Good day, ladies and gentlemen, and welcome to the TrueBlue Second Quarter Earnings Result. On the call today will be TrueBlue CEO, Steve Cooper and CFO, Derrek Gafford. My name is Tobey [ph] and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Derrek Gafford, CFO. Please proceed.

Thank you and good afternoon everyone. Here with me is CEO, Steve Cooper. I will address the Safe Harbor language and then hand the call over to Steve. This 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 10-K filing and other Securities and Exchange Commission filings. Any forward-looking statements in today's call speaks only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement. The discussion today also contains non-GAAP terms including but not limited to adjusted earnings per share and adjusted EBITDA. Adjusted EBITDA excludes non-recurring integration and acquisition costs. Adjusted earnings per share exclude non-recurring acquisition and integration cost, amortization of intangible assets and adjusted income tax expense to a 40% marginal rate. These are measurements used by management in assessing performance and in our opinion provide value to investors. We have provided reconciliations of the non-GAAP measures mentioned here today to GAAP measures on the Investor Relations section of our website at trueblue.com. I will now turn the discussion over to Steve.

Thank you, Derrek, and good afternoon everyone. Today we reported our second quarter 2015 revenue grew 38% to $628 million which produced $37 million of adjusted EBITDA, an increase of 46% compared to a year earlier. While revenue came in at the low end of our expectations, adjusted EBITDA exceeded the high end of our expectations. The revenue shortfall was primarily related to one customer during the quarter and the shortfall has now dissipated and this is not expected to impact our trends in Q3. Our Q2 gross margins were 30 basis points stronger than expected and cost ran slightly lower. Therefore, even with slightly lower revenue than expected, we produced $3 million more of adjusted EBITDA than expected and expanded our adjusted EBITDA margins by 30 basis points to almost 6% here in the second quarter. We expect to see continued expansion in our adjusted EBITDA margins as we continue to grow organic revenue and contain costs in future orders. During the quarter we experienced consistent demand for both our legacy staffing and our newly acquired brands. Our legacy staffing brands grew 3% excluding the headwinds from the green energy business. We do not expect additional headwinds from green energy this year as we have now passed the anniversary of the revenue drop that occurred last year. The addition of staff management and PeopleScout has grown our client list by providing customers with workforce management and recruiting process outsourcing solutions. With the demand for our legacy staffing services increasing along with the opportunity to sell into these new service lines, we are expecting strong revenue growth. Strategies we have implemented over the past year in our legacy staffing business produced over 20% growth in income from those operations, even on fairly even revenue volumes. These strategies are driven by…

Thanks, Steve. The end of Q2 2015 marked the anniversary of Seaton acquisition. The largest of our 18 acquisitions and one of the most significant strategic actions in our history. Staff management and industry leader in the on-premise industrial staffing market added new capabilities enhancing our ability to better serve the industrial market. The addition of PeopleScout added a new complimentary service line and the high growth recruitment process outsourcing market. The transaction has met or exceeded all expectations. Over the last 12 months, Seaton added $738 million of revenue and $37 million of adjusted EBITDA as expected. Integration was also completed this quarter as planned. Here are a few highlights I'd like to share on the value brought by the Seaton deal. Excluding amortization, it added $0.50 to earnings per share or an increase of 40%. Also excluding amortization, increased return on equity by 25% provided $10 million of revenue synergies and $2 million of cost synergies, both of which are not included in the Seaton revenue or adjusted EBITDA numbers mentioned just a moment ago. Of the $190 million of debt used to help finance the transaction, $115 million has been retired. I'll provide more perspective on our outlook for future acquisitions at the end of my commentary today. Over the past year, we've provided standalone reporting for the legacy TrueBlue and Seaton businesses to provide transparency regarding performance of both businesses and we will be discussing our result today using this approach. Going forward, we will be reporting results consistent with the two segments used in our SEC filings. We've also provided segment performance history on the Investor Relations' page of our website for your convenience. The staffing services segment includes the legacy TrueBlue staffing businesses as well as the Seaton on-premise staffing business. The managed services…

[Operator Instructions] Your first question comes from the line of Henry Chen representing BMO.

Hey, good afternoon. I'm just calling in for Jeff Silber. Could you talk a little bit about the one customer shortfall and maybe a little bit on some of the cost synergies that helps choose [ph] some of the margin expansion in the quarter? Thanks.

Sure, good afternoon Henry. Yeah, this has to do with one customer and it's one that's involved in our legacy TrueBlue operations that's a good customer of ours and you know, most of our forecasting when it comes to the top 10% of our customers, we rely heavily on their forecast for the quarter. And this customer just had a shift in their production, some they were moving to, some other facilities and some pushed out during the year and that's really the main thing. Regarding the cost synergies that I mentioned, I mentioned $2 million of cost synergies. Those are annualized numbers. We haven't really shared those, but those did not play a big role in our results for the quarter that I discussed.

Got it, okay. And for third quarter is there any change in your business mix that's implied in the guidance, just trying to get a sense of what end market you're seeing more [Technical Difficulty]?

You cut out just a little bit there Henry, but I think the discussion was for any color that's worth mentioning in our guidance as far as end markets?

Yeah, exactly.

Yeah. Well, let me focus more on the legacy TrueBlue side here. From a vertical perspective, I'll give a little bit of color here. There's nothing dramatic. Steve mentioned that we've seen a bit of an uptick in construction. It's still early on. We run maybe a couple points negative actually in this category over the last couple quarters and we saw a little bit of an uptick getting a slide million deposit of territory in Q2. Manufacturing has been a bit soft. It's still been growing for us, but it's been close to flat and low single-digit. We're assuming basically the same type of growth rates in our industries going into Q3 that we've experienced this quarter. The organic growth rate is for the staffing services segment is an organic growth rate of 5%. We closed this quarter and the legacy TrueBlue side lower than that so it's a bit of a step-up, but it's not assuming anything unique occur from an industry perspective other than what we've been experiencing.

Got it. Okay. Thanks for the color.

Your next question comes from the line of Paul Ginocchio representing Deutsche Bank. Please proceed.

Thanks. Just first on the two clients in RPO business that are coming out in the third quarter, why now and can you give us the rough run rate of those two clients? I guess it's just infecting the managed services piece which is smaller? So, -- and then a follow-up on what's baked into guidance for construction in the third quarter relative to the second quarter growth rate? I think you said just marginally positive. And then I just wanted to go back to that $7 million of revs lost in the first quarter -- the second quarter, sorry. How much was that client down Q-on Q or was that roughly? Thanks.

Okay, let's see. Maybe we'll start in reverse order here. So, for the customer that was down, we were still in basically about flat with that customer, but it was down from what we had originally anticipated. In regard to the managed services couple customers that we exited, the question was why now and how much is that. The why now is those are both two customers that we've done business with on the RPO side? We had them for a while, when that business was bid out, they were competitively low and we thought we would develop efficiencies there. One of those came up for bid and we chose not to drop our prices or what our requirements were from a billing perspective. We actually chose to increase them and they made a choice to go somewhere else and another that dropped out of our run rate was similar decision that we made. In regards to construction, I think that was where we started at the top of this what our assumptions are. We're assuming that construction is going to be similar type of mix and growth rate now maybe 2%, 3% in Q3, so we're not anticipating anything significant turning in that area. We're hopeful and we're optimistic about that, but that's not in our guidance today.

Sorry just on the construction, you said it was up 1% or 2% in the second quarter?

I believe it was up 2%.

Okay. And I would have thought there's comments about worker shortages in construction. I would have thought wage growth is at least 2% to 3%. Are you not seeing that or you aren't getting any volume growth?

We're just talking about revenue overall or are we talking about construction?

Construction.

Yeah, what we've been seeing Paul is we've been seeing bill rate inflation probably about 3% overall. When we get into the skilled types of positions, we're seeing much more wage inflation there. The predominance of the construction mix that we have here is more on the general labor side and in that piece we're not seeing any above market bill rate or pay rate inflation.

So, you're not seeing your volume growth? It's just wage?

Yeah, on construction. That's right.

And finally -- sorry if I get one more and I'll hand it over. The two -- what is that roughly equate to revenues for the managed services those two clients?

Well, excluding that it would be about makes about 5% of our revenue, 5% revenue decline so you can take the 5% and calculate it on your own.

And then the other 5% is FX?

Yeah, that's right. So, part of our business there is the Australian market and that currency -- constant currency pro forma that I gave you is excluding currency drop in Australia.

Thank you.

Your next question comes from the line of Randy Reece representing Avondale Partners. Please proceed.

Afternoon. Did you say anything about the specific industry or brand that the customer weakness was concentrated in?

No. It's on the legacy TrueBlue side.

Now I've heard from public and private players quite a bit of talk about softness in the industrial vertical and surely some things also connected to oil and gas. Do you have any specific comments about vertical market growth performance or expectations 2Q, 3Q?

Well, I give a little bit on this -- I'll give a little bit more directional comment here, Randy. When it comes to this one customer, I chose to specifically talk about that one so that everyone knows that the lighter amount of revenue that it's not a widespread part of our revenue base and it was an isolated item and I want to be clear here too it's not something that we see impacting our future growth trends and I think our guidance here today shows that we're still looking for some pretty healthy organic revenue growth. Certainly a step-up from where we have been running historically. When it comes to industry verticals probably the best two things I can provide some color on is manufacturing and construction. However, before I do that I just want to make it really clear that these are really small degrees of color that I'm providing. There's not something big brewing in either one. They are actually quite small headlines and that is we did see a little bit of movement up in growth construction. We got into positive territory, a couple points versus being down a couple points in Q1 and Q2. Still that's pretty small in our business these things do move around quite a bit. Manufacturing is continuing to be relatively soft for us, particularly on the legacy TrueBlue side. It's doing quite well in our on-premise division by the way, but manufacturing is still in positive territory. So, I don't think there's much more commentary than that. Outside of that, our growth trends across our industries are not too far off from the blended average that we talked about today.

And Randy one thing that we would want everybody to really understand here too is although the revenue came in at the low end our gross margins were above expectation and the gross profit dollars hit expectation. So, being able to manage through that and have smart employees out there making great decisions some types losing the revenue is not always that bad. So, it all plays in what we're thinking about and how we're looking at this most important thing is we're hitting our cash flow targets and we're moving forward and as Derrek has mentioned here a few times, we feel better about the back half of the year and we have trends that support that.

Yeah that was one thing I was trying to get at in all of this is trying to get an understanding of why the gross margins are come in a little bit better than expected, if it has something to do with the mix between brands or some other operational issues that you are executing on.

Yeah, I think it's as I mentioned in my prepared remarks it's about policy and procedure around pricing and sometimes that means walking away from accounts that you're not making money on and we have the discipline to do that. So, it's not big numbers, but it's enough that it's creating curiosity about our topline growth and we feel really confident about a 5% growth organic growth for our legacy business stepping into the third quarter and that should be exciting to you at this time to go okay, we're stepping up after three or four quarters of some substantial drag on that, so it's looking good.

Thank you very much.

Your next question comes from the line of Mark Marcon representing Baird. Please proceed.

Good afternoon. With regards to the staffing services guidance, how -- what's the implied legacy TrueBlue growth rate relative to some of the workforce solutions that are in that portion of the revenue bucket at this point?

Hi, good afternoon Mark. It's -- from a legacy TrueBlue perspective, it's in probably between call it the 4% range.

And so when we take a look at the newer part of the business what -- does that imply like 6% growth, is that 6%, 7%?

The on-premise business, yeah its running more between call it up per single-digits.

Yeah, the reason that math doesn't work is the gross margins are lower in that business Mark, so it takes more -- if you look at the gross profit dollars, it might not be there, but the nice part is the legacy business is picking up from here and the blended mix is what our guidance was for that staffing group.

Okay. And the on-premise business is that maintaining its growth rate or is that slowing a little bit?

Well, it's a pretty healthy growth rate. They've had higher growth rates than this in prior years and I think this is coming in right where we talked about with the Seaton acquisition. The-on premise growth rate this is in the industrial staffing market that's growing arguably somewhere around the 5% to 6% range. It's growing above that. We think there are continuing to grab some market share in that space and I'd say that going into the fourth quarter these trends going forward, we probably have something consistent with that, but we're pleased with that growth rate.

Okay. And then on the legacy if that's growing 4%, is that -- which divisions within that are seeing strongest growth? I would imagine center line is doing really well, CLP, how should we think about that?

Yeah, our drivers business is doing quite well; demand for that is strong. We've got strong growth there as well as margin expansion in that. Interestingly, when we're talking about our staffing business at least some of the more retail oriented business, that's actually doing quite well from a growth perspective. Skill trades continues to do really well for us. It's running probably just a little bit above where the Labor Ready business is. That helps provide a little bit of color on it Mark and manufacturing on the Spartan side has at least for larger customers we seen some of that on the Labor Ready side has been softer, particularly when we're dealing with customers that are manufacturing-oriented and have a big part of their business is exporting, so those that are doing exporting outside of the U.S. where we've seen the biggest area of softness in manufacturing.

Sure that's understandable. And with regards to the Labor Ready business, just operationally, you talked about a refocus with regards to the operations there at the branch level, how is that progressing?

Yeah, it's coming along really well. We had a change process going through where we are really trying to manage those specialized staffing groups together under common leader is ship and we did have a few hiccups there because as that transitioned and I think that we're understanding that deeper and leadership is coming together, teams are coming together in the marketplace better. We still believe that we have a lot of room for upside in consolidating those operations further between Labor Ready CLP and Spartan mainly because CLP is only at about 30% of our markets and Spartan is only at about 30% of our markets. So, now that we have common leadership somewhat leveled and that's where if you'll talk about focus or noise, it was in those ranks and now we believe we have the opportunity to push that initiative further and bring those operations closer together. And so we can expand these great services into the other 70% of our markets where they don't exist. So, I think there's good upside from here that we've got to prove out still by combining the systems, combining the process and getting in front of the clients and moving those capabilities throughout North America and not just in the pockets where they exist. But it was the right project to start, but it was messy to go through the change process, but we're ready to get back on the horse and push it further down the road.

Great. And then with regards to the potential acquisitions, how are you thinking about the prices that you're seeing out there, particularly as it relates to international RPO, how should we think about that?

Well, we're pretty now at this, so we're pretty cautious and I'm surely not the expert at international RPO valuations right now so I think we have a lot to learn. We're pretty cautious buyers of both timing and pricing and we're looking for opportunities that we can manage our risks as we get into these deals. And so all I can do is give you the assurance of maintaining our trajectory that we've been on and not take risk beyond our own capabilities and that's the most important thing here that we don't get crazy and think we're buying a dream that somebody else built, but that's not going to happen. For one in Asia there's no real organized RPOs that are for sale and that we can step into easily. We're going to need to still build this ourselves even with some baseline acquisitions because they will be small and we're going to have to build this and put it together much like we put the staffing business together in North America.

Great. And then on the skilled areas, skilled trades, what sort of multiples would you see there? You obviously know that market extremely well?

Well, I think the best way for us to think about this is directionally, so the multiples that we're willing to pay when it comes to the RPO side will be towards the top of our range closer to something which you saw with Seaton. When we do our return on investment modeling in this and our DCS analysis, really what this comes down to is businesses that are growing faster and have higher margins deserve more and you saw that with the Seaton acquisition. When we're talking about something in skilled trades, probably less than we would be willing to pay for RPO, but that's a strong margin business with as I said in my prepared comments some nice tail winds behind it that we see happening into the at least the next five years. So, that would be somewhere in the mid-range of our valuations that we paid in the past and certainly not as high as Seaton and then light industrial being closer to the end of that pay scale. Unless they were bringing something very new, very compelling, a different way to serve the market where we could leverage some of that value in addition to -- I'm not just referring to cost synergies, but enhancing our service delivery capabilities across the TrueBlue network.

Got it and then just on the managed services revenue, when would you expect that to pick back up to the 15% type growth?

I think we'll start seeing that over the next couple quarters just to keep this in perspective and I'm really glad you asked this question. The sales cycle for RPO as many people know is quite a bit longer than the staffing business. We're talking generally about an 18 month sales cycle. So while we're seeing a little bit of softer revenue growth here on the RPO side, it had a lot to do with Seaton's growth in 2014 and in 2014 that business grew well over 20% organically and did an acquisition of HRX. All told that was revenue growth of 60% to 70% which is a lot to digest. When that digestion is going of that type of growth, there's not that much capacity to be out working the sales channel. And so a big part of you the growth that happens in a particular year is from deals some of which were already sold and booked the year before and some of which that were in the pipeline that start to mature. I've spent a lot of time with this part of our business as well as our Executive team and the pipeline here on the RPO business is quite strong. So, we're not concerned at all about the annual 15% growth rates of getting back to something like that within the next couple of quarters. We're just as optimistic about this if not more as the day that we did the deal.

Great. Thank you.

[Operator Instructions] Your next question comes from the line of Sara Gubins representing Bank of America Merrill Lynch. Please proceed.

Hi thanks, good afternoon. Could you talk about the leverage that you'd be comfortable with as you consider more M&A?

You're talking referring to the debt leverage Sara?

Yes.

Yeah, so the Seaton acquisition was a good step for us on getting comfortable with taking on leverage and that took us up to a debt to EBITDA leverage ratio of about a 1.5 when we did the deal. We're at a 0.7 now when we worked that down quickly and I think we wouldn't, we might be willing to go up to a three times -- 3x to do a deal if we could see that coming down really quickly over the next year. If we could drop that down I could see a really clear path dropping that down to a two within a year, we'd be comfortable with something like that and so will our banks. But I would say that's the top of the range and it's conditional upon us being able to see us bring it down quickly within a year and that we're not buying something towards the end of an economic expansion period where there's some risk with that. So, as long as we feel comfortable about there's lots of runway from an economics perspective or at least, excuse me, an economic perspective and that we could bring it down pretty quickly, we could be comfortable with that.

Okay, great. And then the worker's comp benefit that you mentioned you don't expect to repeat in the third quarter, does that I guess difficult comparison, continue into the fourth and into next year or was it a one-time thing in the third quarter of last year?

Well, it's a bit of a third quarter and a fourth quarter item, but it doesn’t continue into next year and I'm glad you asked the question just so we can clarify this. Our work comp rate that we've been running in Q1 and Q2 has been very steady and we expect to continue at a similar rate throughout this year and don't have any signs that that would be higher than that going into next year. This is really about the prior year and Q3 and Q4 were more favorable than what our current trends are running and spiked a bit above what we had been experiencing through the first half 2014 as well.

Okay. So, it looks like you're making nice progress on margin expansion and legacy TrueBlue. How should we think longer term about where those margins could go in the non-staffing solutions segment?

Yeah, on the EBITDA margins, yeah we're getting some nice leverage there. Prior to the Seaton acquisition, we had great models and were making progress towards getting back to another 7% and so another expansion of another 120 basis points or plus from here. The mix of the Seaton business has slowed down a bit, but surely we see further expansion, whether it's another 50 to 60 basis points from here or give us another year to really get comfortable with what we can do with growing revenue and holding costs, we might change that view, but we know that it's going to be above a 6% if we keep executing the way we are.

Yeah we're on a good trajectory there. Both staffing business, the legacy TrueBlue, on-premise staffing are doing quite well here and now that we've added the appeal business in which in and of itself will let me refer to managed services because that's how we’re taking about it. That runs above a 15% EBITDA margin, so that also helps with the accretion on the EBITDA margin expansion.

Great. And then last question, any discussion with clients around minimum wage hikes or the President's proposal around overtime requirements?

Well, we started those, we're getting questions about how real it might be and we're learning day by day that it looks fairly real and that states are passing this and actually cities are passing minimum wage increase at this point in time, so it's on our radar. We have to fall back to the fact that two-thirds plus of our business is not under contract. We re-price it every day as we're selling it and we've had that in our legacy and we're going to continue that direction and with strong policy and controls and communication, we've seemed to be able to work through some pretty heavy minimum wage increases, unemployment cost increases, work comp increases throughout the years and maintain these margins in our legacy staffing business. Over where we are contracted in larger accounts and then the on-premise that's a little tougher, but most of those contracts say if minimum wage goes up, we can re-price and there's certain other components that we can re-price. So, contractually we aren't locked down. This is going to be more of what is this doing to the economy and can companies afford it and is there going to be constraint? Those are questions that are bigger than us, but that's kind of where it's coming down to, but what we can internally operate to, we feel good about and we feel good about the process and communication we have, this is a bigger economic issue of whether there will be lasting or longer implications on demand or the general economy of that. But that's directionally we're feeling okay about it, but it is moving at a pace that's pretty fast right now, Sara.

Great. Thanks very much.

Your next question comes from the line of Jeff Silber representing BMO Capital Markets. Please proceed.

Thanks so much. I don't know if you have this information handy, but is it possible to give us pro forma growth second quarter 2015 versus second quarter 2014 under your new segment under staffing services and managed services?

No, we don't have that because we didn't own Seaton during the second quarter of last year. So we can't give that to you pro forma. However, out on our website for the period of ownership which we have owned Seaton, so starting a full quarter and Q3 2014, all that information we put it out there and one file for you on our investor website and you can go to that page and get all that information if you like.

Okay. Let me ask the question another way then. In your presentation, you say you expect pro forma managed services growth at the mid-point of 10% in the third quarter. Is that slower or faster than what you think pro forma growth would have been in the second quarter?

Yes. That's pretty comparable. We've been roughly flat in Q2 from a managed services perspective, so that's pretty consistent with that. On a pro forma basis, it would be something close to that because we still do have that customer impact that I mentioned. Not all of that is the two customers [indiscernible] the relationships with that didn't just start in Q3 and we've been battling some of the currency headwind, really started picking up Q2 of last year.

Okay. And you also mentioned your desire to expand in the international RPO market. Are you providing services there now? If so which countries and if not which countries are you targeting?

We do have a couple clients we're servicing, besides Australia, so we have a strong base in Australia. We've got our PeopleScout division here in North America and then PeopleScout has a little bit of service around the world in several countries, but it's mainly with one account and we have a team in England, I think in London and we have a team in Asia that service that one account, call it six to eight employees in each of those countries right now servicing that one account and in over 20 different countries, but it might be one body here and one body there of that one account. So, we have a little bit of experience in that category. Most of our international experience comes just from Australia. And -- so what we're looking to do is add to those teams that service this one account. Can we pick up some additional headcount, some additional recruiters and client experience? One thing very important in the RPO space is referenceability and although we're referenceable in North America our teams in Asia aren't that referenceable because they are serving one account and the team size is small. So, we're -- as I've mentioned earlier, we aren't looking for a huge acquisition. We're looking for opportunities to acquire smaller teams and grow that way, so we can control the risk, understand it and build up capacity. We really believe that once we build up a little capacity there we will then be invited to play in the RPO space in RFPs and once we're responding and can play in RFP, we have a high degree of belief we will start winning in international deals and that acquisitions won't be as important, but we need to jump start it and we need to jump start it now because there's the demand and the number of RFPs is an increasing pace in these international deals. So, again, they won't -- they being the buyers don't necessarily rely on our North American referenceability or even our Australia referenceability. So, goal number one is build up enough size that we can have referenceable and then we will start winning.

Great. And since this seems to be a top priority for you, I'm just curious its little bit beyond what the company typically does. How are you sourcing those potential acquisitions?

Yeah. So, it is, A, top priority not the top. The top is maintaining organic growth above 5% and growing that from here, trying to get that towards double-digit. That's the big payoff for us is our current business and getting that up. A top priority, though, right behind that would be, yes, let’s get this RPO business and we are so interested in that because of the RFP slope that's there. And so that's -- that answers that first part. Second was, well, how you are doing this? Surely your team at Tacoma is probably what you are saying is not working on this. Well, we have relationships. We have plenty of people that want to help us grow that and they are on the street and they are out looking and building relationships just like we have built up our acquisition strength here over the years by being introduced to companies and being introduced to what their endgame might be. We are starting the same thing. Most recently you all seen during the quarter that we promoted Patrick Beharelle who had previously been the CEO of the Seaton Companies and really help to build the strength of the PeopleScout brand up here. So with his recent promotion to be the Chief Operating Officer of TrueBlue as a whole, he is not only extending his arm to ensure that clients are getting access to all of our services here, but he has the capacity to go out and build those relationships with acquisition clients around the world. So that’s part of his duty is. With brokers, bankers introducing him around, he is taking trips and building those relationships. We know this is going to take some time, especially at a risk based method that we are going to -- we’re not going to rush because we’re not going to get an imbalance of risk here. So priority one is you got to identify the targets. We've got a team work on that once identified make introductions, get Patrick over here in front of these companies and move the needle and so that's where we are right now.

All right. Really appreciate the color, Steve. Thanks so much.

[Operator Instructions] Your next question comes from the line of Randy Reece representing Avondale Partners. Please proceed.

Hey. I just wanted to try to clarify here. Did your new managed services segment have around $100 million in revenue in the last 12 months? Is that in the ballpark, because I haven’t been able to find any specific numbers on actual revenue?

Yeah, that’s the exactly about right, Randy. $100 million is the number I would use.

All right. And when you go plotting your international expansion, how are you going to manage your incremental expenses and are you going to have a period of time where you have to kind of take it back in expenses upfront or is there any way you’re going to be able to do this incrementally?

Well, we truly haven’t crossed that bridge yet. First goal is we buy companies profitable and we pay them decent multiple and we don’t have the cash flow loss besides the original investment that we feel comfortable getting return on. That would be first choice. Another way to build this is investing people first, build up the teams, build up the recruiting teams and ahead of the clients. That's not our first choice, but that's an option that we haven’t decided to take yet. That's probably the one that would cause some additional expense ahead of and if we do that we will let you know and we will tell you how much it is. I guess there is a third option as buy a broken company and we could tell you how much drain that that's having. But, again, we will stick with option one right now. Looking for clients or companies that good client base making money, good contracts in place that we feel we step into. Sure we might be able to improve the operation. But we need good referenceability. So we are going to work on this, this year and see where we get, and we will share more with you if we choose different course.

And that's exactly right, Randy. And if we decide to take a different course there we would let all of you know about that. So our first choice is right what Steve mentioned. Part of the cost in going international here is building up just some of the compliance infrastructure which is really important for this. And so we don’t want to do that ourselves. We want somebody who is already blazed that trail and that’s our first option here. And second part about it is, growing internationally and doing that organically is in a very different league than doing this from a staffing perspective. The amount of compliance and the infrastructure it takes to do this to grow organically and do it in a -- for staffing business internationally is in a way different league here than on the RPO side. So I wouldn’t concerned that there is any big splash coming on a big expense trajectory in our plans here that you don’t know about.

Very good. Thanks a lot.

Your next question comes from the line of Paul Ginocchio representing Deutsche Bank.

Thanks. Hey, Steve, one of your competitors reported a slowdown in their U.S. business yesterday and the American Staffing Association Index is indicating the market is down about 3% right now, which is much weaker than the little bit of growth we saw in the first quarter. I'm just wondering what you think of the U.S. temp market, light industrial right now? Is it getting better or is it getting worse?

I think it’s getting better. I think there is going to be deepening of the penetration rate of temps, so working out there. Clients are still looking for talent solutions that keep their businesses moving, give them some flexibility. It’s changing though. As you've seen in our business if we hadn’t have changed who we are we would in big trouble right now. And if we’d have to sit back and hoped and built the whole strategy around hope around construction rebounding to what the construction was pre-recession, we wouldn’t look the same. The same thing is happened in the manufacturing. We have to listen very closely about what the client wants and how they want to be served and then we need to build models around that rather than saying, well, this is who we are and this is how we deliver. That kind of change is not easy. But we have really, really talented people listening right now to the marketplace changes that are taking place. We have a few other innovations coming that we are working on that we believe are right where the marketplace is going. So to continue to expansion and play in this penetration deepening, it takes innovation and it takes change. Hopefully small evolution, so it’s not dramatic at any one point in time. But we are sure glad that we've been on the changed business for 10 years and I think the same thing is going to happen now. But as far as clients interacting business and engaging and talking about their options, the phone is not ringing any less.

Thank you for that. Just to follow-up, you think the U.S. temp market revenues are accelerating right now? Are you seeing accelerating trend in demand or is stable?

It’s modest. I don’t believe it's shrinking right now. I think that there is some volatility in it and all of us are trying to get our hands around, even via less numbers and what comes out of major analyst groups that have big numbers that are analyzing. It appears volatile and it looks like head fix from time to time and I think that's just the changing conditions that clients are purchasing differently and have different demands right now and we are really pleased with what's come together for us the last year. And that is that we can do your permanent hiring, we can do your long-term management of your work force on sites and we can also service your project needs on a short term basis or even long-term basis. And we have cost models that are fairly efficient for each of those purchasing engines. So, yeah, we've had a tough year on organic growth and it’s not easy for me to say here and go, yeah, I know organic growth is going to forward. But the trends we've seen and what's caused the drag on our organic growth, some of those things are behind us. And the fact that we are serving a broader audience of size of company, geography of company and industry of company, we are in a better place than we've been. We will have to continue, though, to evolve, because clients are asking different questions every meeting about what they want and what we can provide, that's going to change. Now the challenge for everybody out there is finding people. So we are being as innovative as we can on the sourcing side and that's where we are going to win going forward is who has access to the not only the highest amounts of people, but the highest quality. That equation hasn’t changed and we all know pricing comes into play. So we've got to run a low cost model, so we can provide all three avenues of that trying go for clients and we've got to continue that. So we continue to innovate on how we source, where we find people, how we engage with them and the technology that we've worked on in the past becomes obsolete too quickly in this changing world and we’re continue to invest in new technologies that we can communicate better with the workforce, and we believe that's going to keep us relevant. So it’s a really good question, and it’s one that we all can't sit on our laurels too long on this one, because the world is changing quickly. And for us to be that talent solution in the changing world that work is something we work on every day and whole credence on that really is a changing world and we have to be relevant every day.

Thank you.

That concludes the Q&A Session. I will now turn the call over to Steve Cooper.

Thank you. We do appreciate your questions today and the changes that we've had here are not that easy to follow. But we very confident with the new segment reporting we've introduced today it’s going to be easier. We'll build up trends in this for you and provide you the details that we've been asking for here as we go forward. So thank you and have a great day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation you may now disconnect. Have a great day.