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Robert W. Baird Conference. February 25, 2009. Tim Payne. CEO. Forward-Looking Statements.
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Robert W. Baird Conference February 25, 2009
Tim Payne CEO
Forward-Looking Statements All information presented that is not historical should be considered forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain other factors, including but not limited to the specific factors discussed in the Company’s periodic filings with the SEC. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements expressed or implied by such forward-looking statements may vary materially from those expressed or implied in this presentation. Forward-looking statements are not guarantees of performance and the Company undertakes no obligation to update publicly any of the information presented in light of new information or future events.
Today’s Topics • MPS Group Overview • Current Professional Hiring Environment • Financial Position • Discussion
MPS Group • One of the world’s largest providers of white-collar staffing services • Contract • Permanent Placement • 2008 Revenue 2.2 billion • $115.4 million in operating income (before SFAS 142 charge) • 224 offices in 12 countries
Geographic Expansion Shanghai United States 58.5% United Kingdom 33.9% Canada 1.8% Europe 4.8% Australia 0.8% Asia 0.2% Percentages based on 2008 revenue
Mix of Services Accounting Healthcare Information Technology Engineering Legal Percentages based on 2008 revenue
Why White Collar Staffing? 1970 1975 1980 1985 1990 1995 2000 2005 2007 Bureau of Labor Statistics Early 2008
Professional Hiring Environment • Current recession dates to December 2007 • Professional hiring remained fairly strong through first half of 2008 • Not true for blue collar / administrative • September 2008 financial crisis created a “shock to the system” • Resulting in poor professional hiring conditions for remainder of 2008
Temp Employment: YOY Change MPS Group grew until October 2008 Recession began December 2007
The Hiring Cycle Early Recession Temping cut as companies cut costs Bull Economy Strong Economy Bull Economy Temping slows as focus switches to “perm” resources Improving Economy With huge backlog, hesitant to hire FTE’s, companies turn to temping companies Strong Economy Temping demand high as skilled workers in shortage 2006 Dec. 2007 2003 - 2004 - 2005
Shed Happens • We know clients will shed temporary workers during downturns • We have an operating model that adjusts simultaneous with shedding • Variable cost model • Changes made after last recession
Company Position Today • High demand professional specialties • Diverse service offerings • Variable cost business model • Strong balance sheet • Experienced management team
Investment Considerations • Long term supply of and demand for white collar talent • Anticipated duration of current recession • Secular trend toward greater use of temporary white collar talent • Historical behavior of employment-related stocks in an improving economy
Tyra Tutor SVP – Corporate Development
Full-Year Revenue $’s in billions
Full-Year Operating Income $’s in millions * = Before non-cash charge
FAS 142: Goodwill Write-down • Each fourth quarter the goodwill valuation is reviewed • With declining valuations for our peer group and uncertain economic conditions, fourth-quarter review resulted in goodwill impairment charge • Charge was non-cash and does not impact availability of borrowings from credit facility • Goodwill balance at 12/31/08 was $282 million
2008 Revenue & Margins * = Before non-cash charge
Fourth Quarter 2008 Results • On February 5th, we released 4Q08 results • Earnings per share was at high-end of management’s October guidance • Revenue was below guidance due to volatile, negative valuation of the British pound • Generated $49 million in operating cash flow
4Q2008 Revenue & Margins * = Before non-cash charge
Variable Cost Business Model • Temporary Staffing • Expense of a temporary employee ends simultaneously with an assignment end • Variable compensation (commissions and bonuses) reduced • Permanent Placement Fees • Variable compensation reduced
Cash Flow From Operations $’s in millions • Strong cash flow from operations • Have $250 million credit facility, which contains favorable borrowing terms and expires Nov. 2011 • $7 million drawn on line as of 12/31/08
Working Capital • When operations slow, cash flow typically accelerates • We pay temporary employees weekly and receive payment from clients about seven weeks later • As we slow, the cost of temporary employees stops immediately, but we continue to collect the receivables • Favorable income tax deduction • In the U.S., our previous acquisitions provide a $50 million tax deduction through 2011, making our cash taxes less than the tax provision • Cost reduction measures in place
Cash Flow Trends $’s in millions
First Quarter 2009 Guidance • First quarter revenue and EPS guidance was provided on February 5, 2009 • EPS $0.02 to $0.07 • Revenue $410 to $450 million • If 1Q09 revenue is at mid-point of guidance (assume $425 million), the year-over-year revenue decrease is approximately 25% • Using the same assumption, but on a constant currency basis, revenue decrease is approximately 15%
Financial Summary • Strong cash position • Strong cash flow, even in downturn • Line of credit in place • Expense control • Variable cost business model • Cost reduction measures in place
Reg. G Reconciliations Non-GAAP to GAAP
U.S. Unemployment Rate Overall Rate at 7.6% Where we focus