Robert Half Inc.

Hello, and welcome to the Robert Half First Quarter 2024 Conference Call. Today's conference call is being recorded. If you would 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 the forward-looking statements. These risks and uncertainties are described in today's press release and 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, roberthalf.com. Client and candidate caution continues to impact hiring activity and new project starts on a global basis. However, the trend towards stabilization that began in the second half of last year continued into the first quarter of this year. First quarter results were largely in line with expectations, and we're encouraged that second quarter earnings guidance, led by productivity, anticipates higher sequential earnings for the first time in seven quarters. We remain 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 first quarter of 2024, company-wide revenues were $1.476 billion, down 14% from last year's first quarter on a reported basis and down 13% as adjusted basis. Net income per share in the first quarter was $0.61 compared to $1.14 in the first quarter a year ago. In March... We distributed a 53 cent per share cash dividend to our shareholders of record for a total cash outlay of 58 million. Our per share dividend has grown 11.6% annually since its inception in 2004. The March 2024 dividend was 10.4% higher than the prior year. We also acquired approximately 750,000 Robert Half shares during the quarter for $60 million. We have 10 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 16% in the first quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thank you, Keith. Hello, everyone. As Keith noted, global revenues were $1.476 billion in the first quarter. On an as-adjusted basis, first quarter talent solutions revenues were down 17% year-over-year. U.S. talent solutions revenues were $764 million, down 19% from the prior year's first quarter. Non-U.S. talent solutions revenues were $248 million, down 10% year-over-year. We have 315 talent solutions locations worldwide, including 91 locations in 17 countries outside of the United States. In the first quarter, there were 62.8 billing days compared to 63.3 billing days in the same quarter one year ago. The second quarter of 2024 had 63.5 billing days compared to 63.3 billing days during the second quarter of 2023. Currency exchange rate fluctuations during the first quarter had the effect of increasing reported year-over-year total revenues by $2 million, $2 million for talent solutions and a negligible amount for productivity. Contract talent solutions bill rates for the first quarter increased 3.1% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, country, and currency. This rate for the fourth quarter was 3.7%. Now let's take a closer look at the results for productivity. Global revenues in the first quarter were $464 million. $378 million of that is from the United States, and $86 million is from outside of the United States. On an as-adjusted basis, global first quarter productivity revenues were down 5% versus the year-ago period. U.S. productivity revenues were down 4%, while non-U.S. productivity revenues were down 10%. 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, first quarter gross margin was 39.5% of applicable revenues. versus 39.8% in the first quarter one year ago. Conversion revenues, or contract to hire, were 3.2% of revenues in the quarter compared to 3.7% of revenues in the quarter one year ago. Our permanent placement revenues in the first quarter were 12.3% of consolidated talent solutions revenues versus 12.8% in the same quarter one year ago. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 47% compared to 47.5% of applicable revenues in the first quarter last year. For productivity, gross margin was 18.9% of productivity revenues compared to 22.2% of productivity revenues one year ago. Adjusted for the amount of deferred compensation that is completely offset by investment income related to employee deferred compensation trusts or the deferred compensation investment income offset, gross margin for pro tivi was 20.7% for the quarter just ended compared to 23.2% last year. Moving on to SG&A. Enterprise SG&A costs were 35.3% of global revenues in the first quarter compared to 32.2% in the same quarter one year ago. Adjusted for the deferred compensation investment income offset, Enterprise SG&A costs were 33% for the quarter just ended compared to 30.9% last year. Talent Solutions SG&A costs were 44.3% of Talent Solutions revenues in the first quarter versus 39% in the first quarter of 2023. Adjusted for the deferred compensation investment income offset, Talent Solutions SG&A costs were 40.8% for the quarter just ended compared to 37.1% last year. First quarter SG&A costs For productivity, we're 15.8% of productivity revenues compared to 15.3% of revenues for the same quarter last year. Operating income for the quarter was $42 million. Adjusted for the deferred compensation investment income offset, combined segment income was $85 million in the first quarter. Combined segment margin was 5.7%. First quarter segment income from our talent solutions divisions was $62 million, with a segment margin of 6.1%. Segment income for productivity in the first quarter was $23 million, with a segment margin of 4.9%. Our first quarter 2024 income statement includes $43 million as income from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of additional employee compensation, which is reflected in SG&A expenses and direct costs. As such, it has no effect on our reported net income. Our first quarter tax rate was 30% compared to 28% one year ago. At the end of the first quarter, accounts receivable $861 million and implied day sales outstanding, or DSO, was 52.5 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 16% versus the prior year, compared to a 16% decrease for the full quarter. Revenue for the first two weeks of April were down 16% compared to the same period last year. Permanent placement revenues in March were down 17% versus March 2023. This compares to a 20% decrease for the full quarter. For the first three weeks of April, permanent placement revenues were down 18% compared to the same period in 2023. We provide this information so 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, 1.45 billion to 1.55 billion. Income per share, 63 cents to 77 cents. Midpoint revenue of 1.5 billion are 9% lower than 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 on a year-over-year basis as adjusted. Talent solutions down 10 to 14%. For productivity, down 3% to flat. Overall, down 7 to 11%. Gross margin for contract talent, 38 to 41%. For productivity, on an as-adjusted for the deferred compensation investment income offset, 22% to 24%, overall 38% to 40%. SG&A as a percentage of revenues adjusted for the deferred compensation investment income offset, talent solutions, 40% to 42%, productivity, 15% to 17%, And overall, 32 to 34%. Segment income for Talent Solutions, 5 to 7%. Productivity, 6 to 8%. Overall, 5 to 8%. Our tax rate, 29 to 30%. And shares outstanding, 103 to 104 million. 2024 capital expenditures and capitalized cloud computing costs, 90 to 110 million, with 20 to 25 million in the second quarter. As always, we limit our formal guidance to one quarter forward. Just for informational purposes, we would note that the 10-year average performance for the third quarter including 2020's COVID impact, is for sequential revenue gains of 1.1% and sequential EPS gains of 4.3%. All estimates we provide on this call are subject to the risk mentioned in today's press release and in our SEC filings. Now I'll turn the call back over to Keith.