Robert Half Inc.

Hello, and welcome to the Robert Half Second Quarter 2024 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.

Hi, 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 on the investor center of our website, roberthapp.com. For the second quarter of 2024, company-wide revenues were $1.473 billion, down 10% from last year's second quarter on both a reported and as-adjusted basis. That income per share in the second quarter was 66 cents, compared to a dollar in the second quarter a year ago. Client and candidate caution continues to impact hiring activity and new project starts as macroeconomic and interest rate uncertainty persists. Second quarter revenues and earnings were within our guidance range. Activity posted strong results led by U.S. growth in revenues and segment income both on a sequential and year-on-year basis. 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. Cash flow from operations during the quarter was $142 million in June, We distributed a $0.53 per share cash dividend to our shareholders of record for a total cash outlay of $55 million. Our per share dividend has grown 11.5% annually since inception in 2004. The June 24 dividend was 10.4% higher than the prior year. We also acquired 900,000 Robert Half shares during the quarter for $60 million. We have 9.1 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 18% in the second quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thanks, Keith, and hello, everyone. As Keith noted, global revenues were $1.473 billion in the second quarter. On an as-adjusted basis, Second quarter talent solutions revenues were down 14% year over year. U.S. talent solutions revenues were $701 million, down 15% the prior year's second quarter. Non-U.S. talent solutions revenues were $235 million, down 10% year over year. We conduct talent solutions operations through offices in the United States and 17 foreign countries. In the second quarter, there were 63.5 billing days compared to 63.3 billing days in the same quarter one year ago. The third quarter of 2024 had 64.1 billing days compared to 63.1 billing days during the third quarter of 2023. Currency exchange rate fluctuations during the second quarter had the effect of decreasing reported year-over-year total revenues by 6 million. $5 million for talent solutions and $1 million for productivity. Contract talent solution bill rates for the second quarter increased 3.1% 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 was also 3.1%. Now let's take a closer look at results for productivity. Global revenues in the second quarter were $487 million. $399 million of that is from the United States, and $88 million is from outside the United States. On an as-adjusted basis, global second quarter productivity revenues were down 1% versus the one-year-ago period. U.S. productivity revenues were up 3%, while non-U.S. productivity revenues were down 16%. Creativity and its independently owned member firms serve clients through locations in the United States and 29 foreign countries. Turning out a gross margin. In contract talent solutions, second quarter gross margin was 39.3% of applicable revenues versus 39.9% in the second quarter one year ago. Conversion revenues or 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 second quarter were 13.3% of consolidated talent solutions revenues versus 13% in the same quarter one year ago. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 47.4%, compared to 47.7% of applicable revenues in the second quarter of last year. For furtivity, gross margin was 22.5% of furtivity revenues compared to 22.9% of furtivity 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 productivity was 23.2% for the quarter just ended compared to 24% last year. Moving on to selling general and administrative costs. Enterprise SG&A costs were 34% of global revenues in the second quarter compared to 33.1% in the same quarter one year ago. Adjusted for the deferred compensation investment income offset, Enterprise SG&A costs were 33.2% for the quarter just ended compared to 31.6% last year. Talent Solutions SG&A costs were 43.1% of Talent Solutions revenues in the second quarter versus 40.7% in the second quarter of 2023. Adjusted for the deferred compensation investment income offset, Talent Solutions SG&A costs were 41.9% for the quarter just ended compared to 38.7% last year. Second quarter SG&A costs for productivity were 15.6% of productivity revenues compared to 15.1% of revenues for the same quarter last year. Operating income for the quarter was $76 million. adjusted for the deferred compensation investment income offset combined segment income was 92 million in the second quarter combined segment margin was 6.2 percent second quarter segment income from our talent solutions divisions was 55 million with a segment margin of 5.5 percent segment income for productivity in the second quarter was 37 million with a segment margin of 7.7%. Our second quarter 2024 income statement includes $16 million as income from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of additional employee deferred compensation costs, which are reflected in SG&A expenses and direct costs. As such, has no effect on reported net income. Our second quarter tax rate was 29% compared to 30% one year ago. At the end of the second quarter, accounts receivable were $893 million and implied day sales outstanding, or DSO, was 54.6 days. Before we move to third quarter guidance, let's review some of the monthly revenue 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 down 13% versus the prior year, compared to a 14% decrease for the full quarter. Revenues for the first two weeks of July were down 14% compared to the same period last year. Permanent placement revenues in June were down 3% versus June of 2023. This compares to a 12% decrease for the full quarter. For the first three weeks of July, permanent placement revenues were down 17% compared to the same period in 2023. We provide this information so 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 time periods. We caution against reading too much into them. With that in mind, we offer the following third quarter guidance. Revenues, 1.39 billion to 1.49 billion. Income per share, 53 to 67 cents. Our Q3 EPS estimate includes a restructuring charge of eight cents per share related to productivity international. This includes $5.7 million charged to SG&A and income tax charges of $2.5 million. Keith will provide additional information on this in a moment. Midpoint revenues of $1.44 billion are 9% lower than the same period in 2023 on an as-adjusted basis. The major financial assumptions underlying the midpoint for these estimates far as follows. Revenue growth year over year has adjusted. For talent solutions, down 12% to 16%. Activity, down 1% to up 2%. Overall, down 7% to 11%. Contract margin percentage for contract talent, 38% to 41%. Creativity, as adjusted for the Deferred Compensation Investment Income Offset, 24 to 26 percent. Overall, 39 to 41 percent. SG&A as a percentage of revenues adjusted for Deferred Compensation Investment Income Offset for Talent Solutions, 41 to 43 percent. 16 to 18 percent overall 33 to 35 percent segment income talent solutions four to six percent productivity seven to nine percent overall five to seven percent tax rate 31 to 33 percent shares 102 to $103 million. 2024 capital expenditures and capitalized cloud computing costs, $80 million to $100 million, with $25 to $35 million in the third 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.