Robert Half Inc.

Hello and welcome to the Robert Half First Quarter 2023 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 telephone keypad. 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 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. For your convenience, our prepared remarks for today's call are available in the investor center of our website, roberthalf.com. First quarter results were largely in line with expectations. Pertivity led the way with its 22nd consecutive quarter of year-over-year revenue growth. Talent solutions performed well against a backdrop of client hiring caution and tight labor markets. We remain very optimistic about our ability to navigate the uncertain global macroeconomic environment and are well positioned to benefit as the macro landscape improves. For the first quarter of 2023, company-wide revenues were $1.716 billion, down 5% from last year's first quarter on a reported basis and down 6% on an as-adjusted basis. Net income per share in the first quarter was $1.14 compared to $1.52 in the first quarter one year ago. Cash flow from operations during the quarter was $66 million. In March, we distributed a $0.48 per share cash dividend to our shareholders of record for a total cash outlay of $54 million. Our per share dividend growth was 11.7% annually since its inception in 2004. The March 2023 dividend was 11.6% higher than in 2022. We also acquired approximately 500,000 Robert Half shares during the quarter for $38 million. We have 13.3 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 31% in the first quarter. Now I'll turn it over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.716 billion in the first quarter. On an as-adjusted basis, first quarter talent solutions revenues were down 9% year-over-year. U.S. talent solutions revenues were $944 million, down 11% from the prior year. Non-US talent solutions revenues were $278 million, down 3% year-over-year on an as-adjusted basis. We had 317 talent solutions locations worldwide, including 86 locations in 18 countries outside of the United States. In the first quarter, there were 63.3 billing days, compared to 62.4 billing days in the same quarter one year ago. The second quarter of 2023 has 63.3 billing days compared to 63.4 billing days during the second quarter of 2022. Currency exchange rate movements during the first quarter had the effect of decreasing reported year-over-year total revenues by 21 million. $15 million for talent solutions and $6 million for productivity. This negatively impacted our year-over-year overall revenue growth rate by 1.2 percentage points, 1.1 percentage points for talent solutions, and 1.3 percentage points for productivity. Contract talent solutions bill rates for the quarter increased 6.9% compared to one year ago. adjusted for changes in the mix of revenues by functional specialization, currency, and country. The rate for the fourth quarter was 7.8%. Now let's take a closer look at the results for productivity. Global revenues in the first quarter were $494 million. $397 million of that is from business within the United States. and $97 million is from operations outside of the United States. On an as-adjusted basis, global first-quarter productivity revenues were up 4% versus the year-ago period, with U.S. productivity revenues up 6%, while non-U.S. productivity revenues were down 1%. Productivity and its independently-owned member firms serve clients through a network of 89 locations, in 29 countries. Turning now to gross margin. In contract talent solutions, first quarter gross margin was 39.8% of applicable revenues compared to 40% of applicable revenues in the first quarter one year ago. Conversion revenues, or contract to hire, were 3.7% of revenues in the quarter compared to 4% of revenues in the quarter one year ago. Our permanent placement revenues in the quarter were 12.8% of consolidated Talent Solutions revenues versus 13.9% in the same quarter one year ago. When combined with contract Talent Solutions gross margin, overall gross margin for Talent Solutions was 47.5% compared to 48.3% of applicable revenues in the first quarter one year ago. gross margin was 22.2% of productivity revenues compared to 26.2% of productivity revenues one year ago. Adjusted for deferred compensation related classification impacts, gross margin for productivity was 23.2% for the quarter just ended compared to 25.3% one year ago. Enterprise Selling General and Administrative Costs, or SG&A, were 32.2% of global revenues in the first quarter compared to 28.3% in the same quarter one year ago. Adjusted for deferred compensation-related classification impacts, enterprise SG&A costs were 30.9% for the quarter just ended compared to 29.8% one year ago. Talent Solutions SG&A costs were 39% of Talent Solutions revenue in the first quarter versus 33.6% in the first quarter of 2022. Adjusted for deferred compensation related classification impacts, Talent Solutions SG&A costs were 37.1% for the quarter just ended compared to 35.6% one year ago. The lower mix of permanent placement revenues this quarter versus one year ago had the effect of decreasing the quarter's adjusted SG&A ratio by 0.6 percentage points. The increase in Talent Solutions SG&A as a percent of revenues in the current period was driven primarily by internal staff compensation costs. First quarter SG&A costs for productivity were 15.3% of productivity revenues compared to 13.3% of revenues in the year-ago period as operating expenditures returned to more normal pre-pandemic levels. Operating income for the quarter was $138 million. Adjusted for deferred compensation-related classification impacts, combined segment income was $165 million in the first quarter. Combined segment margin was 9.6%. First quarter segment income from our talent solutions divisions was $126 million, with a segment margin of 10.3%. Segment income for productivity in the first quarter was $39 million, with a segment margin of 7.9%. Our first quarter tax rate was 28%, up from 26% for the same quarter one year ago. The higher tax rate for 2023 can be primarily attributed to lower tax credits as well as lower stock compensation deductions due to the company's stock price. At the end of the first quarter, Accounts receivable were $1.009 billion, and implied day sales outstanding, or DSO, was 52.9 days. Before we move 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 down 9% versus the prior year, compared to an 8% decrease for the full quarter. Revenues for the first two weeks of April were down 11% compared to the same period one year ago. Permanent placement revenues in March were down 17% versus March of 2022. This compares to a 16% decrease for the full quarter. For the first three weeks of April, permanent placement revenues were down 13% compared to the same period in 2022. We provide this information so that you have insight into some of the trends we saw during the first quarter and into 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, $1.655 billion. to $1.735 billion, income per share $1.09 to $1.19. Midpoint revenues of $1.695 billion are 9% lower than the same period in 2022 on an as-adjusted basis. The major financial assumptions underlying the midpoint of these estimates are as follows. Revenue growth Year over year, on an as-adjusted basis, talent solutions down 11 to down 16 percent. Productivity up 2 to up 5 percent. Overall, down 7 to down 11 percent. Gross margin percentage for contract talent, 39 percent to 41 percent. Productivity, 24 to 26 percent. 40% to 42%. SG&A has percentage of revenues excluding deferred compensation classification impacts. Talent solutions, 37% to 39%. Productivity, 14% to 16%. Overall, 30% to 32%. For segment income, talent solutions, 8% to 11%. Productivity, 9 to 12%. Overall, 8 to 11%. For the tax rate, 28 to 29%. Shares outstanding, 106 to 107 million. 2023 capital expenditures and capitalized computing costs, 90 to 100 million, with 20 to 25 million in the second 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 violence. Now, I'll turn the call back over to Keith.