Robert Half Inc.

Hello and welcome to the Robert Haff Third Quarter 2021 Conference Call. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Haff, and Mr. Michael Buckley, Chief Financial Officer. Sir, you may begin.

Thank you. Hello, everyone. We appreciate your time today. Before we get started, I'd like to remind you that the comments made on today's call are contain forward-looking statements, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds. However, they're subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are described in today's press release and in our most recent 10-K and 10-Q filed with the SEC. We assume no obligation to update the statements made on today's call. During this presentation, we may mention some non-GAAP financial measures and reference these figures as adjusted. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release. Our presentation of revenues and the related growth rates for accountants, office team, Robert Half Technology, and Robert Half Management Resources includes their intersegment revenues from services provided to productivity in connection with the company's blended staffing and consulting solutions. This is how we measure and manage these divisions internally. The combined amount of divisional revenue Intersegment revenues with productivity is also separately disclosed. The supplemental schedules just mentioned also include a revenue schedule showing this information for 2019 through 2021. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. We once again achieved a record level of both revenues and earnings in the third quarter, exceeding the high end of our guidance and as a result of continued broad-based acceleration in the demand for our staffing and business consulting services. Our permanent placement and productivity operations continue to show very strong results, growing year-over-year revenues by 79% and 56% respectively. Our temporary and consultant staffing operations also accelerated in the quarter with year-on-year revenue growth of 35%. Overall, our total revenues were 10% higher than the pre-pandemic third quarter of 2019. I'm very grateful for the notable efforts of our staffing, productivity, and corporate services professionals who've continued to show an outstanding commitment to our success. Company-wide revenues were $1.17 billion in the third quarter of 2021, up 44% from last year's third quarter on a reported basis and up 43% on an as-adjusted basis. Net income per share in the third quarter was $1.53, increasing 129% compared to 67 cents in the third quarter one year ago. Cash flow from operations during the quarter was $225 million. In September, we distributed a $0.38 per share cash dividend to our shareholders of record for a total cash outlay of $42 million. We also acquired approximately 740,000 Robert Half shares during the quarter for $75 million. We have 7.7 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 53% for the third quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.713 billion in the third quarter. On an as-adjusted basis, third quarter staffing revenues were up 38% year-over-year. U.S. staffing revenues were $932 million, up 40% from the prior year. Non-U.S. staffing revenues were $279 million, up 34% year over year on an as-adjusted basis. We have 321 staffing locations worldwide, including 85 locations in 17 countries outside the United States. In the third quarter, there were 64.4 billing days compared to 64.3 in the same quarter one year ago. The current fourth quarter has 61.7 billing days unchanged from the fourth quarter one year ago. Currency exchange rate movements during the third quarter had the effect of increasing reported year-over-year staffing revenues by $7 million. This impacted our year-over-year reported staffing revenue growth rate by 0.8 percentage points. Temporary and consultant bill rates for the quarter increased 5.4% compared to one year ago, adjusted for changes in the mix of revenues by line of business, currency, and country. This rate for the second quarter of 2021 was 3.7%. Now let's take a closer look at results for productivity. Global revenues in the third quarter were $501 million. $400 million of this is from business within the United States. and $101 million is from operations outside the United States. On an as-adjusted basis, global third-quarter productivity revenues were up 55% versus the year-ago period, with U.S. productivity revenues up 54%. Non-U.S. revenues were up 61% on an as-adjusted basis. Exchange rates had the effect of increasing year-over-year productivity revenues by $3 million, and increasing its year-over-year reported growth rate by 0.7 percentage points. Protiviti and its independently-owned member firms serve clients through a network of 86 locations in 28 countries. Moving on to SG&A and gross margin presentation, we remind you that changes in the company's deferred compensation obligations are classified as SG&A or, in the case of Protiviti, cost of services, with completely offsetting changes in the related trust investment assets classified separately below SG&A. Previously, they were both classified as SG&A. Our historical discussion of consolidated operating income has been replaced with the non-GAAP measure of combined segment income. This is calculated as consolidated income before income taxes adjusted to interest income and amortization of intangible assets. For your convenience, we've included a supplemental schedule to today's earning release on page seven, highlighting the impact of changes in the deferred compensation accounts to the summary of operations for the third quarter of 2021 and 2020. This is a non-GAAP disclosure, so we also show a reconciliation to GAAP. Turning now to gross margin, in our temporary and consultant staffing operations, Third quarter gross margin was 40% of applicable revenues compared to 37.5% of applicable revenues in the third quarter one year ago. Gross margins were positively impacted by expanding pay bill spreads and higher conversion revenues. Our permanent placement revenues in the third quarter were 12.9% of consolidated staffing revenues versus 10% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin increased 3.9 percentage points compared to the year-ago third quarter to 47.7%. For productivity, gross margin was 29.5% of productivity revenues compared to 27.1% of productivity revenues one year ago. Adjusted for the effect of deferred compensation changes related to changes in the underlying trust investment assets as previously mentioned, adjusted gross margin for productivity was 29.4% for the quarter just ended compared to 28.1% one year ago. Companywide SG&A costs were 28.9% of global revenues in the third quarter compared to 32.8% in the same quarter one year ago. Changes in deferred compensation obligations related to changes in underlying trust investments had the impact of decreasing SG&A as percentage of revenue by 0.1% in the current third quarter and increasing SG&A by 1.9% in the same quarter one year ago. When adjusted for these changes, company-wide SG&A costs were 29% for the quarter just ended compared to 30.9% one year ago. Staffing SG&A costs were 35.9 percent of staffing revenues in the third quarter versus 40.2 percent in the third quarter of 2020. Included in staffing SG&A costs were deferred compensation reductions related to decreases in the underlying trust investment assets of 0.1 percent in the third quarter compared to additions of 2.6 percent related to increases in the underlying trust investment assets in the same quarter one year ago. When adjusted for these changes, staffing SG&A costs were 36% for the quarter just ended compared to 37.6% one year ago. Third quarter SG&A costs for productivity were 12.1% of productivity revenues compared to 13% of revenues in the one year ago period. Operating income for the quarter was $230 million. This includes $2 million of deferred compensation reductions related to changes in the underlying trust investment assets. Combined segment income was therefore $228 million in the third quarter. Combined segment margin was 13.3%. Third quarter segment income from our staffing divisions was $141 million, with a segment margin of 11.6%. Segment income for productivity in the third quarter was $87 million, with a segment margin of 17.3%. Our third quarter tax rate was 25% compared to 26% one year ago. At the end of the third quarter, accounts receivable were $1 billion and implied day sales outstanding were 52.8 days. Before we move on to fourth quarter guidance, let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing days. Our temporary and consultant staffing divisions exited the third quarter with September revenues up 36% versus the prior year, compared to a 34% increase for the full quarter. Revenues for the first two weeks of October were up 35% compared to the same period one year ago. Permanent placement revenues in September were up 68% versus September of 2020. This compares to a 78% increase for the full quarter. For the first three weeks in October, permanent placement revenues were up 62% compared to the same period in 2020. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. But as you know, these are very brief time periods. We use caution against reading too much into them. With that in mind, we offer the following fourth quarter guidance. Revenues, 1.655 billion to 1.735 billion, income per share, $1.37 to $1.47. Midpoint revenues of 1.695 billion are 30% higher than 2020 and 10% higher than 2019 levels on an as-adjusted basis. Midpoint earnings per share of $1.42 is 69% higher than 2020 and 44% higher than 2019. The major financial assumptions underlying the midpoint of these estimates are as follows. Revenue growth on a year-over-year basis. Staffing up 27 to 30%. Creativity up 34 to 36%. Overall up 29 to 31%. Gross margin percentages. Temporary and consultant staffing 39.5 to 40.5%. Protivity, 27% to 29%. Overall, 41% to 43%. SG&A as a percentage of revenue, excluding deferred compensation investment impacts. Staffing, 35.5% to 36.5%. Protivity, 12.5% to 13.5%. Overall, 29% to 30%. Segment income for staffing. 11 to 12%. For productivity, 14.5 to 15.5%. Overall, 12 to 13%. Tax rate, 25 to 26%. Shares, $111.2 million. 2021 capital expenditures and capitalized computing costs, $15 to $20 million for the fourth quarter. We limit our guidance to one quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings. Now, I'll turn the call back over to Keith.