Robert Half Inc.

Hello, and welcome to the Robert Half fourth 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.

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 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. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthaff.com. We delivered above consensus top and bottom line results for the fourth quarter with productivity leading the way. Global labor demand continues to be resilient. and talent shortages persist, although both are modestly below their peaks. Ongoing economic uncertainty continues to impact client and candidate confidence as well as hiring activity and new project starts. Nevertheless, we're encouraged that our improving weekly revenue trends that began in the third quarter and continued into the fourth quarter are approaching a positive inflection point. We enter 2024 confident in our ability to navigate the current climate and optimistic about our growth prospects, built on our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services. For the fourth quarter of 2023, company-wide revenues were $1.473 billion, down 15% from last year's fourth quarter on both a reported and as adjusted basis. That income per share in the fourth quarter was 83 cents compared to $1.37 in the fourth quarter one year ago. Cash flow from operations during the quarter was 115 million. In December, we distributed a 48 cent per share cash dividend to our shareholders of record for a total cash outlay of 51 million. Our per-share dividend has grown 11.2% annually since its inception in 2004. The December 2023 dividend was 11.6% higher than the prior year. We also acquired approximately 685,000 Robert Half shares during the quarter for $56 million. We have 10.8 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 22% in the fourth quarter. Now I'll turn the call to our CFO, Mike Buckley.

Thank you, Keith. Hello, everyone. As Keith just noted, global revenues were $1.473 billion in the fourth quarter. On an as-adjusted basis, fourth quarter talent solutions revenues were down 18% year over year. U.S. talent solutions revenues were $764 million. down 21% from the prior year's fourth quarter. Non-US talent solutions revenues were $245 million, down 10% year-over-year. We have 313 talent solutions locations worldwide, including 89 locations in 18 countries outside of the United States. In the fourth quarter, there were 61.1 billing days, compared to 61.2 billing days in the same quarter one year ago. The first quarter of 2024 has 62.8 billing days compared to 63.3 billing days during the first quarter of 2023. Billing days for the remaining three quarters of 2024 will be 63.5, 64.1, and 61.6, for a total of 252 billing days in the year. Currency exchange rate fluctuations during the fourth quarter had the effect of increasing reported year-over-year total revenues by $11 million, $8 million for talent solutions, and $3 million for productivity. Contract talent solution bill rates for the fourth quarter increased 3.7 percent compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the third quarter was 4.6%. Now let's take a closer look at the results for productivity. Global revenues in the fourth quarter were $464 million. $372 million of that is from the United States, and $92 million is from outside of the United States. On an as-adjusted basis, global fourth quarter productivity revenues were down 8% versus the year-ago period. U.S. productivity revenues were down 7%, while non-U.S. productivity revenues were down 9%. Productivity and its independently owned member firms served clients through a network of 89 locations in 29 countries. Turning now to gross margin, in contract talent solutions, fourth quarter gross margin was 39.7% of applicable revenues, versus 39.9% in the fourth quarter one year ago. Conversion revenues for contract to hire were 3.4% of revenues in the quarter compared to 3.7% of revenues in the quarter one year ago. Our permanent placement revenues in the fourth quarter were 12% of consolidated talent solutions revenues versus 12.7% in the same quarter one year ago. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 46.9% compared to 47.5% of applicable revenues in the fourth quarter last year. For productivity, gross margin was 23.9% of productivity revenues compared to 27.2% of productivity revenues one year ago. Adjusted for deferred compensation related classification impacts, Gross margin for productivity was 25.9% for the quarter just ended compared to 28% last year. We ended 2023 with 10,500 full-time productivity employees and contractors down 9.6% from the prior year. Moving on to selling general and administrative costs. Enterprise SG&A costs were 35.1% of global revenues in the fourth quarter. compared to 31.6% in the same quarter one year ago. Adjusted for deferred compensation-related classification impacts, Enterprise SG&A costs were 32.5% for the quarter just ended compared to 30.4% last year. Talent Solutions SG&A costs were 44.6% of Talent Solutions revenues in the fourth quarter versus 38.9% in the fourth quarter of 2022. I'm sorry, in the fourth quarter of 2023. Adjusted for deferred compensation-related classification impacts, Talent Solutions SG&A costs were 40.8% in the quarter just ended compared to 37.2% last year. The lower mix of permanent placement revenues this quarter versus one year ago had the effect of decreasing the quarter's adjusted SG&A ratios by 0.4 percentage points. We ended 2023 with 8,000 full-time internal employees in our talent solutions divisions, down 13.8% from the prior year. Fourth quarter SG&A costs for productivity were 13.5% of productivity revenues compared to 13.6% of revenues last year. Operating income for the fourth quarter was $67 million. Adjusted for deferred compensation related classification impacts, combined segment income was $114 million in the fourth quarter. Combined segment margin was 7.8%. Fourth quarter segment income from our talent solutions divisions was $61 million with a segment margin of 6.1%. Segment income for productivity in the fourth quarter was $53 million. with a segment margin of 11.4%. Our fourth quarter tax rate was 27%, the same as one year ago. At the end of the fourth quarter, accounts receivable were 861 million and implied days sales outstanding, or DSO, was 52.6 days. Before we move on to first quarter guidance, Let's review some of the monthly reviewed revenue trends we saw in the fourth quarter and so far in January, all adjusted for currency and billing days. Contract Talent Solutions exited the fourth quarter with December revenues down 17% versus the prior year, compared to an 18% decrease for the full quarter. Revenues for the first three weeks of January were down 17% compared to the same period last year. On a week-on-week sequential basis, the rates of decline continued to narrow during the quarter, a pattern that began last quarter. Permanent placement revenues in December were down 22% versus December 2022. This compares to a 23% decrease for the full quarter. For the first four weeks of January, permanent placement revenues were down 25% compared to the same period in 2023. We provide this information so you have insight into some of the 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 1.44 billion to $1.54 billion, income per share $0.54 to $0.68. Midpoint revenues of $1.49 billion are 13% lower than in the same period in 2023 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 14 to 19%. Productivity, down 3 to 6%. Overall, down 10 to 15%. Gross margin percentage for contract talent, 38 to 41%. Productivity, 20 to 22%. Overall, 37 to 39%. SG&A as a percentage of revenues excluding deferred compensation classification impacts. Talent solutions, 40 to 42%. Productivity, 15 to 17%. Overall, 32 to 34%. Segment income for talent solutions, 4 to 7%. Productivity, 4 to 7%. Overall, 4 to 7%. Tax rate. 29 to 30%, shares 104 to 105 million. 2024 capital expenditures and capitalized cloud computing costs, 90 to 110 million, with 15 to 20 million in the first quarter. Productivity's first quarter segment income guidance includes the seasonal impact of annual staff promotions and compensation increases all of which become fully effective on January 1st. This produces a sequential decline in midpoint estimated segment margin of six percentage points, which is consistent with the four to seven point decline experienced in most of the last 10 years. 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.