Jonas Prising - Chief Executive Officer & Director Mike Van Handel - Executive Vice President & Chief Financial Officer.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker) Manav Shiv Patnaik - Barclays Capital, Inc. Kevin D. McVeigh - Macquarie Capital (USA), Inc. Tobey Sommer - SunTrust Robinson Humphrey, Inc. George K. F. Tong - Piper Jaffray & Co (Broker) Sara R. Gubins - Bank of America Merrill Lynch Gary E. Bisbee - RBC Capital Markets LLC Jeff M.

Silber - BMO Capital Markets (United States) Andrew C. Steinerman - JPMorgan Securities LLC.

Welcome to the ManpowerGroup's Second Quarter Earnings Results Conference Call. All lines will be able to listen-only until the question-and-answer portion of the call. Today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I'd now like to turn the call over to CEO, Jonas Prising. Thank you. You may begin..

Good morning and welcome to the second quarter 2015 conference call. With me is our Chief Financial Officer, Mike Van Handel.

I will start our call by going through some of the highlights for the quarter and then Mike will go through the details of each segment, the relevant balance sheet items, cash flow as well as forward-looking items for the next quarter. I will cover some additional thoughts on our progress after that.

And before we go any further into our call, Mike will 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 on 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 statement 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 and include a reconciliation of those measures, where appropriate, to GAAP on the Investor Relations section of our website at manpowergroup.com..

Thanks, Mike. Our performance continued strong in the second quarter, with good financial and operational performance, slightly exceeding our expectations. As expected, a strong U.S.

dollar compared to other currencies had a significant negative impact on our reported results, as the dollar was much stronger compared to a year ago, although not as strong as we had anticipated coming into the quarter. This headwind in our reported results in U.S.

dollars will likely be something we'll see also going forward during 2015, but, as we've talked about in previous earnings calls, this headwind is a currency translation that does not reflect our operating performance in the different countries, nor does it impact our global operating margin in a significant way.

Earnings per share exceeded expectations, coming in at $1.33 per diluted share. This was up 16% from the prior year in constant currency, but was down 1% on a U.S. dollar reported basis. This strong earnings growth was driven by better than expected constant currency revenue growth of 6.6%, which was slightly above our guidance range.

We were pleased to see that growth was somewhat stronger than we had expected in a number of regions, although Europe is still somewhat mixed picture, with some markets performing very well, and others struggling to make headway. On the whole, Europe is continuing on its path of slow and patchy progress, not unlike the recovery we saw in the U.S.

following the Great Recession. Our gross profit margin was up 20 basis points in the quarter to 17.1%, reflecting continued good growth in our permanent recruitment business, which was up 20% in constant currency.

The investments we have made in our permanent recruitment capability over the past years continued to pay off, as our clients are recognizing and appreciating our expertise and scale in recruitment process outsourcing, direct hire, and temporary to permanent conversions.

Our perm gross profit as a percent of total gross profit was at 14.3%, a historical high for the second quarter. And we believe there's still opportunities for growth in those offerings.

Our Solutions business also saw continued good demand, leading to gross profit growth of 22% during the second quarter over prior year in constant currency, contributing nicely to our overall gross profit margin.

As we have discussed in prior calls, we believe our global capabilities fit well with client demand, even when the initial projects are only country-based, because many of our clients intend to expand nationwide when they start in a region or expand from one country to other geographies, which is well-suited to our national and global footprint.

Our market-leading global footprint in RPO and MSP gives us an excellent opportunity to address the client needs for larger regional deals and that's exactly what we're focused on.

Our costs were also well-managed in the quarter, as we continue our focus on improving efficiency and productivity, while optimizing our client segmentation and delivery models.

The combination of better than expected growth, good pricing discipline and effective cost management allowed us to expand our operating profit margin by 20 basis points to 3.7%, increasing our operating profit to $179 million, an increase of 12% in constant currency.

Our performance in the second quarter built on the good start of the year in markets that provided us with good opportunities for growth, but always in a competitive environment, where our clients have choices with whom they wish to work. Our team members are passionate about helping clients win in the changing world of work.

And the results this quarter are thanks to their commitment and dedication to making sure we meet and exceed the expectations of our clients and candidates in 80 countries every single day. And with that, I'd now like to turn it over to Mike for some additional and more detailed information on the segments..

Thanks, Jonas. As Jonas mentioned, we had a solid second quarter performance, with earnings per share growth of 15.6% in constant currency and revenue growth of 6.6% in constant currency. Our reported earnings per share of $1.33 exceeded the midpoint of our guidance range of $1.25 by $0.08.

Of this $0.08, $0.06 was due to currency, in that the negative currency impact was $0.23 per share compared to guidance of $0.29 per share, and $0.02 was due to operational performance as a result of the slightly higher than expected revenue growth. Revenue growth exceeded expectations in all segments, with the exception of Northern Europe.

This reflects the patchy nature of the recovery in our business as we see it today. Our reported revenues were down 8.7% in the quarter, reflecting a 15% negative currency impact on revenues. While significant, this is slightly less than the 17% negative impact we expected.

We continue to expect currency to impact our translated results in the second half of the year, as the U.S. dollar is stronger at the moment than it was in the second half of last year relative to many currencies.

If foreign exchange rates stay where they are, this significant translation headwind should go away in the first quarter of next year as we lap the impact of the stronger dollar against foreign currencies. Our gross profit margin came in at 17.1%, which is 20 basis points above last year and at the high end of our guidance range.

Compared to the prior year, the 20 basis point improvement primarily came from the currency impact of changes in country business mix. Our Manpower staffing gross profit margin negatively impacted our overall gross margin by 20 basis points, primarily due to changes in business mix in Northern Europe.

This was offset by a 20 basis point favorable impact from permanent recruitment. Permanent recruitment continues to perform exceptionally well, accelerating to 20% constant currency growth in the second quarter. We saw strong growth across all regions, with direct hire up 25% in constant currency and RPO up 19% in constant currency.

As we discussed on previous calls, our growth has been benefiting from the investments in capability we have built in the permanent recruitment area over the last several years as well as a secular shift in client usage.

Our clients are increasingly outsourcing or co-sourcing their recruitment needs, as they recognize this generally is not their core competency and it can cost -- effectively tap into the strength of our global recruiting engine. Now let's turn to gross profit by business line.

Our gross profit in the quarter was comprised of 63% from the Manpower brand, 20% from Experis, 11% from ManpowerGroup Solutions and 6% from Right Management.

As has been the case for the last several quarters, our ManpowerGroup Solutions business is the fastest growing of the business lines, with constant currency gross profit growth of 22%, matching the strong growth we saw in the first quarter.

Our ManpowerGroup Solutions offerings include recruitment process outsourcing, TAPFIN MSP and talent-based outsourcing. We have realized very strong demand across all of our global solutions offerings, as clients are looking to us for expertise in managing their most complex human capital needs.

Within ManpowerGroup Solutions, our expenses were well-managed, resulting in expanding business line contribution margin and strong profit growth. Our Manpower business is comprised of 60% industrial skills and 40% office and clerical skills.

During the quarter, we saw constant currency gross profit growth of 4% overall, with industrial decelerating to 5% growth from the 10% growth we saw in the first quarter. Our Experis brand gross profit is comprised of 60% IT skills, and the balance is comprised of finance and accounting and other specialty skills.

Constant currency gross profit growth accelerated to 9% in the quarter from 7% last quarter. Our countercyclical Right Management business gross profit was flat compared to the prior year, an improvement from the year-on-year declines we witnessed the last few quarters. I'll discuss Right Management in more detail later in the segment reviews.

Our SG&A in the quarter was $652 million, a decline of 8.2% or an increase of 5.2% in constant currency. We've been able to manage our SG&A growth below the rate of revenue and gross profit growth, while selectively investing to support new growth opportunities.

Much of the SG&A growth relates to additional field staff at existing branch offices in our higher growth markets. Our SG&A on a U.S. dollar-reported basis increased 10 basis points to 13.4%, but on a constant currency basis, it was down 10 basis points. Next, I'd like to turn to the operational performance of our segments, starting with the Americas.

The Americas comprise 23% of revenue in the quarter, with revenues of $1.1 billion, an increase of 4% in constant currency. This was slightly ahead of our expectations, as revenue growth in Latin America accelerated during the quarter. Profitability was very strong, with OUP of $56 million, an increase of 34% in constant currency.

OUP margin was 5%, an increase of 120 basis points over the prior year. Driving the OUP margin expansion was strong staffing margin expansion, primarily coming out of the U.S., and very strong growth in permanent recruitment fees, accelerating to 34% in constant currency.

SG&A expenses were well-managed and down year-on-year, primarily as a result of a $9 million charge for legal costs in the U.S. last year. U.S. operation is the largest within the Americas, representing 67% of revenue. Our U.S.

revenues were down slightly from the prior year at $763 million, but profitability was very strong at $42 million, an increase of 40% over the prior year, and an OUP margin of 5.5%. After adjusting for the prior year legal charge of $9 million, OUP was up 8% over the prior year and OUP margin was up 50 basis points.

This margin expansion was driven by excellent performance on the gross profit margin. The U.S. experienced expanding staffing gross margins, as a result of strong price discipline, effective management of workers' compensation and healthcare costs, and lower state unemployment tax rates.

Gross margin also received a good boost from very good growth in permanent recruitment, which was up 40% in the quarter. Our Manpower brand comprised 45% of U.S. gross profit and had a revenue decline of 3%. The revenue decline we experienced is primarily due to further softening in demand from our clients in the industrial segment.

Our industrial business was down 3% in the quarter compared to growth of 4% last quarter. We believe our growth was slightly below market and was hampered by our specific client mix.

While we didn't lose any significant clients or contracts in the quarter, we had a number of our clients reduce their spend on staffing services, but that being said, we believe there is good opportunity in the U.S. market. And we are honing our sales execution to cultivate new wins to offset weaker demand from some of our existing clients.

Our Experis brand in the U.S. saw revenue contract in the quarter by 3% year-on-year, similar to the first quarter. Within Experis, our IT business was slightly up over the prior year, while engineering and finance saw declines. Similar to last quarter, our engineering business was impacted by weaker demand in the oil and gas industry.

Our focus within Experis continues to be driving higher value, higher margin solutions business, which has resulted in strong gross profit margin expansion in the quarter. Our ManpowerGroup Solutions offerings continue to be very well received by our clients, with revenue growth of 13% and gross profit growth of 29% in the quarter.

Both our RPO and TAPFIN MSP solutions performed very well in the quarter, with RPO recruitment fees up 42%, and TAPFIN MSP gross profit up 16%. This resulted in strong growth in our ManpowerGroup Solutions business line contribution. Our Mexico operation had a very good quarter, with revenue growth accelerating to 13% in constant currency.

We also saw improving trends in permanent recruitment, which is up 23% in constant currency. Resulting strong gross profit growth, combined with good SG&A expense management, resulted in OUP growth of nearly 20% in constant currency and good OUP margin expansion. Our business in Argentina grew by 40% in constant currency in the quarter.

While much of that growth is fueled by inflation, we did have billable hour growth of 8% in the quarter. While the environment in Argentina remains difficult, we are starting to see stability in our business as this was the first time in more than four years that we saw billable hour growth.

Our team in Argentina was able to manage this growth into strong OUP improvement and expansion of OUP margin. Other markets within the Americas were up 8% in constant currency, which was primarily driven by good growth in Central America, Peru, and Colombia, somewhat offset by revenue declines in Brazil and Canada.

Our Southern Europe segment, which represents 36% of total revenue, had another very strong performance. Revenue for the quarter was $1.8 billion, an increase of 11% in constant currency. Gross profit margin improved on strong permanent recruitment growth of 21%.

And SG&A expenses were well-managed, driving OUP growth of 20% in constant currency to $93 million. OUP margin was 5.3%, an increase of 40 basis points. France is the largest operation within Southern Europe, representing 68% of segment revenues. Revenue in France was $1.2 billion, an increase of 5% in constant currency.

The Proservia Atos acquisition that closed in the first quarter this year added 1% to our growth, so our organic constant currency growth rate was 4%, similar to the first quarter. Revenue growth trends in France continue to be choppy. Organic growth started out the quarter in April at 2% in constant currency, similar to March.

The growth rate accelerated in May and June, but has now fallen back to the 2% level as we exited June and for the first few weeks of July. Operating unit profit in the quarter was $67 million, an increase of 15% in constant currency. OUP margin expanded 50 basis points to 5.6% on gross margin improvement and SG&A leverage.

Revenue in Italy continues to be very strong, up 26% over the prior year in constant currency to $319 million. While the economy remains fragile in Italy, there's some growth which has resulted in strong demand for our services and solutions. Also boosting growth in the quarter was our contract with Milano Expo.

We have been appointed as a human resources premium partner for providing temporary staffing and workforce solutions at the Expo, which began in May and continues through October of this year. OUP in the quarter was $20 million, an increase of 34% in constant currency.

OUP margin expanded 40 basis points to 6.2% on a stronger gross profit margin and good SG&A leverage. Permanent recruitment continues to accelerate, up 45% in constant currency. Revenue growth in Spain continues to be quite strong, up 37% in constant currency, or 31% on an organic basis.

Profitability was very strong on expanding OUP margins as a result of good SG&A leverage. Our team in Spain has had very strong execution for several quarters and has done a tremendous job delighting our clients with their full service suite of service offerings from temporary services to sophisticated workforce solutions.

The Northern Europe segment represents 28% of total revenue and had revenue of $1.3 billion in the quarter, an increase of 4% in constant currency. OUP was $36 million, a decline of 10% in constant currency. And OUP margin was 2.7%, a decline of 30 basis points.

Within Northern Europe, there was a divergent mix of country performances, similar to last quarter. While business in the UK and Sweden continued to see good growth and Germany accelerated, several other markets experienced weaker growth in the quarter. Revenue in the UK was up 11% in constant currency, and OUP was up 30%.

OUP margin was up 50 basis points, as a result of a stronger gross margin and good SG&A leveraging. The improvement in gross margin was driven by strong demand in permanent recruitment, which was up 35% in the quarter.

Our growth rate did decelerate in the quarter compared to the prior quarter, as demand for our services softened leading up to the UK election and has remained fairly stable at that lower level since that time.

Similar to the first quarter, our growth rate got a boost from the large client engagement that we expect will taper off in the second half of the year. As a result, we are forecasting lower growth rates in the second half for the UK. Our two largest markets in the Nordics are Sweden and Norway.

In the case of Sweden, we continue to see very good growth, revenue growth of 10%, similar to the first quarter, and OUP growth in excess of 15%. (19:24) OUP margin expanded by 120 basis points as a result of strong SG&A leveraging. The environment in Norway, on the other hand, continues to be very difficult, given the reliance on the oil economy.

In Norway, revenues were down by 2% in constant currency and OUP margin contracted significantly as a result of pricing pressure and SG&A deleveraging. Revenue growth improved in Germany, up 7% in constant currency. While we remain strong in price discipline, our gross margin was lower due to higher sickness and vacation time and mix of business.

Revenue in the Netherlands was down 1% in constant currency compared to the prior year. This contraction is primarily due to a few large accounts we stepped away from early last quarter due to severe price competition.

With market growth improving in the Netherlands, our team is focused on sales strategies to improve our growth and backfill some of the lost business with higher margin business. Revenue in Belgium was flat with the prior year.

Our team there has undertaken a number of sales initiatives and we see an improving pipeline, which should benefit the second half of the year. Other markets in Northern Europe were mixed, with declines in Russia and Austria contributing to a revenue decline of 3% in constant currency.

Asia Pacific Middle East revenues were $557 million, up 6% in constant currency. Contributing 2% to the revenue growth was the previously-announced Greythorn acquisition, which closed June 1. OUP in the quarter was $19 million, down 1% in constant currency and OUP margin was 3.3%.

Weighing on the OUP margin was the OUP margin decline in Australia, where revenues contracted by 4% organically. While we have seen some slight improvements in the Australian market, it still suffers from weakness in their commodity-based economy.

Japan is our largest operation in Asia Pacific Middle East, with revenue growth of 4% in constant currency. Over the last few quarters, we have seen a very gradual improving demand environment. Revenue growth in other markets of Asia Pacific Middle East was up 7% in constant currency, primarily driven by good growth in Korea, India and Taiwan.

Revenue growth in China was flat overall, but our investments in permanent recruiters is paying off, with growth in permanent recruitment fees of 34% in constant currency. Revenue at Right Management was down 2% in constant currency, but slightly better than expected at $72 million. OUP was $12 million, a decline of 4% in constant currency.

Our Career Management business, which represents 70% of Right's revenue, was flat with the prior year, as good growth in the Americas was offset by a slight contraction in Europe and Asia Pacific Middle East. Talent Management, which comprises the other 30% of revenue, was down 4% in constant currency, due to softening demand in the European market.

Now, let's move from the operations to our balance sheet and cash flow. Free cash flow, defined as cash from operations less capital expenditures, was $19 million for the first half of the year compared to a use of $37 million in the prior year. Free cash flow is typically weaker in the first half of the year, given the seasonality of our business.

Our days' sales outstanding had a meaningful improvement of two days compared to the prior year. Cash used for acquisitions in the first half of the year was $30 million, which primarily relates to the first quarter acquisition of PEAK-IT in the Netherlands and the second quarter acquisition of Greythorn in Australia.

During the first half of the year, we repurchased 2.2 million shares of common stock for $187 million, $169 million of which was paid by the end of June and the balance paid upon settlement in early July. This brings our total repurchases over the last 12 months to 4 million shares, or just over 5% of shares outstanding.

As of quarter-end, we had 3.8 million shares remaining under our 8 million share authorization. Dividends paid in the quarter were $62 million compared to $39 million the prior year. This reflects the increase in our semi-annual dividend announced in April from $0.49 per share to $0.80 per share. Our balance sheet was in good shape at quarter-end.

Our total debt was stable with the prior year quarter and our net cash declined from $206 million to $36 million, as we used available cash to fund the share repurchases. Our $430 million of debt outstanding at quarter-end was comprised of a €350 million note borrowing maturing in June of 2018 and $40 million of other short-term borrowings.

Our $600 million revolving credit facility was unused during the quarter. Lastly, I'd like to review our outlook for the third quarter. We are forecasting earnings per share to be in the range of $1.50 to $1.58. This includes an estimated negative impact from foreign currencies of $0.24 per share.

At the midpoint of our earnings guidance in constant currency, we are forecasting $1.78 per share, which is up 11% over the prior year on 6% constant currency revenue growth. We are forecasting constant currency revenue to grow between 5% and 7%. This is consistent with the average daily revenue growth we saw in June of 5.6%.

As we look to the first few weeks in July, revenue trends are generally what we saw in June, with the exception of France, which was a touch weaker. On a reported U.S. dollar basis, we expect revenues to range from a decline of 6% to a decline of 8%. This reflects a negative impact from currencies of about 13%, based upon exchange rates.

In looking at the segments, we expect revenues in the Americas and Northern Europe to range between 3% and 5% in constant currency, similar to the growth we saw in the second quarter.

In Southern Europe, we expect revenues to range from 6% to 8% in constant currency, slightly weaker than the 10.6% growth we saw in the second quarter, primarily due to a lower revenue forecast in France.

In Asia Pacific Middle East, we expect revenues to range from 12% to 14% in constant currency, reflecting a slight improvement in organic growth and about 6% growth from the Greythorn acquisition. Right Management, we expect will be about flat with the prior year in constant currency.

We expect gross profit margin to be slightly up over the prior year, driven by the impact of pricing initiatives and continued strong growth in permanent recruitment. Our operating profit margin should be flat to slightly up over the prior year, resulting in constant currency operating profit growth of 11% at the midpoint.

We are estimating an income tax rate of 37.5%, or 2% higher than the prior year. The impact of this higher rate on earnings per share is offset by a lower estimated share count of 78.4 million. We're expecting the previously-announced 7S acquisition in Germany to close late in the third quarter.

As such, we have not included any operational results in the above forecast. We have, however, included estimated contingent closing costs of $2 million related to attorney and banker fees.

The acquisition of Greythorn is included in the third quarter forecast results, but does not have a material impact on overall company revenue or earnings per share. With that, I'd like to turn the call back to Jonas..

Thanks, Mike. We've built on a good start to the year and continued our progress in the second quarter. Our focus on disciplined, profitable growth in combination with a continued focus on efficiency and productivity, coupled with investments to take advantage of growth opportunities, delivered strong results.

Based on our client conversations, we continue to believe that the global outlook is improving, albeit slowly and unevenly.

Europe should start to see some encouraging signs of a more meaningful economic recovery, although the uncertainty created around a possible Grexit illustrates the volatility a region can experience when events like those take hold.

We continue to believe that, on average, we will see a slowly improving labor market conditions in Europe, but that some countries will struggle to generate good employment growth and others may move ahead faster as their economies improve.

So, despite the stimulus and weaker currency, the recovery is likely to be uneven in a number of countries emerging from the recession and likely not be a fast paced recovery, but rather build slowly over time.

And this aids our secular growth opportunity, we believe, and gives us confidence that a region where we experience 65% of our revenue will see growth, as our clients will experience some demand growth but be wary of adding full time staff, given the unpredictable geopolitical environment.

This growth evolution would not be that dissimilar from the long patchy and drawn out recovery we saw for a number of years in the U.S., where the current market environment is now one of more broad-based stable growth across U.S. regions and industries.

Emerging markets present a mixed picture, where some countries are benefiting from improved demand from the U.S. as our products and services become more competitive. And for others, slowing demand in China has impacted their ability to sell natural resources and products to the same degree that they did in the past.

As we have commented on in the past calls, this is an environment where companies all over the world will be interested in attracting the right talent and finding the best workforce solutions for their organization, helping them grow and be successful while becoming more nimble and agile to respond to market changes.

That is an environment we have prepared for and our belief is that an uncertain slow growth environment, where clients value expertise and flexibility, can be very beneficial for a long-term opportunity. And a slow and patchy recovery can drive both cyclical and secular growth opportunities going forward.

We have been focused on building capabilities and solutions for our clients to exploit the market opportunities and, at the same time, applying pricing discipline and simplifying our organization, which has resulted in improved efficiency, agility and financial flexibility.

(29:45) We have earned our way to a strong position of cash flows by reducing our DSO and generating strong operating earnings, which has put us in a strong net cash position. And, in that context, I believe it would be beneficial to reiterate our view on how we believe capital allocation can drive long-term value for our shareholders.

We start with an overall objective of maintaining and (30:11) for the rating agencies throughout the course of an economic cycle, which is an important indicator of our financial strength to our clients worldwide.

And with that as the fundamental premise, this allows a certain level of financial leverage in the business through debt borrowings, which we see as a prudent source of cheaper capital, relative to equity financing. We have maintained an investment grade rating for more than 15 years, including during the period of the Great Recession.

Our first cash priority, of course, is funding the organic growth of our business. We have a long history of driving solid organic growth funded by investments in our business. With these investments, we have created the largest global network in the industry.

And we're consistently recognized by our clients and outside partners for developing and bringing innovative workforce solutions to the market. While our preference is for organic growth, which generally has a higher return on capital, from time to time we will supplement that organic growth with acquisitions.

These acquisitions are primarily focused on accelerating our strategy of shifting our mix of business towards higher value solutions and professional businesses. We are disciplined buyers, looking for good companies with strong strategic and cultural fit at reasonable valuations.

Our acquisition strategy this year is consistent with the past, adding acquisitions that strengthen our market and brand positioning. The previously-announced 7S acquisition will broaden our network in Germany and enhance our capabilities and services to our clients.

Now, while 7S is a larger acquisition than you have seen from us over the last few years, the impact of this and other acquisitions on annual revenue is likely to be a less than 3% of revenue during 2015. We also believe it is important to return cash back to shareholders as a way to enhance shareholder value.

The two ways we accomplish this is through our semi-annual dividend and share repurchases. Our dividend philosophy is to provide a regular cash distribution to shareholders throughout the economic cycle. During periods of economic growth and earnings growth, our practice has been to consistently increase the dividend each year.

In periods of recession, our intention is to hold the dividend stable and not reduce or eliminate it altogether. Recently, in April, you would have noticed that we substantially increased the dividend by 63% to $0.80 semi-annually.

This reflects our confidence in our business and our ability to distribute a larger percentage of our earnings to shareholders going forward. We also see share repurchases as an efficient way of returning excess cash to shareholders.

As Mike mentioned, we have been consistent buyers of our shares over the last four quarters and have repurchased over 4 million shares, or more than 5% of the total outstanding number of shares, for $340 million during that period.

The timing and amount of share repurchases is dependent on a number of factors, including our assessment of intrinsic value based upon our estimates of future cash flows. As we look to the second half of this year, we expect to complete further share repurchases, which should be funded by newly-generated free cash or additional borrowings.

In summary, we are pleased with our progress in the second quarter and are hopeful that we'll continue to see an environment that continues to improve, even at a slow and patchy pace.

Now, regardless of the external environment, however, we will remain focused on serving client demands for our services and solutions across our strong and connected brands, balancing revenue growth of pricing discipline and seeking to improve efficiency and productivity.

We are committed to seizing growth opportunities that align with our strategy and to continue to build a diversified business so we can better help our clients in the changing world of work. And with that, we come to the end of our prepared remarks, and I would ask the operator to start our Q&A session..

Thank you, sir. Our first question is Mr. Mark Marcon with R.W. Baird. Your line is open..

Good morning and congratulations on the strong results. I was wondering, Jonas and Mike, you spent more time talking about capital allocation and the structure of the balance sheet.

Just to make sure I heard things correctly, it sounds like there is an increased comfort with regards to taking on more debt, if I heard you correctly, and then potentially that we could see even more acquisitions.

Is that a correct interpretation of what you were saying or am I reading too much into it?.

(35:31-35:45) and we have been for a number of years. And so, from a balance sheet perspective, it's quite strong. I do think that the business can handle more leverage quite efficiently. And it is certainly a cheaper cost of capital. So, I think there is capacity there. I think there is capacity in the balance sheet.

I think whether it actually makes sense to issue debt, of course, we have to have needs and uses for the cash. So, I think that'll play itself out, but if, in fact, the needs arise, certainly, we've got the firepower in the balance sheet to do that.

I think as it relates to acquisitions, whether we have strength in the balance sheet or not, really doesn't directly impact our acquisition strategy. I think Jonas laid our strategy out quite nicely. I think the strategy hasn't changed.

We think about acquisitions as a way to accelerate our more professional and solution side of our business, but it has to be the right type of company and at the right price and the right culture. So a number of factors play in. So, I think that happens to occur opportunistically.

Then, of course, there's share repurchases, and we feel quite confident in the business and where we are in the cycle. And so, you've seen us quite active there the last four quarters, and I think you can expect that going forward..

Great. The first 20 or 30 seconds of what I presume was your response didn't come through. A number of people here just had silence. I was wondering if you could just repeat whatever you ended up saying in the first..

Okay..

That's a shame. That was the really good part..

It was really brilliant, too, Mark, as well. So, but....

I'm sure it was..

Yeah. No, I think I started off talking about debt and where we are from a balance sheet perspective. And from a balance sheet perspective, we do have capacity in the balance sheet. We are less leveraged than we have been for a number of years.

So, I think if the need and opportunity arises, I think we could put more leverage on the balance sheet, but that, of course, is all predicated upon cash needs..

Got it. Thank you very much..

Thanks, Mark..

Thank you. Next question is Mr. Manav Patnaik of Barclays. Your line is open..

Yeah, I'm here. Hi, guys. Good morning. Just first question, obviously, you gave a lot of color on the top-line, like macro around the countries.

I was just wondering in this, what you guys characterize as a slow and uncertain recovery, is that now for you guys to look at your margin targets and move that up or do you need a more sort of recovery globally for that to happen?.

I think from a margin standpoint, our overall margin target of 4% is out there, and we continue to progress well toward that. Certainly, an improving economy or a little bit faster growth rate will get us there a little bit faster.

As you look back, I know some of you are quite familiar with our roadmap to 4% and the simplification plan got us there, added a lot to our overall margin, about 90 basis points. And then, the gross profit side, we're seeing expand through more permanent recruitment. So, that's behaving quite well.

And then, the other point was leveraging efficiency and productivity, which comes from internal initiatives, as well as new revenue growth. And certainly, that new revenue growth, if it comes on faster, we're going to get there faster, we'll get a little bit more leverage.

You did see a little bit of leverage in the quarter come through, about 10 basis points on SG&A, and so we are able to get a little bit of leverage at these levels of growth rate, but, certainly, if we were to move from mid-single digit constant currency growth rate up to upper single digit currency growth rate, you'd see margin expansion happen more quickly, for sure..

Got it.

And in terms of the internalization fees and so forth, so is that still other opportunities and potential in the work or is it now just relying on the top-line growth to flow through?.

Well, I think we're always working on driving productivity and efficiency into our branch model and so we've got a number of initiatives in place to continue to drive our delivery model. When you look at our overall simplification plan, one of the four elements was our delivery model. And that one we talked about as being an evolution over time.

And certainly, we are driving efficiency with better segmentation of our clients, making sure those that want high-touch are getting the high-touch services that they require and those that we can do more efficiently from more of a centralized model and not through the more expensive branch model, we are delivering in that fashion.

So a number of things we're doing there, but I don't see those as being a step-function like you did on the simplification plan. I think that's going to be more of just driving efficiency on a day-in day-out basis..

Okay. And then just one quick follow-up to your capital allocation discussion, can you maybe just use Germany as an example and tell us what was different about this? You did say it was larger than you've typically done. And I think you've not done a whole lot because, I guess, it is a people's business and you prefer to do that organically.

So, what was it specific about Germany that made it that exception to go out and do that acquisition?.

Well, we've talked about Germany being an interesting market. It's a 90 million population. It's a strong market. Penetration rates are still below the average of the European penetration rate. So, we still think that there is good market growth opportunities in Germany.

And we wanted to enhance our market position in Experis and our Solutions business as well as in Manpower. And we have been working within that market for quite some time. And then, we had some good dialog with the owners of 7S. And it was a good strategic, as well as good cultural, fit for us.

So, it is a geography that we were interested in and we were fortunate to find a company that fit our profile so that we could apply our discipline and make it happen..

And I think when you look at our history, while we haven't done too many of size of late, certainly 2010 was COMSYS and 2004 was Right Management. Both of those were much larger than 7S. So, yeah, they tend to be a little bit lumpy in terms of how they might come in.

And that, of course, is all reflective of the opportunity we see and what we're trying to accomplish from an overall network standpoint..

All right, thanks a lot, guys. Good quarter..

Thank you. Next is Mr. Kevin McVeigh with Macquarie. Your line is open..

Great, thank you.

Hey, I wonder, given the run-off in the currency, are you seeing any impact from a fundamental perspective in terms of certain segments of the market being stronger than what you would have expected from a manufacturing perspective or is that still kind of early stages and on the come?.

I think it might be in the early stages, but as you heard from our prepared remarks, we've seen the industrial side here in the U.S. soften a bit between the first and the second quarter. And we think some of that is attributable to bigger clients with exposure to international markets trimming back and adjusting their cost bases.

They find it more difficult to deliver the value that they want from export markets, but I wouldn't over-estimate that that impact now. It is probably more a function of our own business mix exposure to industrial clients, but certainly it is a component of what we think is happening..

Got it. And then, Jonas, you had an interesting comment in terms of higher penetration rates within Europe. Should we think about the delta similar to what the step-up in the U.S. is or just any thoughts on that in terms of how much higher the penetration could be? And if you had any specific commentary by country, that would be helpful..

The penetration rates in Europe, on average, are still below their prior cyclical peak.

So, just as when we talked about this a number of years ago in the U.S., we think it's premature to say how much higher the peak could be in Europe, but we can observe that the current penetration rates are well below their prior peak, probably, depending on countries, could be as low as 20% below, 15% below and, in some cases, a little bit more even.

So, there is still some room for growth just to get back to prior peak, but this kind of environment, as we described, of slow and patchy recovery means that companies are going to experience some demand growth, but, at the same time, be very wary of adding additional head count themselves.

So, we believe that that desire for more agility is also going to drive secular growth, which is exactly what we've seen play out in the U.S. and we believe that we will see exactly the same thing play out across Europe as well, when they reach their prior peaks and move on from there..

Helpful. Thank you..

Thank you. Next is Tobey Sommer with SunTrust. Your line is open..

Thank you. I was wondering in July, you said the overall business growth rate is relatively stable, except for France.

What region may be offsetting that slight slowdown in France?.

Yeah, I think, when you look at – I guess, what you're asking, Tobey, is in terms of where we are. Overall, our average daily revenue, I think we mentioned, was just under 6% in June. And I think, your question asked, (46:20) we said France softened a little bit going into the third quarter.

I think when you look at where we are, I think our revenue guidance anticipates that France might bounce back a little bit, but it might not. If not, there is a few other geographies as well. I think when you look at overall, we're looking at Asia Pacific Middle East getting a lit bit stronger as we go into the third quarter.

The Americas, we're assuming about constant currency growth, about the same level overall. And Northern Europe, we're assuming similar constant currency growth in Q3 overall..

Northern Europe, I think you talked about business mix maybe impacting gross profit margin. Is that a transitory issue or is there something structural that you're dealing with an ongoing basis? Thanks..

No. I think it really has to do with client mix and where we're seeing the demand. And overall, for Northern Europe, our overall staffing gross margins were stable. But within that mix, we did see a couple of geographies where we had some growth in some of the larger clients with lower margin.

So, it really was just a client mix, not a pricing issue, but really just a mix issue is what it was, in terms of where we're seeing the growth in the marketplace..

Thank you very much..

Thank you. Next is Mr. George Tong with Piper Jaffray. Your line is open..

Hi, good morning.

Jonas, can you elaborate on your expectations for lower revenue growth in France heading into the third quarter and what the potential catalysts are for reacceleration in growth in that area is?.

As we've talked about on prior calls, the recovery in France is uneven, and they have very low economic growth. Their labor markets, as you all have seen, still have rising unemployment, so it's a very difficult environment.

And now, we believe that between a lower currency, in terms of euro being weaker, lower oil prices, as well as the ECB stimulus, all of Europe should experience some support from those events. And that should eventually translate into some more robust economic growth for France.

And when that happens, you'll also see some better labor market evolution, but this is all about where France is. And the team has done a very good job, so far, even in such a volatile environment, in terms of generating some growth. So, we think it's going to continue to be a little bit lumpy. It can move, as you've seen in the second quarter.

It moved quite a bit between the various months. And as we enter into July, we assume between June and July, that what we've seen so far, it looks about the same, and maybe a little bit weaker into July. So that's what we base our outlook on..

Yeah, and maybe just to add to that, as you've heard us say in the past, for the third quarter, really moving into the fourth quarter is going to depend upon how France comes back after the summer holidays. So, August is a fairly soft month and then it's how it climbs back.

And so, we'll see how that comes back, hopefully, comes back with a little bit more spark. And we'll see how it drives the latter part of the year. As you'll recall, last year it came back a little bit softer, so maybe we'll have a little bit better comparable this year..

Got it. That's helpful. Gross margins dropped about 20 bps in staffing, you said earlier, because of mix.

Can you elaborate on your outlook for just longer-term for temp gross margins, if you see rising bill pay spreads and temp-to-perm conversions as catalysts for gross margins and any target you can provide for gross margins in staffing going forward?.

As you've seen that we've been very mindful of driving profitable growth with a high level of pricing discipline, so we're very mindful of where we want to be in terms of our gross profit margins.

And in some markets, as you've seen, our growth has been a little bit lower because we've been disciplined and, in some cases, moved away from some client negotiations where we felt that the prices were too low.

So, in this case, we're going to drive towards improving our margins whenever and wherever possible, and making sure we select the client segments that support that strategy. And that's going to be our go-forward view as well. So that doesn't change.

In a better growth environment, of course, you have a little bit more latitude to choose segments that are favorable. You have more latitude in terms of holding your pricing, but all of the markets are competitive in terms of our offerings.

And we always have to be on our toes and make sure that we are very clear about what it is that we are looking for..

Got it. Thank you..

Thank you. Next is Ms. Sara Gubins, Bank of America Merrill Lynch Your line is open..

Hi. Thank you. You've talked about pricing pressure in a couple of markets, particularly the Netherlands, but also France and Nordics.

Could you just talk about the trends that you saw in the second quarter and how you're thinking about pricing pressure continuing into the third quarter and the back half of the year?.

I don't think we're seeing any increased pricing pressure today. The pricing pressure we refer to in the Netherlands in the prior quarter really led us to walk away from some client engagements.

And that's why you've seen us not being able to make up that larger volume client engagement as quickly as we'd want to, but nor we would expect to because it was a larger client engagement.

The pressure in France is really on the second tier competitors, mid-sized competitors, but I would characterize overall the pricing environment as rational and stable between the two quarters..

Great.

And then, just separately, did you continue to add permanent recruiters in the second quarter on a net basis and could you give us a sense of what that head count has looked like over time?.

Yeah. So we do continue to add, Sara. We added a little bit more aggressively in the latter part of last year and the first quarter of this year. We're focused on driving productivity of those recruiters. We still see great opportunity in the marketplace across a number of markets overall.

So, as we said, overall perm was up 19% in the quarter, but very good performances. The U.S. was up 40%; UK, 35%; Italy, 45%. So, we're seeing good opportunity. We're still feathering in more recruiters in those growth markets, but we're also being sure that we're getting the productivity from those recruiters.

So we still see a good market going forward, and we expect that we're going to continue to add recruiters, but clearly only as needed..

Thank you..

Thank you. Next is Mr. Gary Bisbee, RBC Capital Markets. Your line is open..

Hi, guys. Good morning. I wanted to ask about the U.S. segment. I think for really four years now, you've trailed market growth in the U.S. and you've talked at times about pruning lower margin business and price discipline. And I guess this quarter, it was in industrial and financing, accounting, and engineering being a little weaker.

But can you just talk about the drivers there and what the prospects are to grow, at some point in the future, more in line with the market? And in the second part of the question, despite that sluggish growth, you've had really good profit growth over those four years, with margins up a lot.

If the top line doesn't accelerate, how much longer can you continue to drive the margin, as you've done, to grow profits in the U.S. segment? Thanks..

Well, we've seen some good progress in a number of areas, that you've talked about. So, we've had very strong pricing discipline. We've improved our bill rates in both Manpower and especially in Experis. We're up over 100 basis points in the first half of the year, in terms of our gross margins.

And the business that we're attracting has higher value skills, that our clients are willing to pay more for. So that's been work that we have been ongoing. Now, the business that we have is sometimes project-oriented, from an Experis perspective, which means they start and they drop off.

So, we're really trying to balance that part of the portfolio, which is doing very well, with also an increased presence in the SMB segment. But for both Manpower and Experis, we believe that there are good growth opportunities for us.

And in the case of Manpower, if part of our segments are taking a little bit of a harder hit due to currency and others in the industrial segment, we're going to be focusing on other segments that aren't as exposed to that, and that's where we're putting sales focus on right now to make sure that we get back on track on the Manpower side.

And from an Experis perspective, we keep feathering in more recruiters, so that we can help transition Experis, not only to a very good gross profit margin, as well as profitability story, but also making sure that we are improving our top-line growth going forward, because we think that for both of those brands, we have some good opportunities.

And as you've seen, our Solutions business has done exceptionally well in the U.S. So, in combination, we're very pleased with where the progress that we've seen in the U.S., over the last four years. But we certainly believe that for Experis and for Manpower in particular, we still have upside opportunity. And that's where we're focused on..

Okay.

And any comment on the second part of the question around margins, is that really just Solutions keeps growing well, Experis gets back to growing at some point and there is mix shift? Is that the driver from here or is there anything else that you'd point to?.

Well, we have the opportunity and continue to have the opportunity on the Solutions side. Our perm business has done very well and we have opportunities there as well. And then, when we see some better revenues, we will have the opportunity to leverage the revenues also more than we've been able to do now.

So we're looking forward to moving forward on the Experis brand and getting some more traction in the market, so we could get closer to market..

Great, and then just a quick follow-up, the Solutions business, you've had terrific gross profit growth the last four quarters.

Should we think about starting to comp against that more moderate pace of growth in the back half or is the momentum in the top-line, which you don't always provide, is that such that thinking about continued very healthy growth from Solutions is the right way to think about third quarter and beyond? Thank you..

We've actually had very good growth over the last eight quarters and we've had in the low to mid-teens growth over the last five years in the Solutions business globally. So it is something that we've seen evolve very very well and we continue to make investments in our capabilities there.

And part of this growth has come from parts of the world that are less penetrated in terms of their maturity of using those services. And, in particular, over the last two years, we've seen an acceleration in Europe, but also in emerging markets.

And the maturity levels there are significantly below the maturity levels that you see, in particular, in the U.S. market. And we believe that we have good growth opportunities also going forward. Now, we've had some very good and strong growth, especially over the last four quarters.

So, that may be a comp issue at some point, but, for now, we think we still have some good growth opportunities as we look ahead..

Thank you..

Thank you. Next is Mr. Jeff Silber of BMO Capital Markets. Your line is open..

Thanks so much. Now that you're seeing what seems to be sustainable growth in a lot of your regions, I'm wondering how you're thinking about your office footprint.

Should we be seeing more office openings in the future?.

We will open offices when we believe that the need for a physical infrastructure will drive demand and delivery for our services, but, as you've heard us talk for a number of years now, with the help of technology, we are able to segment our markets, both in terms of last mile delivery, so our physical footprint and physical infrastructure where we are, but combine that with centers of recruitment and delivery that are remotely based.

And that is the trend that we believe will continue to evolve, so it really depends on specific marketplaces whether we want to open and need to open a physical infrastructure there or whether we can service that location remotely through a centralized delivery structure.

So I think you've seen us move more into centralized delivery and reduce our physical footprint.

And over time, I think that our aim is to grow, grow our business without having to increase our physical infrastructure, but much of that will depend on client acceptance of these new delivery models as well as candidate acceptance, because this evolution is something that you need to be in sync with.

If you're too far ahead of the curve of this change happening, you may lose share in certain markets. And, of course, if you're behind, it's making it more difficult to deliver the right value to the right client segments in a specific location.

So you'll continue to see us work on this and continue to see the evolution in this area, but we've really made some very good progress certainly over the last two to three years in that respect..

Okay, great.

And then, based on that, what should we be budgeting for capital spending this year and do you think that'll be meaningfully changed next year?.

Yeah, I think it's fairly stable. I think we're probably, to be on the safe side and call it, $55 million or so. And I think that's going to be reasonably stable. That's pretty stable as last year. I think that's going to be reasonably stable with next year as well.

So, a lot of that investment is maintaining the infrastructure we have, as opposed to opening new offices. While we are opening some new offices in new geographies, as Jonas has mentioned, on a net basis, our office count is down slightly..

All right, great. Thanks so much..

With that, we'll have the last question, please..

Yes. Next is Andrew Steinerman of JPMorgan. Your line is open..

Hi, all. Labor reform, is there anything we should be keeping our eye on that could change demand for temporary help? I remember there is Italian labor reform underway. Also, we hear a lot just about the definition of independent contractors in the U.S.

What should we be keeping our eye on this year in terms of labor reform as it might affect temporary help?.

And, Andrew, are you referring to global changes or are you referring to a specific market, because, as you know, there's been quite a number of changes or announcement of upcoming changes across a number of countries?.

Right.

So, I would like you to help us identify which geographies we should pay closest attention to?.

So we have a number of recent discussions going on. First off, France, where we are now able to renew contracts twice during their 18 month duration, as opposed to once, and also the ability to provide these longer-term project employees not only for 18 months, which was the maximum duration before, and now it's up to 36 months.

So we believe that could directionally be positive, but the impact of that remains to be seen..

Uh huh..

The Japanese Government, as you've seen, has eliminated the 26 categories that used to govern our industry. It's not implemented yet.

And the details of what will happen and how it will be implemented remain to be seen, but, again, that directionally is positive for our industry, but the magnitude as well is difficult to know at this point, because some of the mechanics need to be decided still. But from an administration perspective, that should make it much easier.

And then, I'm sure you've also heard about the discussions in Germany around the proposed bill, which we haven't seen yet, around potentially duration, implementing a duration as well as equal pay, neither of which we know enough about at this point to know how it would play out because the bill hasn't been proposed yet.

But if the terms are equal pay, for our business, that is essentially what we have after four months in the most part, so we don't think that would have an impact. And in terms of the duration, 18 months is very similar to what we see in other markets as well.

So, we wouldn't estimate that that impact, aside from high-skilled on longer-term project talent, would be very impactful to our business either. So those would be the biggest ones that I can think of that are new compared to the prior quarter discussion..

Right.

And Italian labor reform doesn't have an impact?.

Well, the Italian labor reform was now approved on the 25th of June, so it's now enacted. And we think it is going to be directionally positive, but, again, the magnitude is difficult to estimate. As you've seen, our Italian team has done exceptionally well in the markets and shown some great growth.

And it is something that we think will be helpful going forward because it provides more flexibility. It removes some of the forms of flexibility that are less regulated and should favor our industry, in particular, but we'll wait to see and the overall impact as that law becomes enacted and active..

Got it. Thank you, appreciate it..

Thanks, everyone. So with that, we come to the end of our earnings call for the second quarter 2015 and we look forward to speaking with you again next quarter. Thank you..

Thank you for participating in today's conference. You may disconnect at this time..