Good morning, ladies and gentlemen, and welcome to Kelly Services’ First Quarter Earnings Conference Call. All parties will be on listen-only until the question-and-answer portion of the presentation. Today’s call is being recorded at the request of Kelly Services. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Mr. Carl Camden, President and CEO. Please go ahead.

Thank you, John and good morning everyone. Welcome to Kelly Services’ 2015 Q1 conference call. With me on today’s call is Olivier Thirot, our acting CFO and George Corona, our COO is also joining us this morning. Let me remind you that any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company’s actual future performance. As we walk through our quarterly results this morning, let me point out that our year-over-year comparisons are represented in constant currency due to the significant volatility in foreign currency exchange rates. Now, turning to Kelly’s first quarter results. I’m very pleased to report that we delivered solid performance that exceeded our expectations on several fronts. Revenue for the quarter was $1.3 billion up 4.4% year-over-year. Our gross profit rate for the first quarter was 16.7% consistent with the rate we delivered in Q1 last year. All told, we achieved an operating profit of $12 million for the quarter, doubling our profit from a year ago. Kelly’s first quarter earnings from operations and nominal currency were $0.10 per share compared to earnings of $0.07 per share for the same period last year. Overall, we’re pleased with Kelly’s performance during the first quarter, coming off of a year of aggressive investment, we grew revenue at four times the rate of our expenses while showing good price discipline and driving margins upward. That’s a promising start to the year and that confirms our confidence that 2015 will be a year of solid execution of our strategy.…

Thank you, Carl. Revenue totaled $1.3 billion, up 4.4% in constant currency compared to the first quarter last year. The nominal currency that’s down 0.8% is the difference caused mainly by the continued weak European currencies. So, the negative impact of foreign currency on our revenue growth trend was over 500 basis points for Q1. Now, consistent with Carl, for the remainder of my comments, year-over-year comparisons are represented in constant currency. Staffing placement fees were down 4% year-over-year as we continue to experience declines in EMEA and APAC that more than offset the 3% growth we saw in the Americas. Our gross profit rate was 16.7%, flat when compared to the first quarter last year. In constant currency, overall GP was up $8.5 million, so about 4%. SG&A expenses were up 1% year-over-year which does include the impact of cost savings generated by our management simplification plan. Earnings from operations were $12 million in the first quarter compared with 2014 results earnings of $6 million. These result reflect strong operating leverage as almost three quarters of our GP growth drove to the bottom line. Income tax expenses for the first quarter was $5.9 million compared to $2.1 million reported in 2014. The increase is driven by higher overall earnings before taxes as well as an increase in non-tax deductible losses in some countries. Diluted earnings per share for the first quarter of 2015 totaled $0.10 per share compared with $0.07 reported in 2014. Looking ahead for the rest of the year, we expect constant currency revenue to be up 5% to 6% slightly lower than our previous guidance and reflecting the current growth trend in our large centralized accounts. We expect the gross profit rate to be up year-over-year reflecting our continued pricing discipline and a favorable business mix.…

Thank you, Olivier. When we closed out 2014 we said Kelly had emerged a more efficient, better aligned organization ready to deliver solid earnings growth in 2015 and our first quarter results are clearly on track with those expectations. And confirm that Kelly’s strategy aligns with market needs. Accounts service through our U.S. branch network, are showing good sustained growth in Kelly’s commercial core and solid sequential improvements in our PT specialties. Our expanded sales force is growing our PT customer pipelines while our new PT recruiting centers focus on growing our talent pipelines. Our local markets are off to a strong start in 2015 and we expect that trend to continue throughout the balance of the year. We’re also pleased with the trends we’re seeing in our EMEA and APAC segments which delivered cost control and PT revenue growth that align with our strategy in those regions. Our centralized large accounts on the other hand are more exposed to the impact of currency fluctuations and global economic challenges. And as noted before, the sheer size of these top accounts makes this portfolio more susceptible to client-specific fluctuations. This volatility combined with our intent to maintain price discipline, may lead to ongoing revenue variations from quarter to quarter. And we’re pleased to see signs of increased PT order volume in our centralized accounts as these companies search for the skill talent to move their businesses forward. And our OCG segment continues to perform well bringing new clients into Kelly’s portfolio and expanding current relationships. And though we expect RPO to have a challenging year, our BPO and CDO specialties are delivering solid results and continue to play a key role on our talent supply-chain management approach. As many of the world’s largest companies become more intentional and strategic about their global workforce, we are helping them design and deliver more holistic solutions for acquiring and managing their talent. We will continue our investments to capture ongoing growth opportunities in the outsourcing and consulting market. And we expect those CG revenue and gross profit growth in the 15% to 20% range in 2015. As a whole, we’re pleased with Kelly’s performance and our ability to double our earnings in Q1. We believe that recent U.S. jobs report still signal a stable labor market and a demand for skilled workers will increase in 2015 and that we will capture those opportunities for PT growth while delivering leverage in our core staffing business throughout the year. As we continue our investments and drive top-line growth in OCG, we will continue to broaden and deepen Kelly’s role as the trusted talent advisor to many of the world’s top companies positioning us for success in 2015 and beyond. Olivier and I will now be happy to answer your questions along with George Corona, our Chief Operating Officer. John, call can now be open for questions.

[Operator Instructions]. And our first question is from the line of John Healy with North Coast Research. Please go ahead.

Hi, thank you.

Hi John.

Hi Carl. Congrats on the nice work on the operating line. I wanted to ask a question about how you see the year. I appreciate the comments on the constant currency revenue and expense growth. But as I look at the year, typically first quarter is probably the low watermark for operating profit for the year. And I know you’ve got a lot going on with volatility in the customers. But is it reasonable to think that the operating profit that we see for this quarter hopefully will be the low watermark for the year? I mean, can we reasonably think that profit on a quarter-to-quarter basis should move higher from here, assuming the revenue lines don’t get shocked by any sort of economic factors?

I think when you look at the Q2 guidance I think you get a flavor of, the kind of trend we’re seeing now. We expect the revenue, the top line to continue to grow at the same pace as in Q1. And getting an operating leverage of about 50% is a good outcome or probable outcome in line with what we’re seeing in Q1.

Yes, I’m not seeing anything John that’s changing the basic kind of in your cyclicality of the industry, right because you’re right, Q1 is always the weakest quarter that grows through Q2, Q3 and then the debate is always what type of decline do, you get in Q4. I’d it has been a tepid pattern at the moment haven’t seen anything coming off of it. But I think Olivier’s comments, as we’re still - we’re seeing growth that end, in some past recoveries would still have been viewed as tepid, but the leverage now we’re producing off of that growth is very strong.

Got you. Okay, that makes sense. And I wanted to ask about the investments in the OCG business. It seems like you will be spending some money there. Is that anticipation of business that you’ve already been rewarded, or is that just an optimism that those offerings are just going to continue to see further demand increases?

This is George, it’s both. So, there is a part I necessarily in the growth wouldn’t call investments, it’s just the ability to be able to deliver the volume as our current clients and as we bring on new clients we have to bring on some cost to deliver that GP. But the big part of what I do call investments is our belief and thought process in the industry that these products are continuing to catch on, that our large customers are coming to us and asking for more and more service so we have to be able deliver product innovation as we move forward. And then the last piece is, brand new customers come with implementation costs. So it’s all of those three things, it’s delivery and volume, it’s implementing new wins and then it’s delivering product innovation that is being required by our clients as we move forward. And that’s why we continue to say that we see 15% to 20% forward growth here is because the adoption that is coming in the industry for these new ways of work.

Got you, that makes sense. And then just two quick housekeeping questions, I might’ve missed it, but did you guys give any color on why the tax rate in 1Q was just a bit higher than you would have expected? And then additionally if you said what the forecast was for currency headwind in 2Q or the remainder of the year?

I think on the currency bit of course it’s difficult to know what is next because things are changing every day. On the tax side, two folds, and one is, we expect potentially a reinstatement of work opportunity credit but it’s going to be more in Q4, a little bit like in 2014 where you get all the benefit in one quarter. So, basically as we see now, Q1, Q2, Q3, we are going to be around 40% income tax, effective tax rate. And if work opportunity credit is reinstated in Q4, then of course the rate is going to drop in order to get around 20% for the full year. Why the rate in Q1 is higher than even our expectations, there are two things. One is, related to Russia where we have been kind of pushed to book evaluation allowance because of the economic environment and in fact on our P&L. And the second one, basically more seasonality for our foreign business where usually we have more, I mean, loss making countries in Q1 for which we are valuation, we don’t benefit from I would say the loss. But that’s very seasonal, and it’s not going to be expected to continue over the year.

Got you, thank you guys so much.

Thank you, John.

And next we’ll go to Tobey Sommer with SunTrust Robinson Humphrey. Please go ahead.

Hi Tobey.

Hi, good morning. I wanted to ask your question about what was the U.S. local growth and is there a goal in either dollar terms or percentage of sales that you could give us so that we can get a sense for how you progress in coming quarters? Thanks.

I’ll start and then George will pick it up. In the script we said we had, in the local U.S. branch network, we had a 12% increase in commercial staffing. And that we had a 4% year-over-year revenue growth and PT staffing in the local business. And then…

Yes, and I guess, what we’ve said moving forward is that we continue to see improvements especially in PT. The commercial growth at 12% is very strong but how long that will be able to sustain it’s hard to say but we expect to continue to grow at strong rates in commercial throughout the year. But we expect to see PT increasing as the growth rates in PT increasing both throughout the year, as the new model continues to take hold. And we’ve been very pleased with what we’ve seen in the first quarter as that model has taken hold. And as we look at how PT proceeded within the quarter, it was up 2% in January, it was up 4% in February and it was up 5% in March. And you see the progression as it’s moving forward.

Will those growth rates kind of flip-flop towards end of the year based on your outsized investments in PT?

I’m not sure I understand your question.

Will the growth rates in PT rise to potentially exceed commercial growth rate?

I don’t think they’ll rise to exceed commercial but they’ll get close.

Okay. What sort of growth have you had in sales-generating headcount to support your growth aspirations in PT and then local?

So, as we said last year we added over 60 reps in business development for the local PT area. And right now, as we added we’ll just be slowing incremental amounts at this point.

Can you give some context so we can interpret what 60 reps means as a function of the base or percentage terms?

In percentage terms we might have to go back and look to give you an exact number. But it was a substantial increase in the number of reps that we got out.

I was curious in your RPO business, what was, I missed the growth rate that you mentioned it specifically. I’m curious if existing customers that maybe you had for a while, are hitting their projections for hiring. In other words, are they getting the numbers they talked about with you a year or two ago? Are they falling a little short or exceeding, kind of in general?

I think in general they’re hitting but we have some particular impacts in oil and gas where they’re not hitting. Actually they’re starting to reverse their hiring because of what’s going on in the oil market, that’s had a bit of an impact on us. And then as we were growing RPO last year, a lot of the clients would be hitting, they’re hitting their targets but they’re not growing now, so, year-over-year it’s just not as big an impact. We are satisfied that we have a solid pipeline in RPO but as you know, those things take time to close and then time to implement. We see the future of our RPO to be fine but we’re going to have some pressure on the business throughout this year.

Then just two kind of broad questions. One, Carl, I was hoping you could talk to the old long-term operating margin target with these investments underway. Are you in a position to be able to talk about a long-term operating margin target again? And then lastly, I’ll get back in the queue, while OCG - I just wonder if in any of the lines of business, you feel like you’re subscale versus other large global players and that may be requiring some investment and kind of dampening the flow through to profit? Thanks.

Yes, so let me start, try to parse your question on. In terms of an operating target not yet, because I’m not certain what the proportion of business mix in terms of gross profit dollars and so on is going to ultimately end up being between OCG and staffing. And obviously seeing how the mix plays out between PT and commercial. But I get the usefulness of having that number out there, we’re just going to stay to flux right now, as we’re watching OCG growing at a rate five times faster than staffing and I need to see where that works while it needs. As George said with that high of a growth rate, how much leverage do you get out of the expense side, how much more you put in front of the new programs, your program management? We’ve said in terms of, I’m not so certain that it’s a scale issue but we’ve said in terms of our customer mix that we expect RPO to be under pressure kind of the lowest growth. But understand the growth 4% for the quarter, so it wasn’t as if it was a negative growth rate. But we are, one of our very important verticals is a natural resource vertical and in particular that one has been the most disrupted by changes in the price of oil and changes in macroeconomics.

Yes. And so, I guess when we look at scale issues RPO would be the one that I would say that in a competitive space we need to get bigger and more invest in new product like I said, our pipeline is strong so we’re very confident on the future of it. The rest of our businesses, we’re on par with our competitors. It’s really hard when you get into the BPO space because we do very, a lot of things within BPO and there is all kinds of competitors out there, some bigger, some smaller. But we possess enough scale in the things that we’re doing to be able to deliver sound operating profit out of it.

Okay. One last question if I could sneak it in. Could you size relatively the oil and gas industry for you either in RPO or OCG as a whole, whichever way you prefer?

Yes, yes, no.

No, I was asking if you could.

No, not at this time.

Okay.

Thank you, Tobey. John, any?

[Operator Instructions]. And Mr. Camden, no additional questions coming in.

Very good. Thank you all for joining us on the call. And thank you John for hosting the call. And talk to you all later.