Robert Half Inc.

Hello and welcome to the Robert Half Fourth Quarter 2021 Conference Call. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half, and Mr. Michael Buckley, Chief Financial Officer. Mr. Waddell, 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 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 the 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 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, roberthaff.com. 2021 was an extraordinary year, and we achieved record annual results all organically. Fourth quarter revenues grew 36% and that income grew 78%, exceeding the high end of our guidance and reflecting sustained broad-based demand across our staffing and business consulting businesses. Our permanent placement and productivity operations continue to show very strong results. growing year-on-year revenues by 73% and 37%, respectively. Our temporary and consulting staffing operations also performed well and had year-on-year revenue growth of 31%, with particular strength in management resources, which grew 56%. Compared with the pre-pandemic fourth quarter of 2019, 2021 revenues were higher by 15%, and net income was higher by 49%. I continue to be impressed with the energy, drive, and enthusiasm of our entire global workforce, including staffing, productivity, and corporate services professionals without whom our success would not be possible. Companywide revenues were $1.77 billion in the fourth quarter of 2021, up 36% from last year's fourth quarter, on both a reported and adjusted basis. Net income per share in the fourth quarter was $1.51, increasing 81% compared to 84 cents in the fourth quarter one year ago. Cash flow from operations during the quarter was $145 million. In December, we distributed a 38-per-share cash dividend to our shareholders of record for a total cash outlay of $42 million. We also acquired approximately 540,000 Robert Half shares during the quarter for 61 million. We have 7.2 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 50% in the fourth 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 $1.77 billion in the fourth quarter. On an as-adjusted basis, fourth quarter staffing revenues were up 36% year-over-year. U.S. staffing revenues were $992 million, up 37% from the prior year. Non-U.S. staffing revenues were $283 million, up 32% year-on-year on an as-adjusted basis. We have 321 staffing locations worldwide, including 85 locations in 17 countries outside the United States. In the fourth quarter, there were 61.7 billing days unchanged from the same quarter one year ago. The current first quarter has 62.4 billing days compared to 62.3 billing days from the first quarter of 2021. Currency exchange rate movements during the fourth quarter had the effect of decreasing reported year-over-year staffing revenues by $5 million. This impacted our year-over-year reported staffing revenue growth rate by 0.5 percentage points. Temporary and consultant bill rates for the quarter increased 8.5% compared to one year ago, adjusted for changes in the mix of revenues by line of business, currency, and country. This rate for the third quarter of 2021 was 5.4%. Now let's take a closer look at results for productivity. Global revenues in the fourth quarter were $495 million. $387 million of that is from business within the United States, and $108 million is from operations outside the United States. On an as-adjusted basis, Global fourth quarter productivity revenues were up 37% versus the year-ago period, with U.S. productivity revenues up 32%. Non-U.S. revenues were up 61% on an as-adjusted basis. Exchange rates had the effect of decreasing year-over-year productivity revenues by 2 million and decreasing its year-over-year reported growth rates by 0.5 percentage points. Protiviti and its independently owned member firms serve clients through a network of 87 locations in 28 countries. Turning now to gross margin, in our temporary and consultant staffing operations, fourth quarter gross margin was 39.8% of applicable revenues compared to 38.5% of applicable revenues in the fourth quarter one year ago. Gross margins were positively impacted by expanding pay bill spreads in higher conversion revenue, which were 3.8% of revenues in the quarter and 2.8% of revenues in the same quarter one year ago. Our permanent placement revenues in the fourth quarter were 12.4% of consolidated staffing revenues versus 9.7% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin was 47.2%, an increase of 2.8 percentage points compared to the year-ago fourth quarter. For productivity, gross margin was 28.7% of productivity's revenue compared to 26.5% of productivity revenue one year ago. Adjusted for deferred compensation-related classification impacts, gross margin for productivity was 29.3%, for the quarter just ended, compared to 28% one year ago. Productivity gross margins improved primarily due to an increased mix of higher margin services. Companywide SG&A costs were 30.8% of global revenues in the fourth quarter, compared to 32.6% in the same quarter one year ago. Adjusted for deferred compensation related classification impacts, Companywide SG&A costs were 29.7% for the quarter just ended compared to 29.9% one year ago. Staffing SG&A costs were 37.7% of staffing revenues in the fourth quarter versus 39.7% in the fourth quarter of 2020. Adjusted for deferred compensation related classification impacts, staffing SG&A costs were 36.2% for the quarter just ended compared to 36% one year ago. The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding 1.6 percentage points to the quarter's adjusted SG&A ratio. We ended 2021 with 8,900 full-time internal employees in our staffing divisions, up 14% from the prior year. Fourth quarter SG&A costs for productivity were 12.9% of productivity revenues compared to 14.1% of revenues in the year-ago period. In 2021, we had 11,400 full-time productivity employees and contractors. This is up 56% from the prior year and is consistent with productivity's overall increase in billable hours. Moving on to segment income. Operating income for the quarter was $200 million. Adjusted for deferred compensation related classification impacts, combined segment income was therefore $223 million in the fourth quarter. Combined segment margin was 12.6%. Fourth quarter segment income from our staffing divisions was $142 million, with a segment margin of 11.1%. Segment income for productivity in the fourth quarter was $81 million, with a segment margin of 16.4%. Our fourth quarter tax rate was 24% compared to 27% one year ago. The lower tax rate for 2021 can be attributed to better coverage of non-deductible expenses due to higher income in 2021, as well as higher stock compensation deductions due to the rise in the company's stock price. At the end of the fourth quarter, accounts receivable were $985 million and implied day sales outstanding, DSO, was 50 days. Before we move on to first quarter guidance, let's review some of the monthly revenue trends we saw in the fourth quarter and so far in January, all adjusted for currency and billing days. Our temporary and consultant staffing divisions exited the fourth quarter with December revenues up 31% versus the prior year compared to 32% increase for the full quarter. Revenues in the first two weeks of January were up 40.2% compared to the same period one year ago. Permanent placement revenues in December were up 73% versus December 2020. This compares to 74% increase for the full quarter. For the first three weeks of January, permanent placement revenues were up 51.7% compared to the same period in 2021. We provide this information so you have insight into some trends we saw during the fourth quarter and into January. But as you know, these are very brief time periods. We caution against reading too much into them. With that in mind, we offer the following first quarter guidance. Revenues $1.755 billion to $1.835 billion. Income per share $1.39 to $1.49. Midpoint revenues of $1.795 billion are 30% higher than the same period in 2021 on an as-adjusted basis. Midpoint EPS of $1.44 is 47% higher than 2021. The major financial assumptions underlying the midpoint of these estimates are as follows. Revenue growth on a year-over-year basis, staffing up 32% to 34%, productivity up 19% to 21%, overall up 28% to 30%. Gross margin percentages, temporary and consultant staffing 39 to 40%, productivity 27 to 28%, overall 41 to 43%. SG&A as percent of revenues, excluding deferred compensation classification impacts, staffing 35 to 36%, productivity 13 to 15%, Overall, 29 to 30%. Segment income for staffing, 11 to 12%. For productivity, 13 to 14%. Overall, 12 to 13%. Tax rate, 26 to 27%. Shares outstanding, 110 to 111 million. 2022 capital expenditures and capitalized cloud computing costs. 95 to 105 million, with 20 to 25 million during the first 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. Thank you, Mike.