Randstad NV

AEX:RAND

Earnings Call Transcript 2022-Q3

[Operator]

Hello, and welcome to the analyst call on Randstad Third Quarter 2022 Results. My name is Jess, and I'll be your coordinator for today's event. [Operator Instructions]

I will now hand over to your host, Sander van't Noordende, CEO, to begin today's call. Thank you.

[Alexander van't Noordende, executive]

Thanks, Jess, and good morning, everyone. I'm here with Henry and Bisera and Akshay from Investor Relations, and I'm pleased to share our Q3 results with you.

In the third quarter, we saw a combination of solid demand and talent scarcity. At the same time, we have seen client activity moderate slightly in some markets, reflecting the challenges that our clients face in the current macro environment. The good news, though, is that we are increasingly becoming a strategic partner to our clients, providing agile and flexible services to help them meet the demands of an increasingly talent-led world of work.

Having said that, we have delivered another strong set of results, capturing profitable growth in Inhouse Professionals, perm and RPO in all geographies.

New growth for the quarter was 6.8%. Our Inhouse business grew by 15%, Professionals by 12%, perm by 23% and RPO by 55%.

Gross profit grew by 11%, and we delivered an excellent gross margin of 21% in the quarter. This was driven by pricing discipline as well as the changing business mix with around 21% of gross profit generated by perm and RPO combined.

EBITA came in at EUR 336 million for the quarter, with a solid profitability of 4.8%.

During the quarter, we completed the acquisition of the Finite Group, which broadens our technology proposition in Australia and New Zealand. I would like to give a warm welcome to the Finite team.

Looking at to Q4, we are extremely vigilant about the elevated level of macroeconomic uncertainty we see in our markets. However, we are confident in our ability to navigate the current environment and remain laser-focused on delivering for our talent and clients.

I would now like to spend a few words on our vision at Randstad and our announcement on leadership changes in September. Since joining Randstad, I spent a lot of time listening and learning from our clients, our talent, Randstad colleagues and shareholders, of course. What is very clear is that the world of work is changing, changing significantly even, COVID has accelerated this. As I've said before, is being shaped by 3 key trends. First, talent scarcity has put talent firmly in the lead. Second, talent is now strategic for our clients, and they're looking for more support with their talent agenda. And third, our industry is digitizing its speed.

We are in the middle of a profound shift in how we work and the relationship between employer and employee is no longer the same. The pandemic has changed the social contract workers have with employers and expectations are for companies to provide more than a job and a paycheck. Talent wants employers to focus on meaningful work, opportunities to grow, flexibility and belonging.

Employers need to embrace this new social contract and prioritize the talent experience to ensure that they are well placed to recruit and, of course, keep the talent they need. They're looking for a trusted partner to help them navigate the working life cycle and embrace the changes required to succeed in this new world of work.

For us at Randstad, this means we will put talent even more squarely at the heart of every do. We have to become a talent destination so that we can be an integral partner in executing our clients' talent agenda.

And as we look ahead, I'm convinced that there are 3 key aspects that will drive our future success. First, specialization is key. Clients want to talk to someone who knows about their business and talent wants to talk to someone in their own field of specialization. In a dynamic world of work, whether our shortages across both skilled and unskilled cohorts, having a deep understanding of what our clients and talent are looking for will be critical for our future success.

Second is equity. We want to be known as a company that people can trust and that gives people from all backgrounds fair opportunities. This means ensuring that our own behaviors and policies continue to meet the highest standards. It also means we are actively looking for and developing diverse talent. And we are committed to work with all pools of talent across all experiences and background so that we can serve our clients in the best possible way. Creating a wider and more diverse talent pool is a business imperative in a talent scarce world.

Third is, of course, digital. Talent and clients are expecting we are engaging with them through digital channels and delivering them through seamless processes, leveraging data. We will step up our efforts to do that at scale.

To align more closely with these market dynamics, we announced changes to our executive leadership team in September. As you have seen, we have appointed Marc-Etienne Julien, to Chief Talent Officer, and his role will be to make Randstad a partner of choice for global talent, enhancing relevance and attractiveness, of course, leveraging digitization.

Jesus Echevarria will be our Chief Client Delivery Officer, looking after our client offerings to ensure that our full range of services is delivered consistently throughout Randstad's global operations, again, leveraging digital technologies.

To be close to our clients, we will have 6 P&L leaders who will work with Chris Heutink who will take the role of COO, to drive the performance of the business, ensuring that all talent and clients enjoy a consistent and exceptional experience wherever they are in the world.

Finally, Myriam Beatove, our new CHRO, who joins us from Cargill will focus on making Randstad an even greater place to work. And Martin DeWitt, our new CIO, who joins us from Accenture, will work on unifying our IT systems while accelerating our progress in digital and make better use of our data at scale. By focusing on these areas, I firmly believe Randstad will increasingly be the partner of choice for both talent and clients. We will set a new standard within the industry.

So the direction of travel for this new leadership team is absolutely clear. It's all about talent and about closely partnering with our clients, be they large enterprises or SMEs. And specialization, equity and digital will be cornerstones in our approach. And as ever, we will keep updating you as we continue on our journey.

Let me now hand over to Henry to present the results in more detail.

[Henry Schirmer, executive]

Thank you, Sander. Good morning, everybody. I'm excited to report back on yet another strong set of numbers. However, let me start walking you through the performance of our key regions first.

North America delivered another strong quarter with growth of 6% year-over-year. Perm continued to perform strongly, especially in the IT professional space. The U.S. Staffing & Inhouse grew 4% year-over-year with the Staffing business being broadly stable and Inhouse growing strongly, benefiting from high client retention and new wins in the marketplace.

Solid demand and talent scarcity continues to be a factor in this market. Our inside engines help driving fill rate improvements and deploy utilization. And it goes without saying that we ensure our pricing appropriately reflects the extra effort involved.

Our U.S. Professionals continued their strong performance with 8% growth year-over-year, performing especially well in sectors like technology and financial services.

Canada grew 9% in quarter 3 and a pretty similar landscape as compared to the U.S. In Canada, our perm and IT Professionals business continued to perform strongly, mainly as a result of our focused investments and accelerated activity-based field steering.

The North American EBITA margin showed up strongly with 6.5%, up 70 basis points compared to last year, providing an excellent return on our targeted and well-executed investments made into the more attractive parts of the market.

France continues its market outperformance with organic revenue, up 9% year-over-year. Staffing & Inhouse business held up well with growth of 5%. In particular, the Inhouse activities grew strongly in the third quarter, mainly driven by growth in automotive, agri food and industrial sectors.

Our Professionals business delivered very strong growth of 22% year-over-year, driven by health care, finance and engineering. And in addition, our perm business also performed strongly, up 12% year-over-year. We ended the quarter with a solid EBITA margin at 4.9%.

Moving on now to Slide 8. The Netherlands delivered another solid quarter. Revenues were stable year-over-year despite the expected decline in revenue from COVID-related activities that affected Staffing in particular. On the other hand, our Inhouse concept performed well, mainly driven by growth in automotive, food and logistics sectors.

The Dutch perm business continued to perform very well, up 53%, benefiting from strong client demand and our ability to find talent in an increasingly talent-scarce market.

Our Professionals business continued its strong performance, up 15% year-over-year as utilization rates continue to improve. The Netherlands EBITA margin came in strongly at 5.7%, well above the group average.

Now turning to Germany, which also performed very well. Revenue was up 5% year-over-year. Perm continued to hold up strongly, up 41%. Professionals continued on their growth path and delivered a 6% growth year-over-year.

Germany is on its path to structurally improve its profitability, focusing on value-based pricing and cost management. Its EBITA margin for the quarter came in at 4.1%, a notable improvement sequentially and year-over-year.

Moving on to Slide 9 to talk about Italy and Belgium. Italy revenue grew by a strong competitive 9% year-over-year, and it delivered excellent profitability, continuing to clearly benefit from targeted and also well-executed investments. Growth continues to be broad-based. Perm continued to grow, up 29% year-over-year. And Italy ended the quarter with a strong EBITA margin at 6.5%, a 60-basis-point increase year-over-year.

And Belgium delivered a resilient performance in the quarter with stable revenue year-over-year. The Staffing activities were broadly stable and Inhouse performed well. Good demand in talent scarcity continues to be a factor also in this market. Throughout the quarter, our business continued to be confronted with unprecedented levels of talent scarcity. EBITA margin came in at 5.1%.

Now on to Spain, which also delivered another strong quarter, a great performance with revenue up 8% year-over-year. Perm, Inhouse, Professionals and RPO business continued to perform very well in the quarter. And also Portugal is doing well with 10% growth in the quarter. EBITA margin for Iberia came in strongly at 5.8%.

And the rest of Europe also contributed a solid quarter with 6% growth year-over-year and improving profitability. In particular, Inhouse and Professional concepts grew steadily in the third quarter. And the U.K. reported overall growth of 3%, but also Nordics with 12% growth and Switzerland with 5% did very well in the quarter. Poland showed some gradual sequential improvement in its revenue trend and ended the quarter with a decline of 1%.

Overall, we ended the quarter with a solid EBITA margin of 3.9%, 10 basis points below last year; sequentially quarter-over-quarter, up 30 basis points.

And that already brings me to the rest of the world on Page 11, which also continues to do very well with 9% profitable growth year-over-year.

Japan showed a strong performance, growing 9%, performing well across Professionals and IT and Engineering and also in perm. Australia and New Zealand also delivered strong growth, up 12% year-over-year. This quarter, we also finalized our acquisition of the Finite Group, which specializes in technology recruitment, IT consulting and a broad area of IT and digital professional services. This acquisition will further strengthen our position as the market leader within the IT sector in Australia and New Zealand and will be a strong addition to our current service offering.

India grew by 18%, continuing its successful journey, adding more and more recurring profitable business to his portfolio. Happy Diwali to my Indian colleagues.

And Lat Am also continues to do well. Argentina and Brazil stayed in a very good momentum using the RPO engine to drive an even more profitable mix. EBITA margin for this part of the portfolio was 5.1% in quarter 3. Yet again, a very significant contribution to our overall results, demonstrating the power of a broad-based, diversified set of businesses, adding to the success of Randstad.

And then our global business has reported a strong 17% year-over-year growth on the back of a continued solid demand and talent scarcity. Main driver here is certainly our very strong Randstad Sourceright business growing 21%, reflecting a solid demand in RPO.

And as Sander also mentioned, we are increasingly becoming the partner of choice, a strategic partner to our clients, providing agile and flexible services to help them meet the demands of a talent-led world of work.

And Monster continues to play its part as a very important talent sourcing engine within Randstad. Revenue was down 4% year-over-year. However, its overall contribution to the group with regards to talent sourcing makes it a very valuable part of the Randstad family.

That concludes the performance of our key geographies and are now excited to walk you through our group's financial performance on Page 13.

Here we go. Our headline for quarter 3 rightfully called out our strong performance with market-leading growth and continued margin expansion. Revenue growth came in at 7% year-over-year, surpassing the EUR 7 billion mark for the first time in Randstad's history. The Staffing concept held up steadily whilst Inhouse and Professionals delivered strong growth with 15% and 12%, respectively. Perm and RPO year-over-year growth rates were still very solid with 23% and 55%. Overall, the growth and profitability was delivered strongly across geographies, concept, type of clients and industry segments, surely a portfolio diversification, which gave us an edge in this quarter and will serve us well going forward.

Gross margin reflected strongly at 21%, 110 basis points improvement year-over-year, definitely bolstered by a strong permanent RPO growth, but also supported by our ability to price appropriately for our increasingly differentiated services. Perm and RPO jointly represents about 21% of group gross profit.

Operational expenditure decreased by EUR 31 million organically sequentially, representing a continuation of our very focused and disciplined investment approach. EBITA quarter came in at a record EUR 336 million with a 4.8% EBITA margin.

Integration one-off accounts for EUR 30 million cost this quarter, mainly reflecting some minor fine-tuning of operational structures across some geographies and integration costs from our recent acquisitions.

And lastly, on that page, the underlying effective tax rate amounted to 25.6% for the first 9 months. Full year 2022, we expect ETR to be between 24% and 26%.

And with that, let's turn the page and look at our gross margin on Page 14. Gross margin showed up at 21% for the quarter, with a further improvement of 110 basis points year-over-year. Also delivered broad base across concepts, geographies and customer groups, demonstrating our ability to price appropriately for our increasingly differentiated services in an unprecedented inflationary context. And of course, also benefiting from continued strong growth in perm and RPO.

Our temp margin increased by 10 basis points. Perm margin contributed 40 basis points in HR Solutions, including RPO added 60 basis points gross margin increase year-over-year. We cannot emphasize enough how much focus we put on our ability to price appropriately. Structural talent scarcity and unprecedented inflation is adding complexity not seen before in our market. The ability to navigate that complexity, utilizing the spoke market insight across geographies, concepts and client groups deliver significant value for our talents and clients, which, in turn, shows up positively in our P&L.

And that gets me to our OpEx bridge on Page 15. OpEx came in at EUR 1.145 billion, EUR 31 million lower sequentially, excluding ForEx and M&A. OpEx as a percent of revenue was down 50 basis points sequentially, mainly as a result of personnel expenses decreasing by 3% in the third quarter.

The average head count number has decreased throughout the quarter and hence, the September exit rate for FTEs was below the Q3 average. Of the net 1,220 FTEs added in quarter 3, more than 50% of consultants can be attributed to high-margin RPO growth alone, while the remainder was added surgically based on clear ROI expectations and applying stringent field steering principles.

As mentioned earlier, excellence in field steering and conversion is a nonnegotiable operating principle at Randstad. Given the uniqueness of the current market environment, it goes without saying that we are staying extremely close to our customers and volume development. Disciplined cost management, flexibility of the cost base and the ability to react fast to new developments comes at a premium. And with that in mind, let's now move on to our cash flow and balance sheet on Page 16.

Our free cash flow for the quarter came in at EUR 257 million. This is a function of an improved EBITA and offset by working capital movements and timing of tax payments. On the last 9-month basis, we've generated free cash flow of EUR 445 million, which is EUR 66 million higher year-over-year.

Our DSO was 52.5, slightly up year-over-year on the last 4 quarters moving base. Our ROIC, return on invested capital, continues to show up strongly with 18.6%, up from 16.1% last year, reflecting the improvement of our last 12 months EBITA and moderate increments of capital investment.

Our balance sheet remains to be very strong, showing a EUR 74 million net debt position and the leverage ratio of 0.1%, excluding IFRS 16. And as scheduled and announced at the beginning of October, we paid a special dividend of EUR 2.81 per share, totaling about EUR 510 million. This will be visible in the cash flow of the next quarter.

And finally, in the third quarter, we had a net cash outflow of EUR 168 million, which is related to the acquisition of the Finite group. That already brings me to my last chart, the outlook on Slide 17.

Let me first start with the activity momentum. In quarter 3, the total number of employees placed on a temporary basis was around 1% lower year-over-year with the month-on-month trend remaining stable throughout the quarter.

In early October, the total number of employees working was marginally lower year-over-year. Although we remain vigilant to the elevated level of macroeconomic uncertainty we see in our markets, we are confident we can respond quickly and effectively due to our operational agility and our diverse portfolio. This brings to our quarter 4 outlook. We expect quarter 4 '22 gross margin and OpEx, both to be broadly in line sequentially. There will be an adverse 1.2 working day impact in quarter 4.

As I've mentioned earlier, we have a disciplined cost management approach and have already taken cost actions in parts of the business where customer activity is moderating. We can adopt quickly to changes in activities as we have most recently shown during COVID. We have a highly experienced leadership team in place to demonstrate it multiple times that can navigate quickly.

We have a balanced, highly diversified business model and portfolio on concepts and geographies, and we have a strong balance sheet. That said, we use our data to navigate the risk and opportunities. And at all times, we stay very close to our clients and talent so that we can respond quickly to their needs. That is how we operate, and that is what we do.

Well, that concludes our prepared remarks, and we're now looking forward to taking your questions. Back to you, Jess.

[Operator]

[Operator Instructions] And the first question comes from the line of Suhasini Varanasi from Goldman Sachs.

[Suhasini Varanasi, analyst]

Just a couple for me, please. The softening in October that you mentioned, is there any color that you can provide by country or by vertical, please?

And secondly, I appreciate you've given the outlook on SG&A going into Q4. But given how the personnel, FTEs in early October is down year-over-year, can you give us some color on how you are going to think about the SG&A in case there is a sharper slowdown than you expect? And what's the impact on -- of wage inflation on your own cost base?

[Alexander van't Noordende, executive]

Shall I take the first one, Henry? So on the softening in October and more broadly in Q3, remember, softening, minus 1%, in my language, that's also flattish. So let's not -- let's use the right words.

The interesting thing there is that if we look at Q3, there were no real peaks and troughs, meaning the volume development was more or less stable across all industries and countries with the exception of automotive, which had a significant growth in Q3. So it's something across the board.

[Henry Schirmer, executive]

But let me talk about the SG&A piece. I mean, we've -- I think we've demonstrated in quarter 3 that we really look at our portfolio we support where it makes sense. I've used the word surgically and very stringent field steering, that's really the name of the game. So we have stayed very, very close to our clients and our opportunities, and we add costs where we see a super, super clear return for it in the short term and where we, in doubt, we take things out. So that's how we operate. And therefore, I mean, our guidance broadly in line with is sort of that exactly.

We look at it every week at our data sets and our field steering and then react accordingly. And should something more dramatic happen, which we're not speculating on, we have the ability to react also more. And if things are sort of keeping flattish, we also find our way. Most important to take out of quarter 3, yet again is our ability to price. We really make a big deal out of it. We work extremely hard on it. We're using data to support our cases. And I think it's very, very clear now that it works.

[Suhasini Varanasi, analyst]

Just wanted to clarify, was there any impact of wage inflation on your own cost base in Q3?

[Henry Schirmer, executive]

Yes. So when I look at the data, it suggests that because we have quite some renewal of workforce that we are, to a large part, mitigating wage inflation in our own workforce. Of course, this will not hold water for many years to come, but we also made a big case out of it historically, but also in that case, that actually our pricing in the market is stronger than what we are, in a way, going through with our own cost base.

[Operator]

Next question comes from the line of Hans Pluijgers from Kepler Cheuvreux.

[Hans Pluijgers, analyst]

First question on the U.S. If you look at some market data, I saw some say some slowdown through the quarter, especially towards the end of the quarter and going into October. I hear what you're saying that across the board, you say the picture is relatively stable, given maybe some additional flavor on the U.S., what you see there and maybe also by industry.

And then more conceptual question on the dividend policy, you indicate you're also becoming slightly more cautious. But more in general, let's say, you still have a very low leverage ratio, so a very strong balance sheet. But how do you look at it going forward? Of course, you indicated that in principle, you plan to leverage up to 1x. But let's say, if the market becomes, let's say, a little bit more clear, let's say, more difficult, how do you see that leveraging up and therefore, let's say, distributing additional cash? Yes, more conceptual. How you look at? Could you be more cautious in case of a more difficult market, would you give maybe some feeling on that?

[Alexander van't Noordende, executive]

Yes. So maybe a few words on the U.S. from my side. If you look at automotive in the U.S., I already called it out in general, but also definitely a strong industry in the U.S. The other ones that were strong was public health and education and all the other industries, and I would just say, business and IT services, but that's our Professionals business. Our U.S. Technologies business, strong performance.

The other ones, I would say, yes, so your financial services, transport and distribution, manufacturing in the low single digits. So that gives some industry color, Hans. But the U.S. team I mean, you've seen the numbers. They've done a phenomenal job in growing the business and bringing the profitability and serving their clients and talents. I said I live in the U.S., myself, so I see it from close up. It's quite phenomenal what the team is pulling off there.

[Henry Schirmer, executive]

Yes. And then with regards to dividend, it's actually not for me, at least, not the season of our dividends. So we put kind of all hands on deck to deliver a strong quarter 4 as strong as you possibly can. And then we'll look at that. In general, I just want to reiterate that we have some enormous capacity to drive value through organic growth. But we also, I think, earned the right to do very, very good M&A just to kind of to support our organic growth, as you've probably seen now with Finite or the sell acquisition we did. Let us talk more about dividends once we deliver the year.

[Operator]

Your next question comes from the line of Anvesh Agrawal from Morgan Stanley.

[Anvesh Agrawal, analyst]

I got 2 as well. First just going back to the beginning of [indiscernible] you are trying to unify your IT system across the organization and leverage data, I was wondering where are you in that journey. I mean, how much of your IT systems are identified? And are you looking for more investments going forward and potential savings you can generate? So if you can comment on that...

[Alexander van't Noordende, executive]

Yes, very good question. Oh, sorry. You had another one, Anvesh. I was so excited to talk about this.

[Anvesh Agrawal, analyst]

Maybe you want to answer that, then I can go on the second one, that's okay.

[Alexander van't Noordende, executive]

No. So Anvesh, where are we in the journey? It's early days. We, I told you have Martin, our new CIO. He just came on board. He is looking at the lay of the land, but the direction of travel is we cannot build a digital business on a fragmented system landscape. So that's the direction of travel.

Obviously, every investment we will do in that space and in other spaces, there will be solid and clear business cases. And of course, this is also something that cannot be done overnight, but it's a direction of travel, and we'll keep you posted on the developments there. But it's very early days, I would say.

[Anvesh Agrawal, analyst]

Okay. But I mean, just to be clear on that, we're not looking for any incremental SG&A immediately because of that, that we need to think about?

[Alexander van't Noordende, executive]

No, not at this point in time.

[Anvesh Agrawal, analyst]

And then just speaking on the gross margin. Obviously, temp margins are up 10 basis points year-on-year. And then when you look at like the mix is better, the pricing is better, which would tell that the underlying margin on the industrial temp side is probably weakening year-on-year. Is that a fair assumption?

[Henry Schirmer, executive]

Yes. Look, I'm not, I'm not speculating too much on what it is. We see a bit of mix. We saw big Inhouse growth in there which is impacting the gross margin, as you know, also had a working day impact in there. So overall, I must say, I'm very, very pleased with the temp margin as it stands because is going to a big part of where pricing is manifested itself. So overall good.

[Operator]

The next question comes from the line of Sylvia Barker from JPMorgan. Two questions. Well.

[Sylvia Barker, analyst]

Two questions. Well, first on employee costs versus employees. Can you just help us, I know that you've talked about field steering for many years. But Obviously, the number of employees are up sequentially by 3%. A lot of that seems still have gone into RPO. Can you just help us understand which higher paid positions have gone -- have reduced? So I know that you've, I guess it's public that you have had some U.S. tech clients and the RPO contracts, for example. So has that have an impact, a positive impact, I guess, on the employee cost reduction. It would just be helpful to get a bit more color on that movement of kind of employees up the costs down.

And then on volume versus price. So if I look at your Staffing business, your Staffing employees are down 1%. And the Staffing revenue is up 1%, Inhouse is up almost 20%. So could you -- first of all, could you maybe comment on kind of Staffing movements within Inhouse versus kind of on-site Staffing. And then just on the price/mix benefit, could you comment on how much you might be seeing in terms of wage inflation because the overall figures would suggest that that's maybe kind of running at mid- to high single digits at the moment. So I don't know how much of that might be mix.

[Henry Schirmer, executive]

Right. Let me first talk about the kind of the cost mix we have in there. I think it's fair to say that not just in quarter 3, but over the last many quarters, I think we've seen that we are capable of exchanging kind of higher cost jobs with kind of lower cost jobs because just driven by mix where we grow, but also some of the final strategies we have in there from where we serve our business. So there's definitely a very big mix impacting there.

I don't want to take it more part. I think we're already very -- kind of very explicit on how we are reporting on FTEs by regions, et cetera, et cetera. I don't want to go further into detail. But I'm not surprised what I'm saying, let me put it like that. And it's not just a quarter 3 thing.

Do you want to take one of -- what is the second question? Do you want to take one of that? The movement. Can you just run the second question again, Sylvia?

[Sylvia Barker, analyst]

Yes, sure. So if I look at your Staffing employee numbers, they're down 1%. So I guess that includes Inhouse as well. So maybe if you can just comment on Inhouse versus on-site, first of all. And if I look at the number of employees versus the revenue development, it will suggest that your pricing for kind of Inhouse and Staffing together or price plus mix is running up maybe high single digits. So just to understand kind of how much of that is wage inflation? How much of that mix?

[Henry Schirmer, executive]

Yes. No, no, clear. No, thank you. So I think I wouldn't really make a difference between Inhouse and normal Staffing concept. I think what we talk about is very explicit 1% negative volume across quarter 3, flat. And now we see a touch low in the first 2 weeks of October. And that is pretty much broad based across concept, the Staffing and the like. And you've seen that we reported 7% revenue growth with a minus 1% volume, so actually, it's predominantly price and mix driven, I'd say, conformity price-driven and mix plays a role, but I want to take better part, Sylvia.

[Alexander van't Noordende, executive]

Other than to say maybe the Inhouse clients and the enterprise clients have shown to be very resilient. It's a great model. We are very close to the client. We're part of the ecosystem. We're there day in, day out. It works very well.

[Sylvia Barker, analyst]

[indiscernible]

[Henry Schirmer, executive]

Yes. And we can -- actually price as a golden rule, we price for our services wherever we operate. And I've mentioned that before, we actually measure that. It's not kind of an anecdotal thing. We have a very strong data set where we continuously looking at pricing for more than 300 [indiscernible] in our biggest market to convince ourselves to give evidence of how well pricing works.

[Operator]

The next question comes from the line of Konrad Zomer from ABN AMRO-ODDO.

[Konrad Zomer, analyst]

I'd like to ask 2 questions as well, please. The first one, your incremental conversion ratio was 23%, down from 28% in Q2 and 13% in Q1, which is not a surprise given that your head count was up 15% year-on-year organically and the productivity per employee was down 4%. Where do you see this trend going? And can you remind us of your going concern 4-quarter rolling average target, please?

And secondly, on your outlook, it may be just me, but I just wanted to clarify the wording you used for October compared with the wording you used for Q3 because I was just -- I just wanted to check, is that basically the same development in the number of employees when you say marginally lower and when you report minus 1% for Q3, minus 1% to me is also marginally lower. So does that mean the same thing? Or are you comparing it to something else?

[Alexander van't Noordende, executive]

Yes. So Konrad, let me start by the last one. Marginally lower means in the same zone as minus 1%, so it's more or less the same. Take that out of the way.

[Henry Schirmer, executive]

Yes. Then let me talk about ICR. And please allow me, Konrad, to take a step back. So, our investment strategy over the last 2 to 3 years, you really have to look at the delivered, as far as I understand, excellent results. So despite COVID, our business has become much bigger, about 20% bigger in GP growth. We are much stronger. We're more diversified with close to 50% of our GP outside of Europe. And of course, we are much more profitable in absolute, but also in margin terms. So overall, I think we've done a very good job.

The investment in the last couple of quarters largely reflects the accelerated growth of our RPO business, Professionals and perm. And you've also seen we've taken cost measures in those parts where client activity is marginally lower already. So it really -- the way we've developed the portfolio, the impact our fee businesses have on that businesses are really -- I wouldn't say make the ICR discussion obsolete, but we need to be also surgically look into where ICR discussions in line with history really makes sense, which is predominantly in the Staffing part of it.

So last word I want say, please also take into account that when you have largely price-driven top line [ and GP ], then that comes more or less as a standard conversion. So to drive higher ICR conversion is relatively tough to achieve.

So maybe a long-winded answer for your question, I will not give an outlook as you know. But I wanted to really take that confidence we have in our way to navigate the business, the field steering we have in there, the sharpness of taking costs out where we see client activity moderating. And we -- yes, that's driving good results.

[Konrad Zomer, analyst]

Okay. That's a lot to digest. I will think about it carefully afterwards.

[Operator]

The next question comes from the line of Marc Zwartsenburg from ING.

[Marc Zwartsenburg, analyst]

A bit of a follow-up on previous questions. First of all, on the price/mix or let's say, the price increase which you see in the revenue line kicking in versus the volume line, would you expect that the tailwind from the positive price/mix will further accelerate in the coming quarters now that the new CLAs with higher wage increases and also increases in minimum wages start to kick in? So would you expect more support from the price/mix effect in the coming quarters? That's my first question.

[Henry Schirmer, executive]

Thanks, Marc. I don't know, I'm not speculating on that one. What I know is that we will try, and we're very, very careful taking into account what the input costs are more or less. So if inflation would run higher, we would price higher and the other way around. So in a way, we are also there. We are not even a scenario planning it because we're running with the confidence that whatever comes, we price for it. And we price for margin and we price when we see that the efforts required to find talent is increasing dramatically. So the time to fill. We also price for that.

So -- and I think the numbers speak its own language. I mean, we have very, very strong gross margin showing up. EBITA is looking good. against the backdrop of minus 1% volume. So I think it's a lot more complicated than that.

[Marc Zwartsenburg, analyst]

Okay. That's clear. And then maybe another one on the a -- bit on the outlook, but also a bit feeling the water. So the trend through the quarter was stable. We see October then, as Sander also indicated, still marginally down year-on-year. But I can imagine that some sectors, and we've discussed a few in the U.S., are maybe stronger than others. And particularly consumer-driven sectors like e-commerce or what have you, which are quite heavy from a logistical part and heavy temp users. Do you see some weakening trends there? Because it's trickling down a bit. We can't deny that? But do you see some sectors getting a bit more worried worrying than others and that are -- and that also reflects a bit in your statement that on the exit rate in September in terms of your own FTEs that you're already taking from cost measures there. Is that a fair assumption? Or can you give a bit more color on which sectors are definitely showing some deceleration?

[Henry Schirmer, executive]

Look, also there, I mean maybe, Sander, you'd like to also chime in. But it's really also broad-based. There's nothing I would like to take out with the post exception of automotive, which is actually based on weaker comparables, I guess, that really showing up strongly in our data set. Automotive is really going well.

The rest is holding on. I mean, we all probably not -- you all expected the statistics is really having a hard time holding on strongly. So it's going well. But then that is a sort of a company level, 100,000 feet, where it really works is you need to go into Bavaria, what's going on there? And then it's where we have the agility to go from customer to customer and be close to our clients and navigate our resources where we can still do business and do it. So -- but overall, really, Marc, across the board the same picture more or less.

[Marc Zwartsenburg, analyst]

That is remarkably strong still. Maybe it's a bit of coffee catching up a bit more still order books being executed in the scars that you reflected there. But do you see from your clients anything like that their order books are getting a bit short or that the higher times are getting shorter, anything like that?

[Alexander van't Noordende, executive]

Well, we -- at our level, don't see that, let's say, client by client, but the backlogs of the manufacturing companies are reducing somewhat. It's just the statistics that are out there. But let's say, that hasn't reached us yet in terms of lower volumes. So I guess we all need to keep an eye on the order volumes and the backlogs that are out there, and that's what we are doing. And that's what we're going to deal with accordingly.

[Marc Zwartsenburg, analyst]

Yes. No, that's clear. Congrats on the quarter.

[Operator]

The next question comes from the line of Simona Sarli from Bank of America.

[Simona Sarli, analyst]

Just a little bit of more color on Q4. Could you please comment on how we should think in terms of organic growth for Q4, considering also the tough comps compared to last with EUR 480 million higher sequentially? And also, if you could remind us, how much was the COVID-related revenues in Q3 versus Q4?

And lastly, in 2021, you benefited strongly from wage inflation, would you say that there was a significant step change in Q4 versus Q3 of last year?

[Henry Schirmer, executive]

Right. So first of all, quarter 4, I'm afraid. Don't be [indiscernible], we are not making any further remarks. We have -- it has served us well that we just talked about what we expect in the first 2 weeks of the new quarter, and we need to keep it that way.

On COVID, honestly, I'd like to put it firmly to bet. I said last quarter that it has now with such a small number that actually is not material anymore. And I sincerely hope it stays that way. Please allow me not to give you any more detail on that one.

Also wage inflation. I'm afraid, I will not make any further remarks. I think we, as a business, it's not just because we don't want to talk about it. We are being served extremely well to look at our data, to take it in and make -- and then play out our scenarios we have. So -- and that is what we do.

It's high inflation, we will price for it. There is no other way of doing that. It's a golden rule, and the rest is all about field steering. Are we putting our people -- our very valued consultants in those places where you, where we get the best possible returns. And that has served us well in this what we also do with Q4. The way we're not even looking at so much about last year. Last year is water under the bridge. Now we're in quarter 4.

[Simona Sarli, analyst]

Just to clarify, like, on COVID related work, I was referring to last year, if you could remind how much was the contribution in Q3 and how much in Q4, if possible?

[Henry Schirmer, executive]

No, I will not give you that split, I'm afraid because it's really not material for our business.

[Operator]

[Operator Instructions].

[Alexander van't Noordende, executive]

It sounds like there are no more questions, Jess, then I would say thank you all for joining the call today. But before we wrap up the call, we'd like to thank all the 700,000 Randstad's talents and employees for all the hard work for our clients during the quarter.

[Henry Schirmer, executive]

Here. Here.

[Alexander van't Noordende, executive]

Thanks a lot.

[Henry Schirmer, executive]

Thank you so much.

[Operator]

Thank you for joining today's call. You may now disconnect your lines.