References to "we", "our", "us", the "Company," or "MPS" in this Quarterly Report on Form 10-Q refer to MPS Group, Inc. and its consolidated subsidiaries, unless the context requires otherwise.

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain factors, including but not limited to the specific factors discussed in our Form 10-K for the year ended December 31, 2008 in Part I, Item 1A under 'Risk Factors,' in Part II, Item 5 under 'Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities', and Part II, Item 7 under 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' In some cases, you can identify forward-looking statements by terminology such as 'may,' 'should,' 'could,' 'expects,' 'plans,' 'indicates,' 'projects,' 'anticipates,' 'believes,' 'estimates,' 'appears,' 'predicts,' 'potential,' 'continues,' 'can,' 'hopes,' 'perhaps,' 'would,' 'seek,' or 'become,' or the negative of these terms or other comparable terminology. In addition, except for historical facts, all information provided in Part II, Item 7A of our Form 10-K for the year ended December 31, 2008, under 'Quantitative and Qualitative Disclosures About Market Risk' as referenced by Item 3 herein should be considered forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of MPS may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on beliefs and assumptions of our management and on information currently available to such management. Forward-looking statements speak only as of the date they are made, and MPS undertakes no obligation to publicly update any of them in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.

                               Executive Summary

We are a leading provider of business services with over 215 offices in the
United States, Canada, the United Kingdom, continental Europe, Australia, and
Asia. We deliver specialty staffing, consulting and business solutions to
virtually all industries in the following disciplines, through the following
primary brands:



 Discipline                             Brand(s)
 Information Technology (IT) Services   Modis®
 Accounting and Finance                 Badenoch & Clark®, Accounting Principals®
 Engineering                            Entegee®
 Legal                                  Special Counsel®
 IT Solutions                           Idea Integration®
 Healthcare                             Soliant Health®
 Workforce Automation                   Beeline®

We present the financial results of the above brands under our four reporting segments: North American Professional Services, International Professional Services, North American IT Services and International IT Services. The accounting policies of these segments are consistent with those described in

For the quarter ended March 31, 2009, our consolidated revenue decreased 24% and our consolidated operating income decreased 81% compared to the first quarter of the prior year. The demand for our services is

highly dependant upon the state of the economy in the markets in which we operate, particularly the United States and the United Kingdom, and upon the staffing needs of our clients. During the first quarter of 2009, we saw a substantial decrease in demand for our services due to the poor macroeconomic conditions in the United States and the United Kingdom. This deterioration was more pronounced in our permanent placement business than in our staffing business. Permanent placement fees decreased 58% from the three months ended March 31, 2008 to the three months ended March 31, 2009, with staffing services revenue decreasing 22% during the same time period. We believe macroeconomic conditions will continue to erode demand for both our permanent placement and staffing services, further decreasing our revenues and profits. However, our ability to provide guidance on future results is made more difficult by the uncertain macroeconomic conditions.

Our results are impacted by fluctuations in foreign currency exchange rates. The British Pound, the main functional currency for our international segments, weakened substantially against the United States Dollar primarily during the fourth quarter of 2008. Although the volatility of the British Pound as measured in United States Dollars was less pronounced during the first quarter of 2009, any future devaluation of the British Pound versus the United States Dollar would have a negative impact on our results.

While our compensation expenses decrease generally in proportion to our revenue as many of our employees are compensated based on revenue production, we have also taken a variety of steps to improve our cost efficiency. These steps have included slowing the hiring of new staff, reducing personnel through attrition and eliminating certain staff positions. If we do not continue to undertake short-term steps to improve our cost efficiency, further revenue declines could have a greater negative impact on our operating income. However, we do not want to take actions that may impede our ability to grow revenue once the economic conditions strengthen.

The following detailed analysis of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and the 2008 Consolidated Financial Statements and related notes included in our Form 10-K for the year ended December 31, 2008.

Results of Operations for the Three Months Ended March 31, 2009 and 2008-Consolidated

Consolidated revenue was $429.4 million and $567.8 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 24.4%.

Consolidated gross profit was $115.6 million and $162.3 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 28.8%. Consolidated gross margin was 26.9% and 28.6% in the three months ended March 31, 2009 and 2008, respectively.

Consolidated operating expenses were $109.5 million and $130.3 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 16.0%. General and administrative ("G&A") expenses, which are included in operating expenses, were $104.7 million and $124.7 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 16.0%.

Unallocated corporate expenses, included in consolidated operating expenses, pertain to certain functions such as executive management, accounting, administration, tax, and treasury that are not directly attributable to our operating units. Unallocated corporate expense was $7.5 million and $7.4 million in the three months ended March 31, 2009 and 2008, respectively. As a percentage of revenue, unallocated corporate expense was 1.7% and 1.3% for the three months ended March 31, 2009 and 2008, respectively.

Consolidated operating income was $6.1 million and $32.0 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 80.9%. Operating income as a percentage of revenue was 1.4% and 5.6% for the three months ended March 31, 2009 and 2008, respectively.

Consolidated other expense, net, was $1.1 million and $731,000 in the three months ended March 31, 2009 and 2008, respectively. Other expense, net, primarily includes changes in the cash surrender value of our company-owned life insurance, interest income related to our investments and cash on hand, net of interest expense related to notes issued in connection with acquisitions and fees and interest on our credit facility.

The consolidated income tax provision was $3.4 million and $12.2 million in the three months ended March 31, 2009 and 2008, respectively. The effective tax rate was 68.0% and 39.0% in the three months ended March 31, 2009 and 2008, respectively. The increase in the effective tax rate for the three months ended March 31, 2009 was due primarily to the increased impact of our permanent non-tax deductible items in relation to the decreased level of pre-tax income. If we continue to experience decreased levels of pre-tax income throughout the year, our effective tax rate will remain at an increased level.

Consolidated net income was $1.6 million and $19.1 million in the three months ended March 31, 2009 and 2008, respectively.

Results of Operations for the Three Months Ended March 31, 2009 and 2008-By Business Segment

Professional Services division

Revenue in our North American Professional Services segment was $151.7 million and $179.7 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 15.6%. An acquisition completed in 2008 contributed $6.2 million in revenue in the three months ended March 31, 2009. Excluding the impact of this acquisition, revenue for the three months ended March 31, 2009 decreased in all of the North American Professional Services businesses, with the Soliant Health business unit affected least by the weak staffing services demand.

Revenue contribution from the North American Professional Services businesses for the three months ended March 31, 2009 and 2008 were as follows:

                                            Three Months Ended
                                                 March 31,
                                            2009           2008
                  Entegee                     43.9 %         43.9 %
                  Special Counsel             22.9           26.8
                  Accounting Principals       11.8           14.2
                  Soliant Health              21.4           15.1

Gross profit in our North American Professional Services segment was $42.4 million and $54.8 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 22.6%. The aforementioned acquisition contributed $1.7 million in gross profit in the three months ended March 31, 2009. Gross margin in our North American Professional Services segment was 27.9% and 30.5% in the three months ended March 31, 2009 and 2008, respectively. The decrease in gross margin in the three months ended March 31, 2009 was due primarily to a decreased level of permanent placement fees, most notably in the Accounting Principals and Special Counsel business units, and to a lesser extent a decrease in the staffing gross margins in the Special Counsel and Entegee business units. Permanent placement fees, which generate a higher margin, decreased to 3.7% of the segment's revenue in the three months ended March 31, 2009, from 5.8% in the year earlier period.

G&A expenses in our North American Professional Services segment were $33.9 million and $36.9 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 8.1%. As a

percentage of revenue, G&A expenses were 22.3% and 20.5% in the three months ended March 31, 2009 and 2008, respectively. The decrease in G&A expenses for the three months ended March 31, 2009 was due primarily to decreases in compensation expense associated with decreases in revenue, and to a lesser extent decreases in compensation expense resulting from reduced personnel.

Operating income was $7.3 million and $16.7 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 56.3%. Operating income as a percentage of revenue was 4.8% and 9.3% in the three months ended March 31, 2009 and 2008, respectively.

Revenue in our International Professional Services segment was $99.8 million and $147.8 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 32.5%. Changes in foreign currency exchange rates decreased revenue by $36.2 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three months ended March 31, 2009 was due to the decreased demand for our services.

Gross profit in our International Professional Services segment was $23.9 million and $45.5 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 47.5%. Changes in foreign currency exchange rates decreased gross profit by $8.4 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. Gross margin in our International Professional Services segment was 23.9% and 30.8% in the three months ended March 31, 2009 and 2008, respectively. The decrease in gross margin was due primarily to decreased permanent placement fees, and to a lesser extent a decrease in gross margins from the segment's staffing services resulting predominantly from the mix of staffing services, as more of our revenue was contributed by public sector clients which carry a lower gross margin than our other clients. Permanent placement fees decreased to 5.5% of the segment's revenue for the three months ended March 31, 2009, from 11.7% in the year earlier period.

G&A expenses in our International Professional Services segment were $20.8 million and $34.7 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 40.1% in the three months ended March 31, 2009. As a percentage of revenue, G&A expenses were 20.8% and 23.5% in the three months ended March 31, 2009 and 2008, respectively. The decrease in G&A expenses for the three months ended March 31, 2009 was due primarily to changes in foreign currency exchange rates, and decreases in compensation expense related to the decreases in the segment's revenue and reduced personnel.

Operating income was $1.7 million and $9.3 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 81.7%. Operating income as a percentage of revenue was 1.7% and 6.3% in the three months ended March 31, 2009 and 2008, respectively.

IT Services division

Revenue in our North American IT Services segment was $127.3 million and $158.9 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 19.9%. Changes in foreign currency exchange rates decreased revenue by $1.6 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. Two acquisitions completed in 2008 contributed $1.1 million in revenue in the three months ended March 31, 2009. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three months ended March 31, 2009 was due to the decreased demand for our services.

Revenue within the North American IT Services segment is generated primarily from Modis, as it generated 79.3% and 79.2% of the segment's revenue for the three months ended March 31, 2009 and 2008, respectively. Idea Integration and Beeline are responsible for the remainder of this segment's revenue.

Gross profit for the North American IT Services segment was $39.7 million and $48.5 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 18.1%. Changes in foreign currency exchange rates decreased gross profit by $321,000 from the three months ended March 31, 2008 to the three months ended March 31, 2009. The aforementioned acquisitions contributed $703,000 in gross profit in the three months ended March 31, 2009. Gross margin in our North American IT Services segment was 31.2% and 30.5% in the three months ended March 31, 2009 and 2008, respectively. The increase in gross margin for the three months ended March 31, 2009 was due to an increase in the percentage of total segment revenue attributable to our Beeline business unit, which generates higher margins than the other business units. Permanent placement fees decreased to 1.2% of the segment's revenue for the three months ended March 31, 2009, from 1.8% in the year earlier period.

The North American IT Services segment's G&A expenses were $34.3 million and $35.5 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 3.4%. As a percentage of revenue, G&A expenses were 26.9% and 22.3% in the three months ended March 31, 2009 and 2008, respectively. The decrease in G&A expenses for the three months ended March 31, 2009 was due primarily to decreases in compensation expense related to the decreases in the segment's revenue and reduced personnel.

Operating income was $3.4 million and $10.8 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 68.5%. Operating income as a percentage of revenue was 2.7% and 6.8% in the three months ended March 31, 2009 and 2008, respectively.

Revenue in our International IT Services segment was $50.5 million and $81.4 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 38.0%. Changes in foreign currency exchange rates decreased revenue by $17.5 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. An acquisition completed in 2008 contributed $3.7 million in revenue in the three months ended March 31, 2009. Apart from the effect of changes in foreign currency exchange rates, the decrease in revenue for the three months ended March 31, 2009 was due to the decreased demand for our services.

Gross profit in our International IT Services segment was $9.7 million and $13.5 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 28.1%. Changes in foreign currency exchange rates decreased gross profit by $3.3 million from the three months ended March 31, 2008 to the three months ended March 31, 2009. The aforementioned acquisition contributed $842,000 in gross profit in the three months ended March 31, 2009. Gross margin in our International IT Services segment was 19.2% and 16.6% in the three months ended March 31, 2009 and 2008, respectively. The increase in gross margin for the three months ended March 31, 2009 was due primarily to the positive margin impact of reduced revenue from certain low-margin clients. Permanent placement fees decreased to 2.6% of the segment's revenue for the three months ended March 31, 2009, from 2.7% in the year earlier period.

G&A expenses in our International IT Services segment were $8.2 million and $10.3 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 20.4%. As a percentage of revenue, G&A expenses were 16.2% and 12.7% in the three months ended March 31, 2009 and 2008, respectively. The decrease in G&A expenses for the three months ended March 31, 2009 was due primarily to changes in foreign currency exchange rates, and to a lesser extent decreases in compensation expense related to the decreases in the segment's revenue.

Operating income was $1.2 million and $2.6 million in the three months ended March 31, 2009 and 2008, respectively, representing a decrease of 53.8%. Operating income as a percentage of revenue was 2.4% and 3.2% in the three months ended March 31, 2009 and 2008, respectively.

Overview

We intend to generate stockholder value through strategic investments in our existing businesses, acquisitions, and stock repurchases, as appropriate. Changes to our liquidity have historically been due primarily to the net effect of: (i) funds generated by operations; and (ii) funds used for acquisitions, repurchases of common stock and capital expenditures. While there can be no assurances in this regard, we believe that funds provided by operations, our current cash balances, and borrowings available to us under our existing credit facility will be sufficient to meet our presently anticipated needs for working capital, capital expenditures, repurchases of common stock and acquisitions for at least the next 12 months.

In the three months ended March 31, 2009, the $30.0 million of cash provided from operating activities exceeded the cash of $5.2 million used in investing and financing activities and the effect of changes in foreign currency exchange rates. Our net increase in cash in the three months ended March 31, 2009 was due primarily to increased cash collections on trade receivables. In the three months ended March 31, 2008, cash of $51.9 million used in investing and financing activities exceeded the $10.1 million of cash provided from operating activities and the effect of changes in foreign currency exchange rates. Our net decrease in cash in the three months ended March 31, 2008 was due primarily to repurchases of our common stock. The table below highlights working capital and cash and cash equivalents as of March 31, 2009 and December 31, 2008, respectively:

        (dollar amounts in millions)    March 31, 2009     December 31, 2008
        Working capital                $          238.2   $             223.7
        Cash and cash equivalents      $          115.4   $              90.6

Operating cash flows

For the three months ended March 31, 2009 and 2008, we generated $30.0 million and $9.7 million of cash flow from operations, respectively. The increase in cash flow from operations was due primarily to increased cash collections on trade receivables. During a period of decreasing revenue, such as we experienced in the first quarter of 2009, the cost and cash outflows associated with our billable employees fall off immediately as we generally pay our billable employees weekly, while we continue to collect receivables from earlier periods, resulting in an acceleration of operating cash flow.

Investing cash flows

For the three months ended March 31, 2009, we used $3.2 million of cash for investing activities, including $1.6 million for consideration on acquisitions completed in earlier periods, and $1.6 million for capital expenditures.

For the three months ended March 31, 2008, we used $10.3 million of cash for investing activities, including $8.2 million for acquisitions, net of cash acquired, and $4.7 million for capital expenditures. Proceeds from the sale of short-term investments generated $2.5 million.

We anticipate that capital expenditures for furniture and equipment, including improvements to our management information and operating systems, for the remainder of 2009 will be approximately $8.0 million.

Financing cash flows

For the three months ended March 31, 2009, we used $636,000 of cash for financing activities, consisting primarily of $645,000 for the settlement of share based awards. For the three months ended March 31, 2008, we

used $41.6 million of cash for financing activities, consisting primarily of $40.6 million for the repurchase of common stock

Our Board of Directors has authorized certain repurchases of our common stock. From the third quarter of 2002 through December 31, 2008, we have repurchased a total of 27.4 million shares at a cost of $293.2 million under this plan. For the first quarter of 2009, we did not repurchase any shares under this authorization. We have approximately $24.3 million remaining under this authorization as of April 24, 2009. There is no expiration date for this authorization.

Indebtedness of the Company

We have a $250 million revolving credit facility which is syndicated to a group of leading financial institutions and contains certain financial and non-financial covenants relating to our operations. Certain of the financial covenants include the maintenance of financial ratios, of which EBITDA is a main component. Repayment of the credit facility is guaranteed by substantially all of our subsidiaries. The facility expires in November 2011. Subsequent to March 31, 2009 we repaid the $7.2 million balance on our credit facility. As of April 24, 2009, we have no borrowings outstanding under this facility, other than $9.0 million of standby letters of credit for certain operational matters.

Seasonality

Our quarterly operating results are affected by the number of billing days in the quarter and the seasonality of our customers' businesses. Demand for our services has historically been lower during the calendar year-end, as a result of holidays, through February of the following year, as our customers approve annual budgets. Extreme weather conditions may also adversely affect demand in the early part of the year as certain of our clients' facilities are located in geographic areas subject to closure or reduced hours due to inclement weather. In addition, we experience an increase in our cost of sales and a corresponding decrease in gross profit and gross margin in the first fiscal quarter of each year, as a result of certain state and federal employment tax resets.