Jonas Prising - Chairman, CEO Jack McGinnis - EVP, CFO Mike Van Handel - SVP.

Kwan Kim - SunTrust Anj Singh - Credit Suisse Hamzah Mazari - Sterne, Agee Tim McHugh - William Blair George Tong - Piper Jaffray Sara Gubins - Bank of America/Merrill Lynch Jeff Silber - BMO Capital Markets Mark Marcon - Baird Andrew Steinerman - JPMorgan.

Welcome to ManpowerGroup's First Quarter Earnings Results Conference Call. All participants will be in a listen-only mode until the question-and-answer session begins. This call is being recorded. If you have any objections you may disconnect at this time. And, I'll turn the meeting over to your host Manpower, Chairman and CEO, Jonas Prising.

Sir, you may begin..

Good morning and welcome to the First Quarter 2016 conference call. With me today is our Chief Financial Officer, Jack McGinnis along with our Senior Vice President and former CFO, Mike Van Handel.

I will start our call by going through some of the highlights for the first quarter and Mike will go through the operational results of the segments for the quarter and Jack will cover our balance sheet, cash flow and the outlook for the second quarter. I will then come back for some final thoughts before we start our Q&A session.

But before we go any further into our call, Mike will now 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 in 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.

We include a reconciliation of those measures where appropriate to GAAP on the Investor Relations section of our Web Site at manpowergroup.com..

Thanks Mike. We started the year with a good performance in the first quarter. Our earnings per share growth of 22% in constant currency, to $0.98 on revenue growth of 5% in constant currency to $4.6 billion.

Our operating profit grew 11% in constant currency to $132 million and our operating profit margin improved 20 basis points to 2.9% driven by a slightly higher gross profit margin and improved SG&A productivity.

As we have discussed on our recent earnings calls, market environment continues to be choppy around the world with different countries within regions moving at a different economic base. This of course impacts the demand for services in these markets.

Overall, our revenue trend this quarter were fairly stable with the fourth quarter with some markets doing slightly better and other markets doing slightly worse. The one exception to that is Italy with a very strong growth we saw in 2015.

Flattened out in the first quarter due to combination of stronger prior year comparable growth rates, the impact of hiring stimulus and a slow economy. Mike will discuss this further in the first quarter segment results.

As you can tell, currency fluctuations were less than a factor this quarter as we anniversary significant movements in the euro that occurred in early 2015. But as many of you already know very well, it is mainly a translation effect for us as our cost and revenues are matched to each country where we do business.

Looking back over the past quarters, our view of the external environment is not significantly different. We are operating in a global economy that appears to become slightly softer for a variety of reasons over the past 12 months, but with continued good growth opportunities in a number of markets.

We believe that the global economy will continue to be unease. And that is the environment we are prepared for both operationally and strategically.

Our belief is that Europe overall is still early in its economic cycle and although it may be bumpy over the near term in some markets, we should still be able to see good growth opportunities as we move through the economic cycle. We believe the U.S. economy should continue in its slow growth mode.

For some industries are experiencing slow growth but others are doing well, which will give us opportunity for growth in our different lines of business as evidenced by our continued good growth in our permanent improvement business as well as the solutions business.

Despite the difficulties for many countries in Asia Pacific and Latin America, we had good performances also in those regions, which show companies need flexibility to absorb market fluctuations in the respective businesses and industries also when they are operating in a more difficult market.

As we have said before, this choppiness in many markets is not ideal and we believe it is the kind of environment that can still present us with good opportunities for profitable growth.

Speaking to companies in many parts of the world and my recent travels in the U.S., Europe, and Asia, they are seeing the volatility in many other own industry but also seem to accept that this is something that they may have to live with for quite some time and that they need to improve their performance despite these sometimes adverse and choppy conditions.

And uncertain slow growth environment present us with excellent opportunities for our brands to help companies achieve their business strategies by providing world-class workforce solutions. As we mentioned on our last call, at this time we don't see any signs of a broad-based global downturn.

In fact, many companies expressed difficulty finding the right talent as evidenced by the findings of our 2015 talent shortage survey published late last year.

We are focused on generating profitable revenue growth, underpinned by disciplined pricing and strong productivity management so that we can drive operational performance improvements even if global market conditions continue to be patchy and uneven.

In regions with a slow growth environment where unemployment is still high such as Europe, many employers hesitate to add to their permanent workforce and that gives us good opportunities to help them with the needed flexibility to adapt their workforce strategies as the marketplace ebbs and flows as well as make them more focused on their core business by providing market-leading workforce solutions that support their workforce strategies.

Conversely, in markets with low unemployment, our strength in permanent recruitment and solutions expertise will help them find the needed skilled talent wherever they operate.

An increasing number of companies are seeing ManpowerGroup as a great partner to find resource they are unable to find themselves, which has led us to a record level of perm fees for the full-year 2015 and to a new record fee level of 15.2% of GP this quarter.

Our diversification within and between brand is providing many client companies with a global partner across multiple talent capabilities and disciplines they are increasingly looking for. And we are confident that we can provide them with a value proposition they are looking for today as well as in the future.

We're off to a good start to the year thanks to the hard work and efforts of our teams in 80 countries. And we look forward to building on this progress as the year continues. And with that, I'd like to turn it over to Mike for some additional information and detail on the segments for the first quarter..

Thanks Jonas. As Jonas mentioned we started the year off with a good performance. Earnings per Share up 22% in constant currency and 5% constant currency revenue growth. Revenue growth was at the lower end of our guidance range, while operating profit and earnings per share exceeded our expectations.

The operating profit margin was 2.9% up 20 basis points over the prior year and up 20 basis points from the midpoint of our guidance. Compared to the prior-year, our gross profit margin was 10 basis points higher and SG&A costs were 10 basis points lower both driving the expansion in operating profit margin.

Dissecting our revenue growth into a bit more detail, on average we have the same number of billing days in the quarter this year compared to prior year. While leap year added an additional billing day, this was offset by Easter moving into the first quarter this year. That of course will help in the second quarter.

I should also note that while on average there was no impact from billing days, some of our countries were impacted, and therefore, you will hear me reference revenue growth per billing date when discussing country results later in the call. As expected acquisitions contributed about 3% or 5% constant currency growth rate in the quarter.

Therefore, organic constant currency revenue growth in the quarter was 2% about 1% lower than the fourth quarter growth rate after adjusting for billing days. This 1% deceleration in growth rate can be attributed to slower growth in Italy.

As Jonas mentioned, growth in most of the other markets was fairly stable and segment revenue growth outside of southern Europe was about as expected. Earnings per share of $0.98 exceeded the midpoint of our guidance range by $0.07.

This outperformance is mostly attributable to the stronger performance of our operation with $0.05 coming from operations. Currency negatively impacted revenues by 4% and earnings per share by $0.03, $0.01 less than expected. They also picked up a penny on a lower rated average share account due to the share repurchase during the quarter.

Looking at our gross profit margin in detail, our gross margin came in at 16.9% compared to 16.8% the prior year. On a reported constant currency basis, our staffing gross margin was down 10 basis points.

Organically, the staffing gross margin had 20 basis points unfavorable impact on margin which was primarily driven by direct cost increases such as the introduction of complementary health care cost for our staffing associate in France as well as changes in business. I'll discuss this later as a part of the segment review.

Growth in permanent recruitment fees remained solid up 9% in constant currency adding 10 basis points to gross profit margin. Permanent recruitment fees as a percentage of gross profit reached record levels improving 15.2% in the quarter from 14.7% in the prior year.

Lastly, the impact of currency and changes in business mix added 10 basis points to the gross profit margin. Next let's review our gross profit by business line. During the quarter the Manpower brand comprised 62% of gross profit, our experienced professional business comprised 21%, ManpowerGroup Solutions comprised 12% and Right Management 5%.

Consistent with the last several quarters, our strongest growth was achieved by our highest value solutions offering the ManpowerGroup Solutions and our higher skilled professional staff in Experis. During the quarter, our Manpower brand reported constant currency gross profit growth of 2%.

Within our Manpower brand approximately 60% of the gross profit is derived from light industrial skills and 40% is derived from office and clerical skills.

Gross profit growth from light industrial skills declined slightly to 3% compared to a 7% increase in the fourth quarter of the prior-year primarily as a result of the increase in direct costs related to complementary healthcare in France. Gross profit growth in office clerical skills was up 1% and improvement from a 7% decline in the fourth quarter.

Gross profit in our Experis brand grew by 13% constant currency. On an organic basis, gross profit growth was up 1% constant currency. Our Experis business line contribution continues to be very strong up 19% constant currency as a result of continued productivity enhancements, strong expense management and acquisition.

Our ManpowerGroup Solutions includes our global market leading RPO and MSP offerings as well as talent-based outsourcing solutions including Proservia technology support business. Gross profit growth in the quarter is up 7% in constant currency with good growth in each of our solutions offerings.

Right Management also contributed nicely to the quarter with gross profit up 5% constant currency. I'll discuss this further in my segment reviews. Our reported SG&A expenses about in line with the prior year at $642 million.

SG&A expense was favorably impacted $22 million from currencies was slightly more than offset by additional SG&A costs coming from acquisitions of $27 million. On an organic basis, constant currency SG&A expenses were down $3 million compared to the prior year. SG&A expense as a percentage of revenue in the quarter grew 10 basis points to 14%.

On a constant currency basis, SG&A expenses and revenue improved by 20 basis points to 13.9%. We appeared to be keenly focused on driving productivity and efficiency throughout our business model. I would next like to discuss the operational performance for each of the segments. The Americas segment comprised 23% of the consolidated revenue.

Revenue in the quarter was $1 billion an improvement of 4% constant currency. Profitability was quite strong with OUP of $34 million up 23% constant currency.

OUP margin expansion is driven by continued strong growth in permanent improvement up 11% in constant currency over the prior year and strong performance in our higher margin solutions offerings. Additionally, SG&A expenses were very well controlled down slightly against the prior year on an organic basis. U.S.

is the largest country in the Americas segment comprising 67% of segment revenue. Revenue in the U.S. was $703 million a contraction of 3% compared to the prior year. As we mentioned in the last few quarters, we have seen weakness in the manufacturing side of the U.S. economy impact demand for our services.

Encouragingly, this trend seems to have stabilized with ISO manufacturing index back up of 50 last month for the first time since September. While our business is still down in the first quarter it reflects an improvement from the 5% decline we reported in the fourth quarter. OUP growth was very strong in the U.S.

improving 31% in constant currency to $23 million. OUP margin was up 80 basis points to 3.2%. Contributing to the strong margin expansion was an expanding gross profit margin combined with good expense control. Our staffing gross profit margin improved due to strong price discipline and effective management state unemployment taxes.

Primary recruitment also remained strong with fees up 12%, some of the increase we saw in the fourth quarter. In the U.S. the Manpower brand comprises approximately 40% of gross profit. Revenue for the Manpower brand in U.S. was down 7% in the quarter a slight improvement from the 9% decline we saw in the fourth quarter of last year.

This improvement was a result of revenue from industrial skills improving from a fraction 9% in the fourth quarter of last year to a decline of 5% in the first quarter. Experis brand in the U.S. comprised approximately 40% of the gross profit in the quarter. In Experis in the U.S.

IT skills comprised approximately 17% revenues to finance engineering and other professional skills comprising the balance. Similar to the fourth quarter, our Experis revenues were flat with the prior year. Experis revenue from IT skills was also flat with the prior year. Our ManpowerGroup solutions in the U.S.

contributed 20% of gross profit and continued to see solid revenue growth of 9% for the quarter. This solid growth was driven by continued strong demand by our clients for higher value RPO and MSP Solutions. Our Mexico operation continues to perform very well with revenue growth in the quarter of 11% in constant currency in an improved OUP margin.

Our gross margin is down due to shifting business mix; our operations were able to more than offset the decline with improvements in SG&A. Revenue in Argentina was up 31% constant currency. Our revenues were impacted by inflation; the underlying fundamentals of the business continue to show growth with volume growth up 2% from the quarter.

Revenue growth of the other countries within Americas was up 20% in constant currency or 7% on an organic basis. Contributing to this strong growth was double-digit organic constant currency revenue growth in Peru, Central America and Brazil. Growth in Canada was also strong aided by that Veritaaq acquisition completed last September.

Southern Europe revenue comprised 37% of consolidated revenues in the quarter. Revenue in Southern Europe came in at $1.7 billion an increase of 5% constant currency.

OUP was $72 million flat with the prior year in constant currency and OUP margin was 4.3% down 10 basis points from the prior year resulting from the increase in healthcare costs in France. Primary recruitment growth was very strong in the quarter up 14% in constant currency.

France revenue comprised 64% of the Southern Europe segment in the quarter and was up 6% over the prior year in constant currency similar to the fourth quarter. First quarter, however, did benefit from an extra billing day in the quarter to an average daily revenue basis growth was up about 4%.

It appears there may be a slight deceleration in revenue growth moving from the fourth quarter last year to the first quarter this year, it is important to note that the prior year comparable growth rate grew about 5% more difficult in the first quarter of the year compared to the fourth quarter.

On a monthly basis, average daily revenue growth was strongest in January, and then, stepped down to about 2% in February, March. More recently we have seen growth slightly accelerate over the last few weeks. OUP was $47 million a decline of 5% constant currency and OUP margin declined 40 basis points to 4.4%.

While we have maintained our position on a very strong price discipline in France gross margin was unfavorably impacted by the introduction of complementary healthcare cost for temporary associates which was effective on January 1. This was partially offset by accelerating growth of permanent recruitment, which was up 17%.

Additionally, SG&A leveraging had a favorable impact on margin as we were able to drive increased productivity across the French network. Revenue in Italy declined slightly in constant currency to $263 million with strong OUP growth of 17% to $16 million.

OUP margin expanded by 90 basis points to 6.1% primarily as a result of a strong staffing gross margin resulting from enhanced pricing subsidies and improving business model. Permanent recruitment was also a nice contributor in the quarter up 25% over the prior year in constant currency.

While profit growth was very strong in the quarter for Italy, we did see reducing demand for our temporary services due to software economic growth combined with more difficult to prior year comparable growth rates resulting in revenue growth which was much lower than we saw in the fourth quarter or all of 2015 for that matter.

Revenue growth in Spain remained very strong up 17% over the prior year in constant currency. This organic growth rate is just slightly weaker than the fourth quarter, but that can be attributed to slightly stronger prior year comparable growth rate.

Our operation continues to do a nice job in Spain expanding our gross profit margin with an approved mix of business. OUP was up 62% in the quarter in constant currency and OUP margin expanded by 70 basis points. In Northern Europe segment comprised 26% of consolidated revenue in the quarter. Revenue was up 4% in constant currency to $1.2 billion.

7S acquisition completed last September in Germany contributed to the revenue growth. On an organic business revenues were down 4% to constant currency are down 2% on an average daily basis slightly stronger than the 3% decline in organic average daily revenue we experienced in the fourth quarter.

OUP increased to 11% in constant currency to $33 million and OUP margin expanded 20 basis points to 2.7%. Here you will see mix performances across the Northern Europe segment, some markets like the Netherlands and Belgium improving all of them are like the U.K. suffered slightly.

Our largest market in Northern Europe segment is the U.K., which represents 39% of segment revenue in the quarter. The U.K. revenues were down 6% in constant currency were down 3% on an average daily basis slightly better than the fourth quarter.

As noted in previous calls, this decline is primarily driven by lower demand from one of our very large client. Excluding the impact of this client, average daily revenues were flat year-on-year.

While we continue to see growth in the Experis professional brand, which is up 2% over the prior year, the market for our Manpower staffing business has weakened especially across some of our larger account from the public sector. Growth in permanent recruitment fees, decelerated during the quarter or remains healthy up 10% constant currency.

Revenue growth in Germany was up 52% in constant currency. Excluding the impact of the 7S acquisition that closed in September of 2015, unit growth results was solid up 4% or 5% on an average daily basis.

Revenue in both the Netherlands and Belgium improved in the quarter up 3% and 4% respectively in organic constant currency on an average daily basis. The Netherlands we're closing the gap compared to market growth as we are now anniversarying from account losses in early 2015 that were exited due to lower pricing.

Other markets in Northern Europe had a revenue decline of 3% in constant currency. The very strong growth in Poland was offset by significant decline in Russian and declines in a few other markets. Asia Pacific, Middle East segment comprises 13% of total company revenue. Quarter revenue was up 12% in constant currency to $576 million.

On an organic basis, the Greythorn acquisition revenue was up 6% in constant currency. OUP was $19 million in the quarter an increase of 6% in constant currency. And OUP margin declined 20 basis points to 3.2%.

The OUP margin decline was driven by a decline in staffing gross margin resulted from direct cost increases in certain markets and changes in business. This was partially offset by improved SG&A leveraging and tight expense.

Revenue growth in Japan was up 4% on a constant currency basis and 2% on an average daily basis slight improvement from the fourth quarter growth. OUP margins improved in the quarter as a result of productivity improvements and expense leveraging.

Revenues in Australia and New Zealand were up 30% in constant currency or 3% on an organic average daily basis including the Greythorn acquisition. Demand in Australia is fairly stable; it remains at a depressed level given the economic challenges of the market.

Revenue in the other markets in Asia Pacific and Middle East was solid up 10% constant currency. As a result of good double-digit growth in a number of markets including India, Korea, and the Philippines.

Our Right Management business had a very good performance in the quarter revenues up 2% in constant currency $64 million and OUP up 71% to $10 million. OUP margin expanded 610 basis points to 14.9%. Driving the strong margin performance was primarily SG&A expense production and SG&A leveraging.

Additionally GP margin expanded due to a shift in business model. Within Right Management, our strongest growth came from outplacement fees in the Americas region. This growth was primarily driven by strong sales execution in the United States and continued outplacement opportunities in the energy segment.

I would like to have Jack discuss our balance sheet and cash flow and outlook for the second quarter..

Thanks Mike. First, I will cover cash flow and balance sheet. Free cash flow defined as cash from operations less capital expenditures is very strong in the quarter at $148 million. This includes the sale of the 2015 French CIC tax credit in March for $143 million.

Including the CIC sale, free cash flow was still positive for the quarter at $5 million compared to $12 million prior year. During the quarter, day sales outstanding increased one day partly to quarter end timing effect of Easter, the business mix changes associated with large clients.

Capital expenditures represented $17 million during the quarter, which was up slightly primarily due to our investment in recruiting centers in the first quarter. During the quarter, we repurchased 1.5 million shares of stock for $180 million.

At the end of the quarter, we have 3.8 million shares remaining for repurchase under the 6 million share program approved in October of 2015. Our balance sheet was very strong at quarter end with cash of $748 million total debt of $880 million bringing our net debt to $132 million.

Our debt ratio is very comfortable at quarter end with total debt trailing 12 month EBITDA of 12.2 and total debt to total capitalization at 25%. Our debt in credit facilities did not change in the quarter.

At quarter end, we had 350 million euro note outstanding with an effective interest rate of 4.5% occurring in June of 2018 and a 400 million euro note with an effective interest rate of 1.9% during September of 2022. In addition, we have a revolving credit agreement $600 million which remained untapped.

Next, I'd like to review our outlook for the second quarter of 2016. We are forecasting earnings per share to be in the range of $1.47 to $1.55, which includes a negative impact of foreign currency of $0.02 per share.

At the midpoint of our guidance, we are forecasting a $1.53 per share in constant currency up 15% over the prior year on a constant currency revenue growth of 6%. Our constant currency revenue guidance range for growth between $0.05 and $0.07.

Our revenue growth in the second quarter should be favorably impacted almost 2% as a result of an additional billing day on average compared to the prior year. Our revenue guidance also includes 3% growth from acquisitions similar to the first quarter.

On an organic constant currency basis, the midpoint of our second quarter revenue guidance is similar to our growth rate in March. During the first two weeks of April revenue trends were similar to March levels with the exception of France where we have seen a slight acceleration in revenue growth.

In Italy, we expect revenues in fact further against prior year due to the benefit of the Milan Expo that begin in the second quarter of 2015 and continued into the fourth quarter of 2015.

From a segment standpoint, we expect constant currency revenue growth in the Americas and Southern Europe to be in the mid-single digit range with Northern Europe and Asia Pacific, Middle East growing in the upper single-digit range with Northern Europe benefiting about 7% from acquisitions and Asia Pacific, Middle East benefiting approximately 4%.

We expect revenue growth at Right Management to be in the lower single digit. Our operating profit margin should be in line with prior year or slightly exceed prior year as we remain focused on margin expansion.

We expect our income tax rate to approximate 38% and we estimate our weighted average shares to be $73 million reflecting share repurchases through the end of the first quarter. With that, I would like to turn it back to Jonas..

Thanks Jack. The first quarter of 2016 was a good quarter for us. We showed our ability to execute and deliver good results despite the uneven market conditions in some countries. All of our brands and offerings made progress in the quarter. We saw solid growth in Manpower and managed the balance between revenue growth and discipline pricing well.

A continuing challenge that becomes even more important as demand fluctuates in some countries. We remain focused on pricing discipline and profitable growth, reflecting the commitment to outstanding service quality for our clients and candidates.

Experis was our fastest growing brand with improved strength globally in the IT skills segment, which remains an area where many of our clients are expressing continued talent need and we are increasingly well-positioned and recognized in many markets globally for our IT skills and solutions capabilities.

As I mentioned earlier in the call, our permanent recruitment offering continued to grow and reached a new record high as a percentage of GP this quarter. As we are now seen as a provider of choice not only for contingent positions across our brands, but also, for permanent positions on a global bases.

We have been building our permanent recruitment capabilities in both developed and emerging markets and this continues to be a source of growth and opportunity going forward.

Despite many labor markets being mostly stable or improving, our Right Management business has found strength and opportunities in the industries that are experiencing a slowdown.

Owing the offering and matching it to the needs of both client companies and candidates and in many cases, further enabled by our proprietary technology platform right everywhere.

And finally, our solutions business continued to grow at a double-digit pace and in light of the changes we see occurring in companies as they evaluate core versus non-core activities we should be very well positioned with our industry-leading offerings in RPO, MSP and Proservia to provide more of those services to our clients worldwide also in the future.

Many companies have a workforce pyramid that is reflecting the skills they needed in the past as opposed to the one they need in the future. They are increasingly seeing our workforce solutions as the way for them to transform a legacy workforce into a competitive strength.

Providing them with the needed talent and organizational agility as they are faced with disruptive forces in the respective businesses. Our long track record of double-digit revenue growth in our world leading solutions businesses shows our solutions are meeting this increasing demand.

As you can tell from our near-term overall outlook, we anticipate overall stability globally but with continued uneven conditions in a number of markets. Europe should have a good chance of seeing modest economic growth which is projected to be slightly better in 2016 than in 2015 according to the latest IMF report of last week.

And the report also foresees a continuation of the slow growth environment we have seen for many years in the U.S.

but from what we hear from our clients right now, we believe we are seeing economic growth expectations softening in the number of markets, but in many cases still progressing compared to the prior year both in terms of economic growth and with expectations of a modestly improving labor market in many parts of Europe, North America, as well as parts of Asia and Latin America.

And in this environment, we should see continued growth opportunities and we will stay focused driving operational performance improvement even if global market conditions continue to be patchy and uneven always ready to change our stance should the outlook change in either direction.

Our strategies are intended to support our client companies operating in this kind of environment and we should be very well placed to take advantage of the opportunities that come from companies that are looking for operational flexibility and strategic agility in their work forces.

In summary, we are pleased with a good start to the year and our first quarter results and are committed to seizing profitable growth opportunities aligned with our strategies for the remainder of the year. And with that, we have now come to the end of our prepared remarks and I'd like the operator to begin the Q&A session..

Thank you. We will now begin the question-and-answer. Our first question comes from Mr. Tobey Sommer from SunTrust. Sir, your line is now open..

Hi. This is Kwan Kim on for Toby. Thank you for taking my question. On the RPO business, how would you characterize the growth among the different regions and what you are seeing there in terms of new adoptions? And if you could give us some color on the IT business in the U.S., what you are seeing in the current environment. Thank you..

Good morning, Kwan. The RPO business is relatively mature here in the U.S. It is the biggest market globally and I would characterize Europe being less mature, but growing rapidly and the emerging markets in Latin America and in Asia Pacific really being at the very early stages of the introductions of RPO and our other solutions offerings.

As it relates to the U.S. IT environment in terms of our outperformance, you could see that we saw some stability between Q4 and Q1. I would describe the demand for IT skills to still be healthy, maybe slightly softer. But, this is also been impacted by the increasing difficultly and tightness of the labor markets for those skills.

So, we have made some good progress and as you saw from our -- as you heard from Mike's report, we had some good growth in our gross profit margin, some very good bill rates improvement and things like that but we'd still like to see some further growth in our own business because we still think there's good opportunities for us here in the U.S.

market for IT skills..

Got it. Thank you..

Our next question comes from Anj Singh from Credit Suisse. Sir, your line is now open..

Hi. Good morning. Thanks for taking my questions. I was hoping you could discuss France a little bit. How much do think you'll focus on price discipline is impacting you versus what's going on and let's say the overall market, just wondering how much of the lower growth on a billing day basis at 1Q is due to price discipline versus just market trends.

And how would you contrast or characterize the environment versus say a year ago when the French temp market was reflecting positive on a competitive dynamics perspective? Thank you..

Thanks Anj. We would characterize. Our objective is to be able to drive operational performance and we do that through pricing discipline. Now, when we look at the French market and as you heard Mike talk about earlier on in our call, we saw stability between the fourth quarter and the first quarter.

And what's happening in France is that there are a number of segments, first of all, which are growing faster where we are not as strongly represented such as logistics, such as construction. So those are some of the segments that are growing. So, the market might be growing a little bit faster in areas where we are not very strong.

We've also then applied strong operational and pricing discipline when we look at the market because we believe that it will continue to be stable going forward as well and that we had an impact with the health insurance increase as far as direct cost increase is concerned.

So we want to make sure that we are very, very disciplined in the French market so that we derive the value for the service -- the quality service that we provide to our clients. So, we continue to believe that France is on a recovery trajectory.

It is an environment that is uneven in France and you can see that although the economic growth is improving, it is improving from a very low level to frankly reasonably modest level at least according to the IMF forecast. So our anticipation is that the market in France continues on its path of recovery.

When we look at this compared to a year ago we see some improvement, but really stability is what we are anticipating and stability in our case means a slow growth environment and that's the kind of environment that we are prepared for..

Okay. Got it. And one quick one on the U.S. Could you talk about the OUP margins there? How much of this is just a better mix say from solutions as well as let's say perm just trying to get a better sense of how sustainable this is. It seems like it's the strongest we have seen in a long time, 1998 I think if my model is correct.

So just hoping for some more color there. Thank you..

Clearly, our diversification in terms of our business mix has a very strong impact in our ability to drive better profitability in the U.S. But you combine that with a very strong pricing discipline, our ability to recover some of the cost increases either through [indiscernible] or ACA related costs. The teams are doing a very good job.

And then clearly, we have seen some very good continued growth on the perm side as well as on the solution side. And that's those are the higher-margin parts of the businesses that are growing. We have managed this very well. To that, we will of course continue to drive efficiency and productivity.

So we are really looking at this in a prong way driving higher-margin businesses, continue to make sure that we are pricing disciplined, and then at the same time drive efficiencies in any area that we think we have opportunities..

That's helpful. Thank you..

Our next question comes from Hamzah Mazari from Sterne, Agee. Sir, your line is now open..

Good morning. Thank you. Just the first question was around just your footprint and branch efficiency and consolidation.

Is most of the low hanging fruit on the cost side behind you post the large restructuring you guys did a few years ago? I'm trying to get a sense of how much further room there is may be on the branch efficiency side in order to see maybe greater operating leverage in the model?.

Sure. Good morning, Hamzah. So, I think as you rightly pointed out we went through a very major cost recalibration program in 2013 and took almost $200 million out of the business. As part of that program, there were four prongs as I'm sure you will remember, one of them being delivery, in our delivery models and driving productivity and efficiency.

So that is something that we are very attuned to and are working very hard on. I think, I wouldn't expect to see a step change in terms of cost reduction like you saw in 2013, but we are going to continue to drive efficiency and productivity. I think that's part of what you just saw in the U.S.

margin in the first quarter and for the last several quarters. You are starting to see some of that efficiency come through albeit gradually. And so this is -- this is not a one-time project. This is a long-term project where we are driving our efficiency model.

We are doing a better job of segmenting our client, so as that we can service more from a centralized basis. Those that prefer to be served more through branch network and as a result, getting more efficiencies overall as you know we have been reducing our overall branch footprint over the years.

And I think there is still ways to go on that as well in some of the more developed markets. So it's a continued journey. I think there is still opportunity there and that is something we work on every day..

That is very helpful. And just a follow-up on the Experis business. Could you maybe talk about some of the delivery model changes you've done in the U.S. and maybe talk about the exposure to large accounts versus small business? Has that changed at all? Any sense of that? Thank you..

The Experis business is delivering skill sets and solutions that are very suitable to centralized delivery. And as you know, not only for our Experis business but also for our Manpower business we skew towards larger organizations as opposed to smaller organizations. And they also are becoming more amenable and used to new delivery models.

So, we have seen a good evolution in Experis in the U.S. in terms of having more centralized delivery for a number of our large client relationships. Just as Mike says, we expect that to continue. Now, having said that, we also know that there is a local market.

There are clients who prefer to have the deliveries that are closer to them geographically and that we are not ignoring that and we are making sure that we are strengthening that part of the network as well with recruiter as well as salespeople. So, it's really a two-pronged approach.

And it really talks about the increased segmentation of the market and the clients are really having the ability to choose, which kind of engagement model and delivery model works best for them in their business. And we continue to see opportunities here to hone our delivery models and do that we really anticipate doing that going forward as well..

Thank you very much..

Our next question comes from Mr. Tim McHugh from William Blair. Sir, your line is now open..

Yes. Thanks. I just wanted to, I guess ask if you could elaborate a little bit more on what you are hearing in Italy. We watch the data little bit. But, I guess the magnitude of the slowdown is a little surprising relative to the economic data I guess. So, you talked about a slower economy.

I recognize you kind of the acceleration you saw last year was faster than any of us thought based on the data that we saw then at that same time.

So I guess any more color there on what you are seeing and how we can interpret that?.

We think there are a couple of factors. We had the seasonal -- after the seasonal downturn at year end, our come back in terms of the ramp was slower than what we had expected. And we think that in part has to do with a slow economy.

We also think there might be an impact of the hiring stimulus that the government implemented late last year which really favored, which really acted as a hiring incentive for permanent hires in Italy.

Now, it's hard to gauge to what degree that had an impact but we note and you have seen and you heard from us earlier that our permanent placement business grew at a very healthy 25%. So very strong growth there. So, we also of course have quite tough comparables from the prior year.

So, having said all of that, the Italian market is still a growth market and when we look at the opportunity in Italy and you think about the market penetration of slightly more than 1% and just to get to the average market penetration in Europe there still going to be some good growth. So, we are still very optimistic that we will see some growth.

But, in the near term, this is going to be a little bit slower than we expected, certainly for the first quarter. And you could see that we expect that to continue somewhat also into the second quarter when our comparables are getting even tougher..

All right. Okay. Thanks. And then, just, I know you got asked about the U.S. margin and sustainability. But, I guess more specifically, as a competitor you talked about in the U.S. about wage pressure really impacting the gross margin, you obviously, I guess, it doesn't show in the numbers for you.

But, what are you seeing with regard to wage rates and being able to pass that through in terms of price increases declines in the U.S.?.

It's a very competitive market in the U.S. And we have been as you know very price disciplined across our brands, both in Experis as well as in Manpower. On the Manpower side, we did see the softening in the manufacturing sector during the course of last year.

And as you heard us talk about earlier, we have now seen some stability with maybe some slight improvement. But, I would mostly characterize the manufacturing sector and our skills in that sector being stable.

So, we've continued with our pricing discipline making very sure that we work with engagements and when we are able to either become more efficient delivering our services and making sure we work within client segments that see the value of our overall services. And that's something that we anticipate doing also going forward.

The team has done a great job in selecting the segments where we can be successful and we can make sure we demonstrate the quality of service that we have and have been so far able to manage both wage increases and other direct cost pressures quite well..

Tim, I might add to that as well. I think given the demographics of our workforce, we really don't have workers at minimum wages. So as minimum wages are moving up, it's not having a direct impact on our base wages as well. And of course, most of our larger contracts are priced on a multiple of pay as opposed to a spot rate per se.

So that may explain some of the differences as well..

Okay. Thanks. Just one numbers question. There's a change it seems, and obviously, if I look at prior year versus what you reported before between, I think Southern Europe and Northern Europe some revenue moved.

Can you clarify what that is?.

Sure. Yes. We mentioned that, Tim on our last call. And I think the detail is out there in one of our SEC filings probably last quarter. But, basically we have just we've realigned from a management standpoint, few of the countries into out of the Northern European region into the Southern European region. So, I will give you a few examples.

Austria was in there somewhere, Switzerland franchise business was in there, some of the other Eastern European business as we move from Northern Europe down to Southern Europe. So, relatively small overall, but I know it creates a little bit of a hassle with your models.

But, you should be able to find the history out there filed if not just give me a ring and I will be happy to send it off to you..

All right. Thanks..

Our next question comes from George Tong from Piper Jaffray. Sir, your line is now open..

Thanks. Good morning. You are able to achieve 20 bps of operating margin expansion even with just 2% organic average daily revenue growth in the quarter.

What would you need to see in organic average daily revenue growth for the remainder of the year to achieve 20 bps of EBITA margin expansion for the full year?.

Well, that's a good question, George. That's something that we are always trying to drive that operating margin expansion. In the first quarter, we got a little bit of SG&A efficiency, and then, a little bit coming off of the GP line as well.

And as I've mentioned in the past and it's more of a generality, but when we get toward mid-single digit organic growth, you can start to see that operating margin and SG&A leverage come through. And when you get to the lower single digits, it can be quite difficult.

Certainly, we are focused on driving efficiencies throughout the markets as you will recall we did take a restructuring charge in the fourth quarter that certainly is helping us take some of the cost out of the business where appropriate, while still investing in other areas where we see opportunity.

But, that is certainly something that we are driving forward to. But, I don't have an exact number for you in terms of what that 20 basis points would require. But, certainly, we got a little bit stronger organic growth than what we're seeing today and I would be more comfortable with that as we look out to the balance of the year..

Great. Thank you..

Our next question comes from Sara Gubins from Bank of America/Merrill Lynch. Ma'am, your line is now open..

Thank you. Good morning. I want to make sure that I'm understanding the growth in the first quarter versus the expectations for the second quarter. If we look at the guidance for the second quarter, if you take out the extra billing day in M&A, I think you are forecasting 0% to 2% organic growth in the second quarter.

Is that compared to the 2% that you saw in the first quarter and if that's right, does it suggest that you saw slowing growth in March versus January and February?.

Yes, Sara, this is Jack. That's right. As Mike kind of laid out previously, that was effectively a 2% organic growth in the first quarter. And after you adjust for the billing days in the second quarter, that takes as to just about 1% organic growth adjusted. So, that's right. You have that right.

As we have said, that is aligned with what we saw in the month of March. So that outlook is aligned with what we saw at the end of the quarter..

Okay. Great. And then, I'm hoping we can get some more color on Northern Europe. It sounds like the guidance would suggest about a little bit of an improvement on an organic basis versus the 2% average daily declines that you saw in the first quarter.

Could you help us understand a little bit more about what you are seeing across the region?.

I think if you look at Northern Europe that is where you have probably the most mix. I think there is some improving news within both the Netherlands and Belgium, both of those markets we are seeing better growth there in our business.

You'll recall that in the Netherlands in particular, we had stepped away from some business last year for certain anniversary. That is where our growth rate -- now, we are approaching market levels they are. We are seeing improvement there overall. The business in Germany for us is fairly stable overall.

And then the U.K., I would step down a little bit. It has been fairly stable. I would characterize it as being flattish. Overall in the marketplace, and that is about what we're seeing in our business.

We have one client that is pulling back reducing the level of demand, which is putting us in the low negative single-digit range, little bit of contraction there. But, I don't see a lot of shift and frankly not a lot of shift overall.

If I take a look, with the average daily billing days and with some of the impact of acquisitions, actually our second quarter guidance is fairly close to what the first quarter is. So, I would say we are looking at something that's fairly similar in Northern Europe when you strip out billing days impact and you strip out acquisition impact..

Okay. Great. And then, just a last quick question, do you have that billing days for the third quarter and the fourth quarter just a level set on that? And then, I don't know if you have it, but the impact in the back half of the year from M&A that have already completed, could you help us think through that? Thanks..

Sure. In terms of billing days overall, in the third quarter we are flat with it. We got the same number of days at right around 65 days both periods. And then, in the fourth quarter, 65, during the fourth quarter we actually lose a day. We are at about 63 versus about 64 in the prior year. So it was the impact from days.

And then, the last part of your question, I'm trying to remember..

Around M&A impact from what you've already done..

Right. So the first half of the year, most of our M&A last year happened. We had great time in June. But then, September, we had Veritaaq in Canada and of course 7S right toward the end of September.

So effectively you will see about 3% impact in each of the quarter in the first half of the year, third quarter is going to get a slightly less impact, a little bit more than 2%. And then, by the time we get to the fourth quarter, very nominal impact from acquisitions..

Great. Thank you so much..

You bet..

Our next question comes from Mr. Jeff Silber from BMO Capital Markets. Sir, your line is now open..

Thanks so much. Just wanted to go back to an earlier question on wage inflation, I think we were just talking about the U.S.

Are you seeing any impact in any of your major segments across the world in the areas we are seeing labor supply tightness?.

Well, as Mike mentioned earlier, we are primarily working with larger organizations and we use multiples of pay and wage increases and applying those multiples means that we pass those increases on and through to our client billing. So, we are not seeing a margin compression issue, by and large in the U.S. or anywhere else for that matter.

Now, there are some countries where you will have an additional impact aside from the regular wage increase, such as Germany, which has the fourth phase of their new labor agreement kicking in June at 3.5%.

So, that's going to be for us to work on and make sure that we can also include that in our regular pricing increases and we may see some pressure downwards on margins from that particular one. But, we've been able to mitigate that well in the past. And that is something that we continue to be very focused on..

Right. And then, you had mentioned the impact of the complementary healthcare costs in France hurting gross margin.

Is there anything else going on specifically in France? I know they have been trying to do a lot of labor law reform, I know there has been some pushback but anything on the horizon that you see that could either help or hurt your business? Thanks..

Well, you've heard a lot of stuff coming out of France lately, you've seen demonstrations that the government has really tried to modernize the labor market further and most of those are things related to company's being able to negotiate directly with union, their working hours, directly some reduction in severance pays or at least an understanding of what they will be.

All of this though will have at this point from our estimate no impact on our business in France. So, it's an evolving market in France.

It is clear that the French government wants to make the market more competitive, wants to make it better from a labor perspective and they made changes over the last three or four years, some of which of course have been beneficial to us.

And we overall see this evolution in the French market as positive because it is going to make them more competitive, which will help the economy grow better and that should provide as with even better opportunities in France..

All right. Great. Thanks so much..

Thanks Jeff..

Our next question comes from Mr. Mark Marcon from Baird. Sir, your line is now open..

Good morning and thanks for taking my question.

With regards to the restructuring charge that you took in the fourth quarter, how much of that benefit from the savings, did we end up seeing in the first quarter or are we going to see more savings in the second quarter and the back half of the year?.

Good question, Mark. It came fairly quickly. We saw about $7 million in the first quarter, maybe just a touch more than that. And as we get into the other quarters of the year, we are going to be looking at about $8 million per quarter.

So, you won't see incrementally a significant shift, just a little bit more coming through the second quarter and the balance of the year..

Great.

And then, with regards to France, in April, aren't we suppose to start seeing a little bit of help from a subsidy to offset a little bit of the health cost that came through?.

Yes. So, it's part of the responsibility pact, increase the subsidy related to the family welfare program. So as a result, we will get some benefit coming in the second quarter, which should help mitigate some of the cost increase from the complementary healthcare. That's right.

It won't get fully mitigated, but it will help in offsetting some of the cost increase..

Great. And then, a bigger strategic long-term question.

With perm hitting an all-time record as a percentage of gross profit, how are you thinking about that from a long-term perspective in terms of how comfortable or what size are you comfortable with perm reaching as a percentage of gross profit? And do you think the environment has changed where some companies are basically going to view you as being a permanent, a really truly permanent component quarter in and quarter out in terms of the recruiting infrastructure?.

Great question, Mark. And we believe that companies are already increasingly seeing as, as a go-to-company for work force solutions in general. As you've seen our diversification over the years has really taken root. And permanent placement is an important component of that.

We have been investing in that over the years and really increasing our capabilities. So this is something we think that companies will continue to use us for. And we have been working very hard to make sure that they can see the capabilities that we have both in developed and in emerging markets.

As it relates to what proportion we're comfortable with, I think we have really [baked in] [ph] contingent staffing businesses already in Manpower as well as in Experis. We think they still have some good growth opportunities going forward, for us also the solutions business in itself. So, we don't have a fixed target I should start by saying that.

But, I would estimate that this could increase over time to something north of the 15% but we are maybe getting closer to 20% if it's really successful. And I don't know that I would think about it going much further than that.

Because that sort of seems to be a place where would already be beacon and with a number of placements that we make, we are bigger than almost anyone in the world today making permanent recruitment. So, the outlook for our perm growth is still very good and we still have a long way to go.

But, I think that that would be the range in which you can think about as you model what kind of contributions we think the diversification can have for us..

Terrific. Thank you..

So, this will be the last question..

Okay. Thank you. So our next question comes from Mr. Andrew Steinerman from JPMorgan. Sir, your line is now open.

I'd like to talk a little bit of a clarification on the Italian margins and the sustainability of Italian margins, the revenue did dip certainly but the operating margins were better than we had modeled. I heard the perm comment being strong.

Is there anything more to that kind of healthy margin?.

Well, it's really a combination of different things. Good cost controls, steady drive for continued efficiency and productivity, good pricing discipline. There are probably deals that we could have in Italy, but there are pricing, so in sectors with skills that we might not be that interested in growing as fast.

Then, continued driving and establishing ourselves really as the leading perm provider in Italy, which is the position that we hold today and building on that strength, so between those, I think you can -- those are the things that are -- have added up to that really strong margin performance, both gross margin as well as operating margin performance, Andrew..

Great. Thank you so much..

Excellent. So, this concludes our conference call for the first quarter. And thanks for joining us. And as always, Mike will be available to answer any follow-on investor questions that we didn't have time to cover in our call today. And we look forward to speaking with you again on our next earnings call. Thanks, everyone..

And that concludes today's conference. Thank you for your participation. You may now disconnect..