Robert Half Inc.

Hello, and welcome to the Robert Half 4th 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 1 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 fourth quarter of 2024, global enterprise revenues were $1.382 billion, down 6% from last year's fourth quarter revenues, on an as-reported basis and down 7% on an as-adjusted basis. Debt income per share in the fourth quarter was 53 cents compared to 83 cents in the fourth quarter one year ago. Revenues and earnings for the fourth quarter were largely in line with our expectations led by productivity, which reported year-on-year revenue growth for the second straight quarter. Contract revenues remain stable throughout the quarter, sustaining early third quarter levels for 23 consecutive weeks prior to the holidays. As we move into the new year, we're very encouraged by the significant rise in U.S. business confidence that followed the recent elections. We're very well positioned to capitalize on emerging opportunities and support our clients' talent and consulting needs through 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 $155 million. In December, 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 11.2% annually since its inception in 2004. The December 2024 dividend was 10.4% higher than the prior year. We also acquired approximately 1 million Robert Half shares during the quarter for $77 million. We have 7.3 million shares available for repurchase under our board-approved stock repurchase plans. Return on invested capital for the company was 15% in the fourth quarter. Now I'll turn the call over to our CFO, Mike Buckley. Thank you, Keith.

Hello, everyone. As Keith noted, global revenues were $1.382 billion in the fourth quarter. On an as-adjusted basis, fourth quarter talent solutions revenues were down 12% year over year. U.S. talent solutions revenues were $686 million, down 11% from the prior year's fourth quarter. Non-U.S. talent solutions revenues were $208 million, down 14% year over year. We conduct talent solutions operations through offices in the United States and 17 other countries. In the fourth quarter, there were 61.6 billing days, compared to 61.1 billing days in the same quarter one year ago. The first quarter of 2025 had 61.9 billing days compared to 62.8 billing days during the first quarter of 2024. Billing days for the remaining three quarters of 2025 will be 63.2, 64.2, and 61.4 for a total of 250.7 billing days for the year. Currency exchange rate movements during the fourth quarter had the effect of decreasing reported year-over-year total revenues by 4 million, and that's 4 million for talent solutions and a negligible amount for productivity. Sequential quarter currency fluctuations reduced revenues by 7 million, 5 million for talent solutions, and $2 million for productivity. Contract Talent Solutions bill rates for the fourth quarter increased 3.4% 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 3.2%. Now let's take a closer look at results for productivity. Global revenues in the fourth quarter were $488 million. $396 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 up 5% versus the year-ago period. U.S. productivity revenues were up 6%, while non-U.S. productivity revenues were flat compared to one year ago. Proactivity 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, fourth quarter gross margin was 39.1% of applicable revenues versus 39.7% in the fourth quarter one year ago. Conversion revenues, or contract to hire, were 3.2% of revenues in the quarter compared to 3.4% of revenues in the quarter one year ago. Our permanent placement revenues were 12.1% of consolidated talent solutions revenues in both the current quarter and the fourth quarter of 2023. When combined with contract talent solutions gross margins, overall gross margin for talent solutions was 46.4%, compared to 46.9% of applicable revenues in the fourth quarter one year ago. For productivity, gross margin was 24.9% of productivity revenues, compared to 23.9% 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, for the deferred compensation investment income offset. Gross margin for productivity was 25.1% for the quarter just ended, compared to 25.9% last year. Ended 2024 with 11,000 full-time productivity employees and contractors, up 4.8% from the prior year. Moving on to SG&A. Enterprise SG&A costs were 34.1% of global revenues in the fourth quarter compared to 35.1% in the same quarter one year ago. Adjusted for the deferred compensation investment income offset, Enterprise SG&A costs were 33.8% for the quarter just ended compared to 32.5% one year ago. Talent Solutions SG&A costs were 44.4% of Talent Solutions revenues in the fourth quarter versus 44.6% in the fourth quarter of 2023. Adjusted for the deferred compensation investment income offset, Talent Solutions SG&A costs were 43.9% for the quarter just ended compared to 40.8% last year. Ended 2024, with 7,600 full-time internal employees in our talent solutions divisions down 5.2% from the prior year. Fourth quarter SG&A costs for productivity were 15.2% of productivity revenues compared to 14.5% of revenues for the same quarter one year ago. Operating income for the quarter was $65 million, Adjusted for the deferred compensation investment income offset, combined segment income was $71 million in the fourth quarter. Combined segment margin was 5.1%. Fourth quarter segment income from our talent solutions divisions was $23 million, with a segment margin of 2.5%. Segment income for productivity in the fourth quarter was $48 million, with a segment margin of 9.9%. Our fourth quarter 2024 income statement includes $6 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, it has no effect on our reported net income. Our fourth quarter tax rate was 28%. and this compares to 27% one year ago. At the end of the fourth quarter, accounts receivable were 772 million, and implied day sales outstanding, or DSO, was 50.5 days. Before we move to first quarter guidance, let's review some of the monthly 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 11% versus the prior year, compared to a 12% decrease for the full quarter. Revenues for the first three weeks of January were down 14% compared to the same period last year. Permanent placement revenues in December were down 6% versus December 2023. This compares to an 11% decrease for the full quarter, For the first four weeks in January, permanent placement revenues were down 3% compared to the same period in 2024. We provide this information so that 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 and we caution reading too much into them. With that in mind, we offer the following first quarter guidance. Revenues, 1.35 billion to 1.45 billion. Income per share, 31 to 41 cents. Midpoint revenues of 1.4 billion are 3% lower than the same period in 2024 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 7% to 10%. Productivity, up 8% to 10%. Overall, down 1% to down 4%. Contract margin percentages for contract talent, 38% to 40%. Productivity, as adjusted for the deferred compensation investment income offset, 20% to 22%. Overall, 36% to 39%. SG&A as a percentage of revenues adjusted for the deferred compensation investment income offsets. Talent solutions, 43% to 45%. Productivity, 15% to 16%. Overall, 33% to 35%. Segment income for talent solutions, 1% to 4%. Productivity, 4% to 7%. Overall, 2% to 5%. Our tax rate, a range of 31% to 35%. Shares, 101 to 102 million. 2025 capital expenditures and capitalized cloud computing costs, 75 to 95 million, with 20 to 25 million in the first quarter. Proactivity's first quarter segment income guidance includes the seasonal impact of annual staff promotions and compensation increase, all of which become fully effective on January 1st. This produces a sequential decline in midpoint estimated segment margin of 4.4 percentage points, which is consistent with the four to seven point decline experienced in most of the last 10 years. On a year-over-year basis, at the midpoint, productivity's first quarter revenues and earnings are expected to grow by 9% and 20%, respectively. 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.