts in Q3, as we think about 2014, recognizing you're not giving guidance, could the kind of expense run rate continue to come down a bit?

Tim, good question. I think it still has some opportunity to come down a little bit further. As we look at the -- as I had mentioned earlier for the third quarter, we're looking at restructuring in the $5 million to $10 million range. And I would -- at this point, preliminary estimate for Q4 is probably somewhere in the $10 million to $15 million range. So probably looking at still restructuring charge of another $25 million coming through this year as part of the overall plan. So I think there still is more opportunity, more to come. And then I think as you look beyond that, we'll continue to work on our delivery models and our delivery channels in driving productivity and efficiency through those. And that's a longer road, if you will, in terms of achieving all of that benefit. So I think that forced component of the plan actually goes in through 2014 and 2015. We haven't fully quantified that as -- like it's -- that gets to be out there a little bit further, but we're already working on elements of that. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then just one numbers question. On the tax rate, you -- even excluding the French impact, you brought down the number versus what I think you were thinking last quarter at least and as well as in your guidance. Is this kind of a new rate that we can think about going forward?

I think it's a rate you can think about for this year. Every year, we've got a number of elements going through our tax provision in terms of business mix and country mix. We're benefiting some of this year from some of the tax planning we're doing and some of the cash flows that we have through the organization. So I probably -- as you look out beyond 2013, I'm not prepared to give guidance on that yet, but I would bring it back more to what you saw in the previous year from an overall tax rate standpoint, which would be probably closer to the mid-40s when you include the business tax in there.

Our last is from Mark Marcon, Robert Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I think one thing that's a key point is that you were able to perform better this quarter than last quarter, despite a still tough environment, while executing against this fairly significant restructuring. I'm wondering if you can talk a little bit about the morale in the field, what the reaction is. And it sounds like you've actually reduced some impediments to selling and increased the selling focus. Can you talk a little bit about that?

Right. Thanks. And that's why we're very adamant about this not being a cost-cutting program. This is a simplification program and inside the company, it's called Simplify to Sell and Win. And it's about taking burden off of our field people and making sure that we give them the best we can give them to get out there and make a difference in the marketplace. So clearly, there's been some very tough decisions that have been made and some months that, particularly in the fourth quarter of last year, were extremely difficult. And right now, we're still working through a few things as we simplified between global and region in countries. We haven't quite made it through the gauntlet yet to carve out some of the work that shouldn't be done. So there are some people that are rowing the boat extremely hard. Having said that, morale is actually strong. And I visit a lot of branches and a lot of countries. It's difficult to have really good morale in France and Italy because when they're reading the papers, it's pretty tough, general business news and world news. So I've suggested to our French and Italian colleague, don't read the damn papers, just focus on our business and -- because we're doing fine. So there's an energy in the organization and the energy is, is that we have a very clear path that we're driving here. We are getting more better pipelines coming through our salesforce.com system and there is a bit of a bounce in our step. And as a result, when you look at how our people have accepted this, what we have done with the communications, how our executives have gotten out, our people are -- have a massive durability and love for this company and they're…

Right. It's a combination of them, so they see that some of these very difficult austerity programs that were implemented and the dynamic between the country governments and Brussels and the central banks saying that "I'll be here for you." So you're starting to get a backdrop that doesn't have a -- how -- what other shoe is going to drop and this is really going to get ugly. That's starting to go away. So now you're looking more at the business and when they're looking at the business, I would say that there is a real complaint out there that there's some lack of liquidity. So the small-, medium-sized business and even the large-, medium-sized business is a little constrained with the banking system right now because they just can't get some of the liquidity. Having said that, the clients are looking at their kind of forward look -- book of business and saying, slightly better, but we're going to remain cautious. We're going to stay on high alert. Everybody in Europe is a little bit -- I shouldn't say everybody, there's a lot of people in Europe that are slightly disappointed that China is moderating a bit because that sure would have helped with a little bit lower euro to get some exporting going. But while they have that, it's not going to be saving the day for them. So I would say there's just a recognition about -- things are not going to get any worse is kind of the general feeling. They've got a lot more work to do, some debt to peel off. They're going to take austerity and moderate it a bit. And as a result, you're going to get some of the confidence back, get some of the spending back and this will start to grow and -- but our view would be yes, it will grow and just grow at a very moderate pace. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then 2 quick number questions. With regards to the benefit from the recalibration, you, during your investor presentation, discussed targeted savings that we would achieve in -- by 2014. Can you talk about what percentage increase you might be seeing in that, given that things are going better than expected? And then secondly, Mike, are there any things that we should take into account for the fourth quarter as we model things out that would be especially significant from a seasonal perspective?

Okay, sure. So as part of the roadmap to 4%, what we laid out was P&L savings this year from the simplification plan of $80 million hitting the P&L and then a reduction in the actual run rate of our SG&A expense of $125 million. And so as we look at that, as I mentioned earlier, through the first quarter, we've taken out already $99 million of expense, so we've exceeded the $80 million. And as we get through the full year, I think expenses will be down in excess of $180 million. So we -- that will hit the P&L. And then from a run rate perspective, of course, the run rate's going to be in excess of $180 million. So it's gone quite a bit better. Not all of those cost savings came with restructuring charges as we go through the simplification plan. Some things have restructuring charges associated with them, some things don't. And so there are some elements to that, which get a little bit complicated, but that's how we see it and that's how it's playing out. In terms of Q4 and anything unusual, Q4 typically is a better seasonal quarter. Usually, we see things improve a little bit seasonally. I don't think there's anything of an unusual nature as I look out to Q4 that I would call out at this stage.

All right. Thank you, everyone.

This conference has concluded. All lines may disconnect. Again, thank you, everyone. Have a great day.