Robert Half Inc.

Hello, and welcome to the Robert Haas Second Quarter 2022 Conference Call. Today's conference call is being recorded. If you'd like to ask a question during the Q&A portion of the call, please press star and the number one on your phone. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Haas, 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 and in our most recent 10-K and 10-Q 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 in 2022, 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. Productivity and our permanent placement operations continue to be reported separately. Also, what we previously referred to as our staffing operations are now referred to as talent solutions. There is 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 at the investor center of our website, roberthalf.com. We are pleased to once again report very strong results, which continue to reflect a robust global labor market and demand environment. Talent solutions led the way with permanent placement and contract talent solutions growing 39% and 19% respectively on a year-on-year basis. Corporativity solutions also remain strong. I'd like to acknowledge the dedication and exemplary efforts of our entire global workforce, including talent solutions, productivity, and corporate services professionals who make our success possible. Company-wide revenues were $1.863 billion in the second quarter of 2022, up 18% from last year's second quarter on a reported basis and up 20% on an as-adjusted basis. That income per share in the second quarter was $1.60, increasing 20% compared to $1.33 in the second quarter one year ago. Cash flow from operations during the quarter was $233 million. In June, we distributed a $0.43 per share cash dividend to our shareholders of record for a total cash outlay of $49 million. Our per share dividend has grown 11.6% annually since inception in 2004. The June 22 dividend was 13.2% higher than 2021. We also acquired approximately 900,000 Robert Half shares during the quarter for $79 million. We have 5.8 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 48% in the second quarter. Now I'll turn it over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.863 billion in the second quarter. On an as-adjusted basis, second quarter talent solutions revenues were up 24% year-over-year. U.S. talent solutions revenue were $1.071 billion, up 25% from the prior year. Non-U.S. talent solutions revenues were $295 million, up 20% year-over-year on an as-adjusted basis. We have 316 Talent Solutions locations worldwide, including 85 locations in 17 countries outside of the United States. In the second quarter, there were 63.4 billing days unchanged from the same quarter one year ago. The current has 64.3 billing days compared to 64.4 billing days one year ago. Currency exchange rate movements during the second quarter had the effect of decreasing reported year-over-year total revenues by $37 million, $26 million for talent solutions, and $11 million for productivity. This negatively impacted our year-over-year overall revenue growth by 2.3 percentage points, 2.3 percentage points for talent solutions and 2.4 percentage points for productivity. Contract calendar solution bill rates for the quarter increased 8.2% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the first quarter of 2022 was 9.1%. Now let's take a closer look at the results for productivity. Global revenues in the second quarter were $497 million. 396 million of that is from business within the United States, and 101 million is from operations outside of the United States. On an as-adjusted basis, global second quarter productivity revenues were up 11% versus the year-ago period, with U.S. productivity revenues up 8%. Non-U.S. revenues were up 21% on an as-adjusted basis. Proactivity and its independently owned member firms serve clients through a network of 88 locations in 29 countries. Company-wide second quarter public sector revenue was $94 million, of which $70 million was reported by Proactivity and the balance reported by Talent Solutions. Currency exchange rates had the effect of decreasing year-over-year public sector revenues by $4 million. We expect third quarter 2022 public sector revenues to be 90 to 100 million, and we continue to expect full year 2022 public sector revenues to be flat to up 10% for the year. Turning now to gross margin. In contract talent solutions, second quarter gross margin was 39.9% of applicable revenues. compared to 39.7% of applicable revenues in the second quarter one year ago. Conversion revenues, or contract to hire, were 4.1% of revenues in the quarter. Our permanent placement talent solution revenues in the second quarter were 14.7% of consolidated talent solutions revenues versus 12.8% of consolidated talent solutions revenues in the same quarter one year ago. When combined with contract talent solutions gross margin, overall talent solution gross margin was 48.7%, an increase of 1.3 percentage points compared to the year-ago second quarter. For productivity, gross margin was 30.4% of productivity revenues compared to 29.1% of productivity revenues one year ago. Adjusted for deferred compensation related classification impacts, gross margin for productivity was 28.1% for the quarter just ended, compared to 30% one year ago. Gross margin in the current period was impacted by higher staff resource costs, including continued expansion of headcount in the quarter. Enterprise selling general and administrative costs were 27.3% of global revenues in the second quarter compared to 30.9% in the same quarter one year ago. Adjusted for deferred compensation related classification impacts, enterprise SG&A costs were 30.3% for the quarter just ended compared to 29.4% one year ago. Talent Solutions SG&A costs were 32.2% of Talent Solutions revenues for the second quarter versus 38.4% in the second quarter of 2021. Adjusted for deferred compensation related classification impacts, Talent Solutions SG&A costs were 36.2% 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 0.9 percentage points to the quarter's adjusted SG&A ratio. Second quarter SG&A costs for productivity were 14% of productivity revenues compared to 12.5% of revenues in the year-ago period. Operating income for the quarter was $306 million. Adjusted for deferred compensation related classification impacts, combined segment income was $241 million in the second quarter. Combined segment margin was 12.9%. Second quarter segment income from our talent solutions divisions was $171 million with a segment margin of 12.5%. Segment income for productivity in the second quarter was $70 million. with a segment margin of 14.1%. Our second quarter tax rate was 27%, the same as one year ago. At the end of the second quarter, accounts receivables was $1.092 billion and implied day sales outstanding, or DSO, was 52.6 days. Before we move to third quarter guidance, let's review some of the monthly trends we saw in the second quarter and so far in July, all adjusted for currency and billing days. Contract Talent Solutions exited the second quarter with June revenues up 18% versus the prior year, compared to a 21% increase for the full quarter. Revenues for the first week of July were up 16% compared to the same period one year ago. permanent placement revenues in June were up 38% versus June of 2021. This compares to a 43% increase for the full quarter. For the first two weeks of July, permanent placement revenues were up 3% compared to the same period in 2021. This period includes the historically variable impact of the 4th of July holiday. We provide this information so that you have insight into some of the trends we saw during the second quarter and into July. But as you know, these are very brief periods of time. We caution against reading too much into them. With that in mind, we offer the following third quarter guidance. Revenues, $1.87 billion to $1.95 billion. Income per share, $1.60. to $1.70. Midpoint revenues of $1.910 billion are 14% higher than the same period in 2021 on an as-adjusted basis. Midpoint earnings per share of $1.65 is 8% higher than 2021, notwithstanding a 5-cent negative impact for currency and a higher tax rate. Note that in the prior year, Q3 2021 revenues and EPS had very strong year-over-year growth rates of 43% and 129%, respectively. The major financial assumptions underlying the midpoint of these assumptions are as follows. Revenue growth on a year-over-year basis, talent solutions up 16% to 19%, productivity up 6% to 9%, overall up 12% to 16%. Gross margin percentage, contract talent 38% to 40%, productivity 28% to 30%, overall 42% to 44%. SG&A has a percentage of revenue excluding deferred compensation classification impacts, talent solutions, 36 to 37%, productivity 14 to 16%, overall 30 to 32%. Segment income, talent solutions, 11 to 13%, productivity 13 to 15%, overall 11 to 13%. Tax rate, 26 to 27%, shares 108 to 110 million. Third 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.