Welcome to ManpowerGroup Second Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode until the Q&A session of today’s conference. This call is being recorded. If you have any objections, please disconnect at this time. And now, I will turn the call over to ManpowerGroup Chairman and CEO, Jonas Prising. Sir, you may begin.

Good morning. Welcome to the second quarter conference call for 2018. With me today is our Chief Financial Officer, Jack McGinnis. I will start the call today by going through some of the highlights of the second quarter, then Jack will go through the operating results and the segments, our balance sheet and cash flow, as well as comments on our outlook for the third quarter, and then I will follow up with some final thoughts before our Q&A session. Before we go any further into our call, Jack 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 website at manpowergroup.com.

Thanks, Jack. We have made good progress during the first half of 2018 and delivered solid second quarter results. Revenue in the second quarter came in at $5.7 billion, an increase of 4% in constant currency. On a same-day basis, our underlying organic constant currency revenue growth rate was 3%. This reflects a lower growth rate than we expected at the beginning of the quarter. The lower revenue growth rate is primarily attributed to some of our Manpower business in Europe and most notably in France. Partially offsetting the softer revenue growth trend in some countries were better than expected revenue trends in the U.K., throughout Asia Pacific and various businesses within the Americas. Specific to the U.S. this April, we’ve experienced a steadily improved billing days adjusted revenue trend. Operating profit for the second quarter was $208 million, up 2% in constant currency. As we announced on our last call, we did incur restructuring charges of this quarter, which Jack will discuss in more detail later in the call. Excluding these restructuring charges from both years, operating profit was $224 million for the quarter, an increase of 4% in constant currency. Operating profit margin came in at 3.7% down 10 basis points from the prior year and after excluding the restructuring charges operating profit margin was 4% which was flat to the prior year and represented the midpoint of our guidance. Our performance in the quarter also reflects gross profit margin contraction which has improved from recent quarters, offset by further SG&A productivity improvements. Earnings per share for the quarter was $2.17, excluding the restructuring charge in the quarter, earnings per share was $2.35 an increase of 24% in constant currency. During the quarter, we continued to see strong growth in our market-leading solutions businesses, particular in RPO, which…

Thanks, Jonas. As Jonas mentioned, we had a solid second quarter performance with operating profit growth excluding restructuring costs of 9% or 4% growth on a constant currency basis. This performance resulted in an operating profit margin of 4%, excluding restructuring costs which was at the midpoint of our guidance range. As Jonas discussed, revenue growth of 4% in constant currency came in slightly below our constant currency guidance range. On a reported basis, our gross profit margin declined 40 basis points which represented the midpoint of our guidance range. Currency translation represented 10 basis points of the 40 basis point decline and on a constant currency basis the gross profit margin decline was 30 basis points, which represented a 10 basis point improvement from the first quarter trend. Although our gross profit margin declined compared to the prior year, this impact was offset by our SG&A costs, which once again improved as percent of revenue driving the operating profit margin result before restructuring costs. Breaking our revenue growth down into a bit more detail, our reported growth rate of 9% includes a positive currency impact. On a constant currency basis, our revenue growth rate was 4%. Acquisitions contributed about 30 basis points to our growth rate in the quarter and organic constant currency revenue growth in the quarter was also 4%, which after adjusting for billing days represented a 3% growth rate. The slower growth rate was primarily driven by a slower revenue growth than expected in France. Although we experience a softer revenue environment in France during the second quarter, we believe it is a market in which there continued to be very good opportunities for growth, particularly post the summer holiday season. On a reported basis, earnings per share were $2.17, which included restructuring costs which had…

Thank Jack. Reflecting on the second quarter revenue trend, although our revenue growth was softer than the expected, we believe we have opportunities to improve profitable growth in the future. This optimism is evident in our conversations with our clients, indicating resilience of employer confidence. The continued strength of the global labor markets was also confirmed for our Q3 ManpowerGroup Employment Outlook Survey which again showed favorable hiring intent in 43 out of 44 countries surveyed. And in addition our recent Global Talent Shortage Survey confirmed that labor markets are getting tighter as our Talent Shortage Index reached its highest level in 12 year with 45% of employers indicating difficulties in finding the talent they need. In summary, in the current environment access to human capital continues to be of critical importance for employers across the world, and we are well placed to take advantage of that demand with our strong and connected brands, our extensive portfolio services and our unrivaled global footprint. To conclude our prepared remarks, I would like to thank our employees throughout the 80 countries and territories in which we operate. We are very grateful for the commitment and dedication that they devote to helping power the success of our clients around the world, and for finding meaningful and sustainable employment for people across a wide range of skills and industries. Thank you for everything you do to make us successful. And with that, I would now like to open the call for Q&A. Operator?

Thank you. [Operator Instructions]. Our first question is coming Andrew Steinerman of JPMorgan. Your line is now open.

Jonas, I want to know what you think is causing the deceleration in French temporary help. Is it the labor strikes? Is it something broader? Our economists are still suggesting favorable real GDP. Do you feel like there might be an economic pause in France? And why are you optimistic about the French temporary help business kind of post the summer?

Yes. Thanks Andrew. When we speak to our clients what they say is that, the French economy is growing very quickly and their manufacturing output and activity was very high at the end of 2017 and coming into 2018. But as they saw a little bit of a slowdown and if you look at the PMI date, and you look at other things, the French National Bank yesterday came up with the report confirming that whilst the economic outlook was positive and they expected to continue to do well, they did note the slowdown right now, but that they expected to see a pickup towards the end of the year. So, in our conversations with our clients they say that they came in a little bit ahead of their skis at the beginning. They're working off their inventory and I think that's what we're seeing from our manufacturing clients. We haven't seen an impact on the strikes directly, but of course there can be a derivative effect of that with our clients, but I would say our optimism is really founded on the understanding of the fundamentals which continue to look good for France. Our conversations with our clients, our own surveys which indicate that France should be able to see some better growth after the summer; we don't know exactly when that would be. But clearly the return in September is going to be important for us to understand and then going forward from there. So, as Jack said in our prepared remarks, we're optimistic about our opportunity to see some improved growth in France towards the end of the year.

Okay. Thank you.

Thank you. Our next question is coming from Hamzah Mazari of Macquarie Group. Your line is now open.

Good morning. Thank you. The first question is just if you could maybe just touch on how investors should think about any tariff impact on your business. I know you have exposure to industrial staffing. Maybe just highlight for us any direct impact, any indirect impact. Are you concerned? I know visibility is low because it's early days, but just sort of any comments there?

Yes. Good morning, Hamzah. I would say more broadly that we keep monitoring effects of -- potential effects of the trade wars or to tariff disputes, the impact of the new legislation potentially introduced by populist governments that come in. The effects of a hard and soft Brexit and things like that on a continuing basis. And of course we think that that could have an impact, but I would say in general and in specific to your question around tariffs we have not seen any impact at this point. And should that change? Of course we'll take that into account. But so far we've not seen any impact from those tariff discussions at this point.

Okay. And then just maybe for Jack. Maybe if you could just talk about how you're thinking about the buyback. I know it's not in guidance. The stock has derated significantly. If you we look at historically at your buybacks you stepped it up a lot in 2015 when we were sort of an industrial recession around that time. Maybe just frame for us how do we think about capital allocation going forward?

Sure, Hamzah. I guess I'll start by saying our capital allocation strategy remains consistent, so we haven't changed our allocation strategy. And to your point what you've seen is a good track record of us returning cash to our shareholders through share purchases and that continued through the second quarter. Our approach will continue to be opportunistic. We don't have said amounts that we announced, so we do have an opportunistic approach. And as we've said before in terms of capital allocation overall, if we are not allocating cash to acquisitions we will certainly continue to do share purchases. And I would say you should expect that share purchases would continue into the third quarter.

Okay. Thank you.

Our next question is coming from Mark Marcon of Baird. Your line is now open.

Good morning. Thanks for taking my question. I was just wondering if you could give us bit of an update with regards to what you're hearing as it relates to the CICE, both in terms of the way that your competitors are potentially reacting. And how we should think about pricing? And then in addition to that, any latest developments with regards to the subsidies that are going to replace the CICE?

Mark, this is Jack. Yes. I guess I'd say, the short story is, there really hasn't been any significant developments, so I think in line with our previous comments. All along we've expected that we probably won't get more detail, more specific detail that will help us give more guidance on this topic until the preliminary budget comes out from the government in late September. So there hasn't been anything formal happening on that. I do know that this continues to be an area that there's a lot of discussion around just within corporate France in general, but as of right now there really hasn't been anything significant to talk about since our last call. In terms of your point on the subsidies what we do know is part of the very general framework that they put out previously as we would expect subsidies to increase particularly in the class of workers in the one times to 1.6 times minimum wage. Their preliminary guidance talked about that going up an incremental 3.9% versus the previous levels and also talked about the continuation of the 6% subsidy for CICE today continuing in a new form into 2019. But as we said before the -- that some of the details that we really need to be able to give a more precise guidance on this is exactly how profit-sharing will work on that benefit and we don't expect to have more detail on that until the preliminary budget.

And when do you think the preliminary budget will come out now? Is it still September?

Yes, typically the very end of September.

Okay. And you may have given it and I missed it, but the -- what were the revenue trends by month in France and how is July looking early on?

Yes. So I'd say this quarter the revenue trends by month for France aren't as helpful because of the holiday impact for both April and May. So I think generally speaking if you look at April it was a mid-single digit increase, May was closer to flattish based on the significant impact of holidays, lot of holidays falling on Tuesdays and Thursdays, and June came back to stronger growth more in line with what we saw in April. But I think the trend that we saw specific to July was a step down and that's – to Jonas earlier point that's what we've used for our guidance. We're seeing what the trend is in July, so it's below the third quarter -- the second quarter trend overall, so the second quarter overall for France as we talked about was about 3% growth. We're saying that reduced from that level in early July, so think of it as low single-digits. And that's what we're seeing now and that's what we're using for the guidance. But to Jonas's point it really depends on how France comes back after the summer holidays. And if they come back strong in production then certainly we'll see some upside from there.

And then one last follow-up, just the monthly trends in the U.S. between ManpowerGroup and Experis and do you expect Experis to be up year-over-year in the U.S. in the third quarter?

I'll get Jack to give you some of the details between the various brands, but overall what we said it was going to happen in the second quarter roughly played out and that way we saw improvement for Manpower and Experis as well as solutions for that matter and we're continuing on our path to see that business come back. So while we're - it still not where we want to be. We did see the improvement that we were expecting and we're expecting also going into the third quarter to see continued improvement. So whilst we still have some more work to do. We're on the right track as far as the U.S. business is concerned.

I think, Mark, in terms of the trend that you ask for on the Manpower brand in the U.S. we saw steady improvement as we talked about for the U.S. overall, that was driven by the Manpower brand during the quarter. So, think of it is mid single-digits decline in April and May improving too low single-digits in June and on the Experis side when you look at that average rate for the quarter of that mid single-digits that was improved through the end of June, we saw an improvement similar, steady improvement but off a higher level of decline, so steady improvement on the Experis side through the end of June ending in the mid-single digits.

Great. Thank you.

Thanks Mark.

Thank you. Our next question is coming from Tim McHugh of William Blair Company. Your line is now open.

Thanks. As we see growth, I guess kind of becoming stronger in Latin America, Asia, I guess some of the smaller countries that we don't talk about as much. How do we think about the margin impact of that in terms of the revenue, and I guess mix shift to certain degree. Are those higher margin, lower margin countries relative to the company average?

I would say – and Jack can come back to the margin impact, but I would say as you correctly observed and as I mentioned in our prepared remarks, this quarter is a nice illustration of having a very strong and the largest global footprint in our industry as far as our coverage is concerned and how we could see some of the emerging markets in Latin America and Asia Pacific really making a very strong contribution and an acceleration. So that was really good to see. And as you may recall from our investor materials, although those markets don't at this time represent as much in revenue. They represent almost 40% in terms of our volume, so we feel really good about our footprint in those markets. And I thinking in this quarter you saw a number of them stepping up and really contributing also to the growth level.

Yes. I would just add on to that. I think specific, Tim, to the margins, as Jonas said, typically they run at a lower margin. You can see that when you look at the APME segment overall at their OUP margin will be below what you'll see in some of the other areas. But I think the key point is the improvement during the quarter. So significant improvement, APME up 50 basis points than OUP margin, and a lot of that is being driven by those countries that we mentioned, so very, very strong performance by India, Greater China, lot of the other countries that we mention in our prepared remarks, and improving trend in terms of gross profit margin as well. And I said the same thing for a lot of the Latin America countries. I think if you look at Mexico, very, very strong OUP margin improvements year-over-year in the second quarter for us and that goes as well as for a lot of the countries in the other Americas as well, so a very positive trend.

And I would say the advantage of being so strong in a lot of these emerging markets is that we can diversify the business both from an Experis perspective, our solutions business as well as our perm, very early in their evolution and that's part of the reason why you are seeing also the positive evolution from a margin perspective.

Great. And follow-up just, I guess maybe more broadly margin, I guess you're still growing at mid single-digits, but I guess some of the technology investments that you described I guess are limiting margins or is that would've thought that would've been a fast enough pace of growth that kind of see expansion still. So are we at a period where you're going to continue to step up that technology investment for a while? And we shouldn't be expecting margin expansion for a little bit here? I guess, can you just update thoughts on – I guess the path over the next year or 18-month?

Tim, I'd say, you're right, we call that out specifically as an item that's impacting the third quarter outlook. But I would say, the impact of that has been has been something that we've been dealing with for a number of quarters. So we have been progressively doing technology enhancements and technology spend. So, I think it's not going to be in exact straight line. I think in the third quarter there's a bit more happening which has a little bit more of an impact, but that combined with some of the lower growth and some of the countries where we been having very good operating leverage is driving some of that pressure. And I think specifically France has been an area where we had very good operating leverage based on that stronger growth. So I wouldn't say that you should expect that to see an outsized trend of that technology investment over the next few quarters having a bigger and bigger impact. I'd say, we've been doing a very good job of having that spend come in while we're able to fund it with good SG&A efficiencies, and I think you should expect to see that. So I wouldn't read too much into the trend into the third quarter.

Thank you.

Thank you. Our next question is coming from George Tong of Goldman Sachs. Your line is now open.

Hi. Thanks. Good morning. I like to dig a little bit deeper into France. Can you discuss how your competitive position is evolving with the recent slowdown? And what your view is and how production is likely to perform after the summer holidays based on your conversations with the customers?

Our position in the French market is a little bit more skewed towards manufacturing, so we're not surprised to see that that when that slows down a bit that we would see some of those effects. And having said that, I think there is very clearly enough external market indications that the market has slowed down, be it at a macro level or at an industry level from our perspective. So we think this is the general trend and we feel good about our positioning within that trend and we believe that given our mix that we are moving with the market. And we are hopeful as we've said that that this is a lull and that we start to see some more activity based on an improved environment later on in the year. And September will be an important month for us, but it could happen a bit later, but overall we remain optimistic that we'll have growth opportunities in France. And at this point we consider this a lull, we don't know how long it will last and we'll manage it either way, but we still feel good about the prospect of France. It's a country that's really just recently seen some better growth in 2017. 2018 growth has come down a little bit in terms of its projections from where it was before, but it still improving from a year-over-year perspective. And we think that the reforms that France is undergoing will also make it more competitive and thus more conducive for growth from our perspective. So, overall we feel good about the prospect in France, although we of course are managing through this softer environment at this time.

And I – George, I would just add to that in terms of what's actually happening in the underlying trend. So despite the revenue trend and the slowing that we saw, still very good underlying progress in the staffing margin and we've seen that for a number of quarters now and that improved again into the second quarter. So when you think about it we've talked about the fact that we've had to absorb that 60 basis point decrease in staffing margins based on the CICE rate reduction. And as a result of continued strong pricing discipline we continued to narrow that gap again in the second quarter. So that was very positive. The other item that we talked a lot about in terms of France a year ago was are the turnaround we were doing in the Proservia business there and that's actually worked very well. And so that actually is contributing to our gross profit margin in France this year. So it's a lift as oppose to a drag from a year ago and so that's been not very good progress as well. So we'll continue – to Jonas's point, we'll continue to execute on those strategies and I think I'm on an underlying basis we see good opportunity continue to improve the efficiency.

Yes. Very helpful. And I guess related to your point on margins, in the quarter margins obviously contracted gross margins about 40 bps year-over-year, can you elaborate on wage inflation trends you're seeing in your various Northern and Southern European markets and what bill pay spread assumptions you're factoring into your 3Q guidance?

Yes. I'd say no significant changes there, George, I think the trend that we've talked about in recent quarters is we're still seeing fairly muted levels of wage inflation and that continues into the second quarter. So we're not seeing a dramatic change. I'd say on a general overall basis, certainly there will be pockets where we'll see that in terms of the more in demand skill sets that we'll see wage inflation around. But generally speaking we haven't seen a dramatic shift. I think using the U.S. as an example we haven't seen a dramatic -- in our data we haven't seen a dramatic change from what the BLS data has published on an overall basis. So still in the mid 2% to 3% range of wage inflation and we're not projecting that's going to change dramatically into the third quarter. I think on margins – on gross margins overall to your point though I think that trend in the second quarter of down 40 basis points. We were really encouraged by the progress we made during the second quarter. And you'll remember in the first quarter and the fourth quarter we were looking at 60 basis point declines year-over-year and we did note that FX was part of that last quarter and we had sickness as part of that as well. So it was encouraging to see on a constant currency basis, decline in GP margin was only 30 basis points. So, we expect to see stabilization in that client mix shift and that's exactly what we saw in Italy and we saw improvement in their staffing margin trend during the second quarter, and as I mentioned earlier, good solid improvement in France as well. So the outlook for the third quarter is you'll see that gross profit margin at 30 basis points, so continuing and holding on to that progress that we saw in the second quarter of narrowing that gap to 30 basis points and taking that into the third quarter.

Very helpful. Thank you.

Thank you. Our next question is coming from Manav Patnaik of Barclays, Your line is now open.

Hi. This is Ryan on for Manav. Just a question on the U.S, I mean, can you help us understand some of the improvement there? How much that was just kind of catching up to the market and how much of that was driven by some of the internal changes that you made?

Well, we think, the teams are executing well and in an environment that is good, so we have opportunities, we had demand for services and solutions in all of our brands here in the U.S. We're very mindful of making sure that we apply pricing discipline. We think financial talent is high in the U.S. and we want to make sure that we get the right kind of growth. And I think the team is starting to make good progress there. I still think that we have more work to do and until we get to where we need to be, but we're pleased with the progress that we've seen so far.

Got it. And then in Italy obviously there's been some proposals on the on the temp labor side. I know its pretty early, but any thoughts there on some of those early proposals? And how you guys think of that?

I would say regarding the decree in Italy, it's very early days. This is all very recent. So this was initially announced on July 2, so during this month it was published July 13. And so -- from that date it basically has a 60-day period in which the parliament reviews it, determines whether they're going to make changes and amendments. And that process is underway currently. So the parliament is reviewing it. There is some discussion that that could be finalized, reviewed through the end of the month. So later in July there could be some developments regarding amendments to the proposed decree. And we'll just continue to watch it. We know this is a big issue in the industry overall, so broader than the staffing industry. This relates to fixed term contracts as well. So this is an issue for all of corporate Italy. And this will be an issue that we know currently there's a lot of discussion happening in Italy regarding the decree and we'll be watching that closely. At this stage it's really too early to tell, but we'll certainly provide updates on that in the future going forward.

Got it. Understand. Thank you.

Thank you. Our next question is coming from Tobey Sommer of SunTrust. Your line is now open.

Thanks. I was hoping you could give us a little bit of color on the Experis business in the U.S. and in particular IT made some progress and expect further progress with respect to kind of your pricing discipline, but I'm curious about the pricing that you are seeing in the market overall whether there's any change there or anything that you would expect versus kind of pricing that you already commented on for the U.S. as a whole?

Well, Tobey. I think the overall wage environment in the U.S. in terms of wage inflation is still reasonably muted, I mean it somewhere between 2%and 3%. Now within the area of IT skills of course the demand for those skills means that its -- and the scarcity of resources means that we have opportunities to exercise pricing discipline and ensure that we get great -- good value for the great talent that are Experis team are finding for our clients. And I would say that the team is been very good at making sure that we look at that and we are getting the right amount of bill rates as well as improved spread and it's part of why our margins in the U.S. have been improving and on the Experis side in particular. And this is some of the trade-off, yes, it's hard to find the talent but you are able to get a little bit better bill pay spreads as well as better bill rates for scarce talents. There's not that many of them. So this pace of progress might be a little bit slower, but we're pleased with how the team is approaching it and the gradual approach of continuing to make this improvement and as you heard us say in our prepared remarks we expect further improvement for both Experis as well as for Manpower into the third quarter.

And the item I'd add to that, Jonas, is Experis did well in the second quarter in terms of perm improvement, so that doesn't always drive a big revenue trend in terms of the staffing revenues that come through the revenue line. But they saw very good improvement in perm recruitment fees in the quarter as well, so another good sign that we're seeing strengthen in pockets of the business.

Thanks. Can I get your perspective also on the H1B visa activities that the administration is taking, whether that impacting the IT staffing market in the U.S.? And then I'm also curious about your perspective on statement of work growth there in the company's competitive positions, you compete and execute that kind of work?

Well, I think more broadly speaking access to talent and skill talent is going to be a crucial competitive lever for the United States. And to achieve that we believe that immigration and access to that skill talent wherever it may be is going to be a crucial advantage that we need to exploit and need to have that movement of talent into the market. So and as far as restricting skill talent from coming to the U.S. it may have an impact of course on the H1B visas you saw how quickly the visas ran out once they were released, so the demand for that kind of talent not surprisingly is still very high. As regards to our own business, we are not that dependant on H1B visas ourselves, although we have activities also where we are able to leverage our global footprint and make sure we access some of that talent through our operations in particular in India and in other places. But my view on that would generally be – restricting access there is not going to be good for the country, nor is it going to be good necessarily for the industry as a whole because there’s a lot of demand for those kinds of skills. As it relates to statement of work, this is an area that we’ve seen evolve nicely in terms of our own business here in the U.S. and I think that could be a good growth opportunity and good opportunity for some progress with the number of our clients as well.

Thank you.

Okay, with that, we’ve completed all calls in the queue and we’d like to thank you for joining the call today.

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