Robert Half Inc.

Hello and welcome to the Robert Half First Quarter 2022 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.

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 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, 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. We'd like to remind you that beginning this quarter, our financial disclosures for contract operations Formerly temporary and consulting staffing are based on functional specialization rather than our previously branded divisions. The functional specializations are finance and accounting, administrative and customer support, and technology. Finance and accounting combines the former accountants and management resources. Administrative and customer support was previously office team. and technology was formerly Robert Half Technology. Pertivity and our permanent placement operations continue to be reported separately. Also, what we previously referred to as staffing operations are now referred to as talent solutions. There's no change to our underlying business operations or organization. Our presentation of revenues and the related growth rates for each of our contract functional specializations includes intersegment revenues from services provided to productivity in connection with the company's blended talent solutions and consulting operations. This is how we measure and manage these businesses internally. The combined amount of intersegment revenues with productivity is also separately disclosed. The supplemental schedules just mentioned also include a revenue schedule showing this information for 2020 through 2022. For your convenience, our prepared remarks for today's call are available in the investor center of our website, roberthaff.com. We are very pleased to report another very strong quarter driven by a robust demand environment across the globe. First quarter revenues grew 30% and net income grew 52%. on a year-over-year basis. Our permanent placement talent solutions again led the way, achieving year-over-year revenue growth of 67%. Our contract talent solutions and productivity also continued to post very strong results, growing year-over-year revenues by 30% and 19% respectively. Our continued success would not be possible without the dedicated commitment of our entire global workforce, including talent solutions, productivity, and corporate services professionals. Company-wide revenues were $1.815 billion in the first quarter of 2022, up 30% from last year's first quarter on a reported basis, and up 31% on an adjusted basis. That income per share in the first quarter was $1.52, increasing 55% compared to 98 cents in the first quarter one year ago. Cash flow from operations during the quarter was 69 million. In March, we distributed a 43 cent per share cash dividend to our shareholders of record for a total cash outlay of 47 million. Our per share dividend has grown 11.7% annually since inception in 2004. The March 22 dividend was 13.2% higher than in 2021. We also acquired approximately 475,000 Robert Half shares during the quarter for $55 million. We have 6.7 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 47% in the first 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 $1.815 billion in the first quarter. On an as-adjusted basis, first quarter talent solutions revenue were up 35% year over year. U.S. talent solutions revenue rose were $1.046 billion, up 38% from the prior year. Non-US talent solutions revenue were $297 million, up 28% year-over-year on an as-adjusted basis. We have 317 talent solutions locations worldwide, including 83 locations in 17 countries outside of the United States. In the first quarter, There were 62.4 billing days compared to 62.3 billing days in the first quarter of 2021. The current second quarter has 63.4 billing days unchanged from the same quarter one year ago. Currency exchange rate movements during the first quarter had the effect of decreasing reported year-over-year talent solutions revenue by 13 million. This negatively impacted our year-over-year reported Talent Solutions revenue growth rate by 1.3 percentage points. Contract Talent Solutions bill rates for the quarter increased 9.1% compared to one year ago, adjusted for changes in the mix of revenue by functional specialization, currency, and country. This rate for the fourth quarter of 2021 was 8.5%. Now let's take a closer look at the results for productivity. Global revenues in the first quarter were $472 million, $369 million of that is from business within the United States, and $103 million is from operations outside of the United States. On an as-adjusted basis, global first quarter productivity revenues were up 20% versus the year-ago period, with U.S. productivity revenues up 17%. Non-U.S. revenues were up 32% on an as-adjusted basis. Exchange rates had the effect of decreasing year-over-year productivity revenues by 5 million and decreasing its year-over-year reported growth rate by 1.3 percentage points. Productivity and its independently owned member firms served clients through a network of 88 locations in 29 countries. Turning now to gross margins. In contract talent solutions, first quarter gross margin was 40% of applicable revenues compared to 38.8% of applicable revenues in the first quarter one year ago. Gross margins were positively impacted by expanding pay bill spreads and higher conversion revenues, or contract to hire, which were 4% of revenues in the quarter as compared to 3.1% of revenues in the same quarter one year ago. Our permanent placement revenues in the first quarter were 13.9% of consolidated talent solutions revenues versus 11.2% of consolidated talent solutions revenues in the same quarter one year ago. When combined with contract talent solutions gross margin, overall talent solutions gross margin was 48.3%, an increase of 2.7 percentage points compared to the year ago first quarter. For productivity, gross margin was 26.2% of productivity revenues compared to 26.5% of productivity revenues one year ago. Adjusted for deferred compensation-related classification impacts, gross margin for productivity was 25.3% for the quarter just ended compared to 26.9% one year ago. Gross margin in the current period was impacted by higher staff resource costs including a significant expansion of headcount during the quarter. Enterprise selling general and administrative costs were 28.3% of global revenues in the first quarter, compared to 30.3% in the same quarter one year ago. Adjusted for deferred compensation-related classification impacts, enterprise SG&A costs were 29.8% for the quarter just ended, compared to 29.5%, one year ago. Talent Solutions SG&A costs were 33.6% of Talent Solutions revenues in the first quarter versus 37.3% in the first quarter of 2021. Adjusted for deferred compensation related classification impacts, Talent Solutions SG&A costs were 35.6% for the quarter just ended compared to 36.3% one year ago. The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding 1.5 percentage points to the quarter's adjusted SG&A ratio. First quarter SG&A costs for productivity were 13.3% of productivity revenues compared to 12.5% of revenues in the year-ago period. Operating income for the quarter was $258 million. Adjected for deferred compensation-related classification impacts, combined segment income was $228 million in the first quarter. Combined segment margin was 12.5%. First quarter segment income from our talent solutions divisions was $171 million with a segment margin of 12.7%. Segment income for productivity in the first quarter was $57 million with a segment margin of 12.1%. Our first quarter tax rate was 26%, the same as it was one year ago. At the end of the first quarter, accounts receivable were $1.072 billion, and implied day sales outstanding, or DSO, was 53 days. Before we move on to second quarter guidance, Let's review some of the monthly revenue trends we saw in the first quarter and so far in April, all adjusted for currency and billing days. Contract Talent Solutions exited the first quarter with March revenues up 28% versus the prior year, compared to a 31% increase for the full quarter. Revenue for the first three weeks of April were up 29% compared to the same period one year ago. Permanent placement revenues in March were up 63% versus March of 2021. This compares to a 69% increase for the full quarter. For the first four weeks of April, permanent placement revenues were up 30% compared to the same period in 2021. We remind you that the comparative period of 2021 in 2021 experienced extraordinary growth with permanent placement achieving 154% growth rates in the first three weeks of April 2021 and 97% for the full quarter. We provide this information so that you have insight into some of the trends we saw during the first quarter and into the month of April. 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 second quarter guidance. Revenues, $1.855 billion to $1.935 billion. Income per share, $1.53 to $1.63. Midpoint revenues of $1.895 billion are 22% higher than the same period in 2021 on an as adjusted basis. Midpoint EPS of $1.58 is 19% higher than 2021. Note that in the prior year, Q2 2021 revenues and EPS had very strong year-over-year growth rates of 40% and 227% respectively. The major financial assumptions underlying the midpoint of these estimates are as follows. Revenue growth on a year-over-year basis, talent solutions up 25% to 27%, productivity up 9 to 11 percent, overall up 21 to 23 percent. Gross margin percentages, contract talent 39 to 40 percent, productivity 27 to 28 percent, overall 41 to 43 percent. SG&A as a percentage of revenues excluding deferred compensation classification impacts. Talent Solutions, 36% to 37%. Productivity, 14% to 15%. Overall, 30% to 31%. For segment income, Talent Solutions, 12% to 13%. Productivity, 13% to 14%. Overall, 12% to 13%. Our tax rate, 26% to 27%. Shares outstanding, 109 to 110 million. Second quarter capital expenditures and capitalized cloud computing costs, 25 to 30 million. 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.