Robert Half Inc.

Hello and welcome to the Robert Half Third Quarter 2024 conference call. Today's conference 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 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. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. For the third quarter of 2024, company-wide revenues were $1.465 billion, down 6% from last year's third quarter on an as-reported basis and down 8% on an as-adjusted basis. That income per share in the third quarter was $0.64 compared to $0.90 in the third quarter one year ago. Revenues and earnings for the third quarter exceeded our expectations driven by very strong results from productivity which posted sequential and year-on-year revenue gains. While client budgets remain constrained and decision cycles extended, business confidence levels are improving aided by continuing progress on inflation and the beginning of a global rate cutting cycle. This is reflected in our most recent weekly sequential results which have been stable and consistent for the past 12 to 14 weeks. We continue to be confident, both in our ability to weather the current climate and in our future growth prospects as the macro landscape improves. We remain well positioned to capitalize on emerging opportunities and support our clients' growth initiatives with the strength of 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 $130 million. In September, we distributed a 53 cent per share cash dividend to our shareholders of record for a total cash outlay of $54 million. Our per share dividend has grown 11.3% annually since its inception in 2004. The September 2024 dividend was 10.4% higher than the prior year. We also acquired approximately 800,000 Robert Half shares during the quarter for 49 million. We have 8.3 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 18% in the third quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.465 billion in the third quarter. On an as-adjusted basis, third quarter talent solutions revenues were down 13% year over year. U.S. talent solutions revenues were $725 million, down 13% from the prior year's third quarter. Non-U.S. talent solutions revenues were $229 million, also down 13% year over year. We conduct talent solutions operations through offices in the United States and 17 other countries. In the third quarter, there were 64.1 billing days compared to 63.1 billing days in the same quarter one year ago. The fourth quarter of 2024 had 61.6 billing days compared to 61.1 billing days during the fourth quarter of 2023. Currency exchange rate fluctuations during the third quarter had a de minimis impact on reported revenues. Contract talent solutions bill rates for the third quarter increased 3.2% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the second quarter was 3.1%. Now let's take a closer look at results for productivity. Global revenues in the third quarter were $511 million, $421 million of that is from the United States, and $90 million is from outside of the United States. On an as-adjusted basis, global third quarter productivity revenues were up 5% versus the year-ago period. U.S. productivity revenues were up 8%, while non-U.S. productivity revenues were down 8%. Productivity and its independently owned member firms serve clients through locations in the United States and 29 other countries. Turning now to gross margin, in Contract Talent Solutions, third quarter gross margin was 38.9% of applicable revenues, versus 39.8% in the third quarter one year ago. Conversion revenues, or contract to hire, were 3.3% of revenues in the quarter compared to 3.5% of revenues in the quarter one year ago. Our permanent placement revenues were 12.9% of consolidated talent solutions revenues in both the current quarter and the third quarter of 2023. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 46.8% compared to 47.5% of applicable revenues in the third quarter last year. For productivity, gross margin was 24.6% of productivity revenues compared to 26.2% 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 productivity was 25.8% for the quarter just ended compared to 25.6% last year. Enterprise SG&A costs were 34.9% of global revenues in the third quarter compared to 38% in the quarter one year ago. Adjusted for the deferred compensation investment income offset, enterprise SG&A costs were 33.3% for the quarter just ended, compared to 32.5% last year. Talent Solutions SG&A costs were 45.2% of Talent Solutions revenues in the third quarter, versus 39.3% in the third quarter of 2023. Adjusted for the deferred compensation investment income offset, talent solutions SG&A costs were 42.8% for the quarter just ended compared to 40.4% last year. Third quarter SG&A costs for productivity were 15.6% of productivity revenues compared to 14.7% of revenues for the same quarter last year. Operating income for the quarter was $61 million. Adjusted for the deferred compensation investment income offset, combined segment income was $90 million in the third quarter. Combined segment margin was 6.2%. Third quarter segment income from our talent solutions divisions was $38 million. with a segment margin of 4%. Segment income for productivity in the third quarter was $52 million, with a segment margin of 10.2%. Our third quarter 2024 income statement includes $29 million as income from investments held in employee deferred compensation plans. 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, it has no effect on our reported net income. Our third quarter tax rate was 31% compared to 30% one year ago. At the end of the third quarter, accounts receivable were $885 million and implied day sales outstanding, or DSO, was 54.4 days. Before we move to fourth quarter guidance, let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing. Contract Talent Solutions exited the third quarter with September revenues down 14% versus the prior year, compared to a 13% decrease for the full quarter. Revenues for the first two weeks of October were down 12% compared to the same period last year. Permanent placement revenues in September were down 7% versus September of 2023. This compares to a 13% decrease for the full quarter. For the first three weeks of October, permanent placement revenues were down 19% compared to the same period in 2023. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. But as you know, these are very brief time periods We caution reading too much into that. With that in mind, we offer the following fourth quarter guidance. Revenue, 1.34 billion to 1.44 billion. Income per share, 47 to 61 cents. The midpoint revenues of 1.39 billion are 7% 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 as-adjusted basis. Talent solutions down 9% to 13%. Creativity up 3% to up 6%. Overall down 4% to 8%. Contract margin percentage for contract talent 38 to 40%. Creativity on an as-adjusted basis for the deferred compensation investment income offset, 25 to 27%. Overall, 38 to 40%. SG&A as a percentage of revenues adjusted for the deferred compensation investment income offset. Talent solutions, 43 to 45%. Productivity, 14 to 16 percent. Overall, 33 to 35 percent. Segment income for talent solutions, 2 percent to 4 percent. Productivity, 10 to 12 percent. Overall, 4 to 6 percent. Tax rate, 28 to 30 percent. Shares, 102 to 103 million. 2024 capital expenditures and capitalized cloud computing costs, $80 million to $90 million, with $20 to $25 million in the fourth quarter. All estimates we provide on this call are subject to the risk in today's press release and in our SEC filings. Now I'll turn the call back over to Keith.