Princy Thomas: Hi, this is Princy on for Manav. Thanks for taking my question, Jack and Jonas. I wanted to just see — you mentioned on the call that you have continued diversification going on within your services and products offerings, and that would help offset softening demand in certain regions and verticals. I wanted to just get a gauge on what specific verticals and regions you’re seeing softening demand in.
Jack McGinnis: But, Princy, you broke up a little bit in the question, but I think — I got the gist of your question is you’ve highlighted some areas in your prepared remarks where you’re seeing some strength and that’s helping offset some of the broader weakness elsewhere. Where from a — it sounds like from a sector perspective, where do we have weakness? And what I’d say there is, you know, to Jonas’s earlier comments, you know, I’d say manufacturing continues to be very sluggish. Ex-automotive in Europe. So automotive in Europe has been solid. We’ve talked about that previously in Germany and holding up in France as well and in Italy and some of those markets. But I’d say when you take auto aside, manufacturing continues to be very, very sluggish.
So that’s a big one. I’d say the other big one that we’ve talked a lot about is enterprise tech. Enterprise tech continues to be very sluggish, very cautious in terms of ongoing demand, and not really seeing much of a big inflection point there. I think maybe the last one, I’d just call out is finance. The financial sector was a strength in the first half of 2023. What we’ve seen really starting in the second half of last year and into the first quarter, just more cautious buying behavior in the financial sector for staffing services, and that continues. So that’s a little color in terms of, you know, where we’re seeing some of that offset to some of the areas where we have seen strength. And again, on the strength, you know, aerospace has been strong for us, particularly in France.
Construction in certain markets has actually been okay for us as well. And as I mentioned earlier, health care IT, we did see some good activity in the first quarter, some project-related activity in the first quarter in the US.
Princy Thomas: Thank you. And I wanted to ask a follow-up. What kind of demand are you seeing currently for AI-related skills and roles? I know you mentioned that it’s still [early innings] (ph).
Jack McGinnis: I think that was what kind of demand are you seeing in AI skills? Right, and I addressed that just previously that we’re seeing an increase in demand for AI skills. But I would also say that in the grand scheme of things, the volumes are very small. Interestingly though, what I found, what we look at when we see the job ads and which industry is looking for AI skills, the financial services sector is the one where we see posting the most ads and posting the most orders for those skill sets, which might be — one might think that this comes from the technology sector, but in fact, what we’re seeing is that it’s coming primarily from the financial services sector, which of course is running massive technology platforms, and they are looking for the AI skills.
But I would position that though within the context of from an overall demand perspective, although these are difficult skills to find and they’re increasing at a fast rate, the overall size of the demand is still small.
Princy Thomas: Thank you.
Operator: Thank you. Our next question comes from Tobey Sommer with Truist Securities. Your line is open.
Tobey Sommer: Thanks. I wanted to ask you about your productivity improvements and investment initiatives and the impact on SG&A percentages, demand rebounds. Maybe you could think about it in the context of would you be able to achieve a different SG&A percentage at the recent peak in revenue in 2021, around $21 billion? Any change in complexion of those two pieces? Again, I’m thinking out several years when demand rebounds [when] (ph) we get back there.
Jack McGinnis: Yes, thanks Tobey for that question. I’d be happy to talk to that. So the answer is definitely we would expect to see some really good improvements in our efficiency ratio. So whether you’re looking at SG&A as a percentage of GP or revenues, but I’d say, GP probably is the most relevant one. When you look at pre-pandemic levels of efficiency and certainly where we’ve been in recent years, you’ve seen the deleveraging play out. But based on the work we’re doing, and to your point, we have — and we talked a bit about it in our prepared remarks. We are progressing quite nicely in our transformation programs. We talked a bit about the Shared Service Center, the Global Business Center that we’re opening up. We have opened up in the first quarter in Porto, Portugal.
These type of things with our cloud-enabled financial structure are going to be driving significant efficiencies in our cost structure going forward. And that’s on the heels of already significant progress in the front office PowerSuite implementations that will come through in a more meaningful way when volumes return from a recruiter productivity perspective. So when you add those together, we would expect a significant improvement in SG&A as a percentage of GP, when you see those programs really start to kick in when volumes return back to previous levels to your point and ongoing efficiency. So that will drive meaningful improvement in those ratios and you’ll see that drop down to EBITA margin as well and we’ve talked about that in the past.
So there’ll be a bit of a double impact. You’ll see the fall off of some of that investment spend as we continue through these programs, but then you’ll see the efficiencies come through, which will be meaningful as well. And all of that will help us improve our EBITA. One of the key components of our roadmap to EBITA margin improvement. And you’ll see that come through in the ratios as those programs continue.
Tobey Sommer: Thanks. I was hoping you could comment on your capital deployment strategy, because we’re a couple years into softening demand. And historically, when you kind of, as a management team, have gotten signs that the [coast] (ph) is clear and demand signals are improving, you typically deploy a little bit more capital at that time in the form of acquisitions. Is that still the playbook and what areas or criteria may you use to select acquisitions?
