Adecco : 2022 Full Year Results Press Release

AD HOC ANNOUNCEMENT pursuant to Art. 53 Listing Rules of SIX Swiss Exchange

Group press release, Zurich, Switzerland, February 28, 2023

Q4 & FULL YEAR 2022 RESULTS

Winning market share; strong revenue growth and gross margin

Q4 HIGHLIGHTS

• Revenues +13% reported, +5% yoy organic TDA1; up in all GBUs
• Strong return on growth investment plan driving market share gains; relative revenue growth +550 bps in Q4, with improvement of +1,500 bps yoy. France, DACH, APAC and LatAm clearly outperform
• Strong gross margin of 21.0%, supported by portfolio shift, positive mix, and pricing
• Robust EBITA margin excl. one-offs of 3.7%; mainly reflecting lower benefit from special items, growth investment, a lower contribution from Adecco US, LHH Recruitment Solutions and accretion from AKKA; productivity +2% qoq
• Operating income €113 million, reflecting higher amortisation and one-offs, both relating to the AKKA acquisition
• Basic EPS €0.39; Adjusted EPS €0.76

FULL YEAR HIGHLIGHTS

• Revenues +13% reported, +5% yoy organic TDA1 ; up in all GBUs
• Strong gross margin of 21.0%, supported by portfolio shift, positive mix, and pricing
• Robust EBITA margin excl. one-offs of 3.5%, mainly reflecting lower benefit from special items, growth investment, a moderated contribution from LHH and Adecco US and accretion from AKKA
• Operating income €547 million, reflecting higher amortisation and one-offs, both relating to the AKKA acquisition
• Basic EPS €2.05; Adjusted EPS €3.28
• AKKA delivers EBITA margin and EPS accretion in year 12; ~€25 million synergies realised
• Healthy 70% cash conversion maintained in investment phase: Cash Flow from Operating Activities €543 million
• Simplify, Execute, Grow agenda driving positive momentum: Global Sales restructured; Ian Lee appointed to Executive Committee as President, Geographic Regions to ensure local perspectives are represented
• Proposed dividend per share CHF 2.50, composed of CHF 1.85 gross plus CHF 0.65 from reserves not subject to withholding tax

Denis Machuel, Adecco Group CEO, commented:

"The Group had a strong finish to 2022 as we continued to drive momentum from our investment plan. We achieved excellent growth in Q4, with Adecco significantly outpacing the market. The newly combined Akkodis business performed well, over-delivering on its synergy target for 2022 and tracking on target for synergy capture for 2023. In LHH, our digital coaching business, Ezra, posted strong growth, and our Career Transition business delivered excellent results as the team successfully captures increasing demand amidst an uptick in corporate restructuring driven by the US technology sector.

Gross margins were strong for the quarter. Our Simplify, Execute, Grow agenda is being progressed across the organisation to accelerate implementation of our existing strategy and improve both operational and financial performance. We are very confident we will achieve the planned cost reduction target. Looking ahead, we are laser focused on driving share gains, with enhanced productivity and profitability, across all our business units this year."

Unless otherwise noted, all growth rates in this release refer to same period in prior year. 1 On an organic and trading days adjusted basis. 2 EPS accretion in year 1 excluding one-off integration and implementation costs.

Q4 & FY 2022 Results								2
KEY FIGURES
		Q4 21	CHANGE		FY 21	CHANGE
EUR millions, unless otherwise stated	Q4 22	FY 22
			Reported	Organic			Reported	Organic
Revenues	6,212	5,495	+13%	+5%1	23,640	20,949	+13%	+5%1
Gross profit	1,302	1,140	+14%	+2%	4,974	4,281	+16%	+6%
EBITA excl. one-offs2	228	259	-12%	-26%	833	953	-13%	-22%
Operating income	113	191	-41%	-39%3	547	780	-30%	-29%3
Net income/(loss)4	65	184	-65%		342	586	-42%
Basic EPS	0.39	1.11	-65%		2.05	3.62	-43%
Adjusted EPS5	0.76	1.22	-38%		3.28	4.21	-22%
Gross profit margin		20.7%	+30 bps	-20 bps		20.4%	+60 bps	+20 bps
21.0%	21.0%
EBITA margin excl. one-offs	3.7%	4.7%	-100 bps		3.5%	4.6%	-110 bps
Cash flow from operating activities		272	+187			722	-179
459		543
Cash conversion ratio2	70%	83%			70%	83%
Net debt/EBITDA excl. one-offs2	2.5x6	0.0x			2.5x6	0.0x

Q4 financial performance

Revenues

Fourth quarter revenues of EUR 6,212 million were up 5 percent organic and TDA (3 percent organic, 13 percent reported). Currency translation effects had a net positive impact of 200 basis points and M&A activities a net positive impact of 800 basis points. There was a 200 basis points negative impact from the number of working days.

At the Global Business Unit level, organically and TDA, Adecco revenues were up 6 percent (5 percent reported), LHH revenues were up 1 percent (5 percent reported), and Akkodis revenues rose 6 percent (83 percent reported, including AKKA).

Compared to the prior year, Career Transition revenues were up 15 percent organically (22 percent reported), while Outsourcing, Consulting & Other Services was up 18 percent (73 percent reported, including AKKA's integration), and Training, Upskilling & Reskilling services were 14 percent higher (22 percent reported). Flexible Placement grew

1 percent (4 percent reported), and Permanent Placement was up 3 percent (9 percent reported).

Q4 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	+5%	Adecco	+5%	+6%	Flexible Placement	+4%	+1%
TDA	-2.0%	LHH	+5%	+1%	Permanent Placement	+9%	+3%
Currency	+2.0%	Akkodis	+83%	+6%	Career Transition	+22%	+15%
M&A	+8.0%				Outsourcing, Consulting	+73%	+18%
			& Other Services
					Training, Upskilling &	+22%	+14%
					Reskilling
Group	+13%	Group	+13%	+5%	Group	+13%	+3%

1 On an organic and trading days adjusted basis. 2 For further details on the use of non-GAAP measures in this release, please refer to the 2021 Annual Report. 3 In constant currency terms. 4 Attributable to Adecco Group shareholders. 5 Please see page 14 for the description of this non-GAAP measure. 6 Adjusted for the acquisition of AKKA (Proforma).

Q4 & FY 2022 Results

3

Gross profit

Gross profit was EUR 1,302 million, up 2 percent organically (14 percent reported) in the fourth quarter period. Gross margin was 21.0 percent, 20 basis points lower organically (up 30 basis points reported).

On an organic basis, gross margins benefited from 20 basis points positive contribution from Career Transition and 10 basis points positive contribution from Permanent Placement. These benefits were outweighed by a 50 basis points lower contribution in Flexible Placement, largely reflecting lower benefit from special items. Currency effects were 30 basis points positive, and M&A was 20 basis points positive.

Selling, General & Administrative expenses (SG&A)

SG&A excluding one-offs was EUR 1,082 million, 10 percent higher organically reflecting investment in headcount to drive growth (22 percent reported, including AKKA as well as unfavourable currency impact of ~500 basis points). Full- time Employees ("FTEs") were up 8 percent organically, and 14 percent reported, including AKKA, to 39,364. Branches were up 5 percent, to 4,586.

EBITA

EBITA excluding one-offs was EUR 228 million, compared to EUR 259 million in the prior period.

The EBITA margin excluding one-offs was 3.7 percent, up 10 basis points sequentially. The year-on-year-100 basis points differential was driven by lower benefit from special items, investment in growth and a moderated contribution from Adecco US and LHH Recruitment Solutions, partly mitigated by accretion from the AKKA transaction and a higher contribution from LHH Career Transition & Mobility. Income from the Group's FESCO Adecco JV in China was EUR 8 million, from 6 million in the prior year period.

One-off costs were EUR 73 million, mainly reflecting charges taken as part of the plan to boost performance in Akkodis Germany as well as AKKA integration and related costs.

Amortisation of Intangibles

Amortisation of intangible assets was EUR 42 million in the quarter, from EUR 20 million in the prior year period, with the difference primarily driven by the acquisition of AKKA.

Operating income

The Group generated an operating income of EUR 113 million, 41 percent lower, due to the aforementioned items.

Net income and EPS

Net income attributable to Adecco Group shareholders was EUR 65 million, from EUR 184 million in the fourth quarter 2021. The result reflects lower income from operations, interest expense of EUR 15 million, and other income/(expenses), net of EUR 21 million. Income taxes amounted to EUR 12 million, with an effective tax rate of

15.6 percent including discrete events.

Basic EPS was EUR 0.39, 65 percent lower compared to the prior year period's EUR 1.11. Adjusted EPS, which is the Group's net income excluding a total EUR 61 million for amortisation of intangibles, one-off costs and associated tax effects, divided by basic weighted-average shares outstanding, was EUR 0.76, compared to the prior year period's EUR 1.22.

Cash flow and net debt

Cash flow from operating activities was EUR 459 million in the quarter, compared to EUR 272 million in the prior year period. Cash flow was impacted by lower business income while benefiting from favourable working capital development. DSO was 53 days, from 51 days in the prior year period, mainly reflecting a shift in business mix.

Q4 & FY 2022 Results

4

The rolling last four quarters cash conversion ratio was 70 percent, compared to 83 percent in Q4 2021, a healthy result during a period of increased growth investment and AKKA integration related one-off costs.

Net debt was EUR 2,455 million at end Q4 2022. The Net Debt to EBITDA ratio, excluding one-offs and adjusted for AKKA was 2.5x, in line with management expectations. The Group is firmly committed to decreasing its leverage going forward.

As a reminder, the Adecco Group issued EUR 1,500 million of senior and subordinated debt in H2 2021 at attractive terms to finance AKKA's acquisition. In addition, the Group has a robust financial structure, with fixed interest rates on 78 percent of its outstanding gross debts, no financial covenants on any of its outstanding debts, a well-balanced bond maturity profile and strong liquidity including an undrawn EUR 1,000 million revolving credit facility. In addition, the company has no bonds maturing until end 2024.

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.

1. DECCO

EUR millions, unless otherwise					Revenues			EBITA margin excl. one-offs
stated
		Q4 22		Q4 21	CHANGE (yoy)		Q4 22		CHANGE
						Reported	Organic, TDA				(bps, yoy)
Adecco	4,673	4,467	+5%	+6%	3.5%	(170)
France		1,301		1,243	+5%	+6%		5.3%		(80)
Northern Europe				619	-1%	+3%				(150)
613	2.3%
DACH		362	+17%	+19%		(560)
423	-0.1%
Southern Europe & EEMENA		1,071		1,056	+1%	+3%		5.2%		(120)
Americas				675	+5%	-3%				(340)
707	-0.2%
APAC		512	+9%	+14%		+40
558	4.7%

Adecco's revenues grew 6 percent in the fourth quarter, boosted by strength in France and very strong results from DACH and APAC. Northern Europe and Southern Europe & EEMENA both grew moderately, while the Americas were mixed.

Adecco continues to deliver on its ambition to drive market share gain by leveraging its H1 investment programme and increased its growth leadership versus major competitors in the fourth quarter. It delivered relative revenue growth +550 basis points ahead of market in the fourth quarter, bringing the full-year improvement to +1,500 basis points year- on-year. In relative terms, France, DACH, APAC and LatAm regions all clearly outperformed.

Flexible Placement revenues were 2 percent higher. On a sector basis, growth was led by autos and IT tech. Manufacturing activity was robust, while continued rebalancing in logistics impacted growth by approximately (150) basis points. Revenues were very strong in Permanent Placement, up 24 percent, led by Germany, Italy, and Iberia, and in Outsourcing, up 22 percent, led by Japan and LatAm.

Gross margin was healthy, supported by favourable solutions mix and pricing. The 3.5 percent EBITA margin mainly reflects lower benefit from special items that flattered the prior year period, investment in growth and a lower contribution from Adecco US.

Q4 & FY 2022 Results

5

Segment results

Adecco France

• France delivered strong revenue growth of 6 percent in the quarter, outperforming the market, supported by excellent performance in QAPA as well as Onsite. In sector terms, healthcare, autos, and manufacturing were strong, while logistics was soft.
• The strong EBITA margin reflects favourable solutions mix and pricing as well as lower benefit from special items.

Adecco Northern Europe

• Revenues from UK & Ireland were 3 percent higher, with strong growth in finance and services, partly mitigated by subdued activity in logistics. In the Nordics, revenues were up 2 percent, led by Finland, while in Benelux, revenues were up 3 percent.
• The EBITA margin reflects positive gross margin development and investment in growth.

Adecco DACH

• Germany recorded outstanding growth of 24 percent, showing strong return on investment. Growth was broad-based but benefited particularly from autos, professional services and logistics strength. Switzerland & Austria grew 11 percent.
• The EBITA margin development reflects lower benefit from special items, the timing of incentive accruals and higher sickness rates. On an underlying basis, the EBITA margin was robust.

Adecco Southern Europe & EEMENA

• Moderate revenue growth was achieved in Italy, up 2 percent on a tough comparison period, while growth in Iberia and EEMENA was stronger, at 5 percent and 7 percent respectively. Manufacturing, F&B and consulting sectors developed favourably while logistics was soft.
• The strong EBITA margin reflects positive mix and pricing and growth investment.

Adecco Americas

• Latin America revenues were up 21 percent, led by Argentina and Mexico, with the segment gaining share. In North America, revenues were 13 percent lower. Revenues in the US were challenged, reflecting compressed peak season demand. At the same time, relative performance trended positively, and operational green shoots were strengthened, for example with improved sales intensity and fill rates, and lowered voluntary turnover.
• The EBITA margin reflects the ongoing turnaround effort in the US and lower benefit from special items.

Adecco APAC

• The region reported very strong revenue growth of 14 percent. Japan, Asia and India all recorded excellent revenue growth; 20 percent in Japan, and 19 percent in both Asia and India. This strength was partly mitigated by performance in Australia & New Zealand, where revenues were 11 percent lower, weighed by the end of a large government contract. End-market growth was broad-based, led by IT Tech and retail.
• The strong EBITA margin reflects higher volumes, favourable solutions mix and investment in growth.