Q4 2019 Earnings Call
Quarter 2019 conference call.
Our host for today's call are Mr., Keith widow, Chief Executive Officer, a brick house and Mr., Michael Buckley, Chief Financial Officer, Mr. or what else you may begin.
Hello, everyone. Thank you for joining todays call.
Before we began I would like to remind you that the comments made on todays call contain forward looking statements, including predictions estimates about our future performance.
These statements represent our current judgment of what the future holds however, they are 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.
Most recent 10-K and 10-Q filed with the FCC, we assume no obligation to update the statements made on todays call.
During this presentation, we may mentioned, some non-GAAP financial measures and reference these figures as as adjusted.
Reconciliations and 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 web site at Robert half Dot Com from the home page click on the Investor Center link at the bottom lots of the page.
Before we go over our fourth quarter results I'd like to say a few words about Max mesmer to transition to executive chairman at the end of last year.
33 years as CEO .
Lack set a very high standard and leading Robert half to where it is today.
And we're very grateful for everything he's done.
Max and I've worked together over this entire time period and I hope to continue his standard of excellence as we move forward.
We are fortunate to have Mac stay as executive chairman and remain involved into growth strategy of the company.
Joining me now in our quarterly calls as our newly appointed CFO Michael Buckley.
Mike is at 24 year veteran of Robert half originally from public accounting.
Well, I guess or Robert half in various roles, including controller, Vice President Finance and most recently chief administrative officer.
He has allowed the finance and accounting function at Robert half for many years.
Now, let's review Robert Half's fourth quarter 2019 financial results Companywide revenues were 1.537 billion up 4% for the fourth quarter of 2008 teams on both a reported and as adjusted basis.
Fourth quarter 2019, net income per share was 98 cents compared to 95 cents.
Fourth quarter, one year ago.
This is a 4% increase year over year cash flow from operations was 81 million in the fourth quarter and capital expenditures were 14 million in December we distributed it 31 cents per share cash dividend to our shareholders of record for a total cash outlay of 36 million.
[noise], we also repurchased approximately 1 million Robert half shares during the quarter for 59 million.
We have 2.5 million shares available for repurchase under our board approved stock repurchase plan.
We ended 2019 with continued strength in the U.S. job market and solid demand for our professional staffing and consulting surfaces. We were particularly pleased with how protiviti performed during the quarter I, Robert half technology, and Robert half management resources divisions also.
So turned in solid results largely due to the ongoing talent shortages in the professional disciplines. They serve.
Return on invested capital for the company was 40% and the fourth quarter.
Now I'll turn the call over to Mike Buckley.
Thank you Keith and Hello, everyone and very pleased to join you on the call today.
Let's start with a closer look at revenues for the fourth quarter as Keith had noted global revenues were 1.537 billion for the quarter. This is up 4% during the fourth quarter, one year ago on both reported and as adjusted basis.
Also on an as adjusted basis.
Fourth quarter staffing revenues were up 2% year over year U.S. staffing revenues were 962 million up 3% on as adjusted basis.
Non U.S. staffing revenues were 271 million down 1% year over year on an as adjusted basis.
We had 326 staffing locations worldwide, including 87 locations in 17 countries outside the United States.
In the fourth quarter, there were 61.7 billing days unchanged from the same quarter one year ago.
Current first quarter has 63.1 billing days versus 62.2 days in the first quarter one year ago.
Currency exchange rate movements during the fourth quarter had the effect of decreasing reported year over year staffing revenues by 6 million.
This decreased our year over year reported staffing revenue growth rate by one half of one percentage point.
Now, let's take a look at results for productivity.
Global revenues in the fourth quarter were 304 million.
$239 million, if that is from business within the United States and 65 million is from operations outside the United States.
On an as adjusted basis global fourth quarter pay TV revenues were up 14% versus the year ago period with U.S. Protiviti revenues up 17% from the prior year.
Non U.S. revenues were up 3% on an has adjusted basis.
James rates had the effect of decreasing year over year, Protiviti revenues by 1 million and decreasing the year over year reported growth rate by 0.3 percentage points.
Creativity and its independently owned member firms serve clients through a network of 26 locations in 27 countries.
Okay.
Now, let's take a look at gross margin.
In our temporary and consulting staffing operations gross margin was 38% of clickable revenues in the fourth quarter.
Compared to 38% of applicable revenues in the fourth quarter, one year ago.
Our permanent placement revenues in the fourth quarter were 10.2% of consolidated staffing revenues versus 10.3% of consulting consolidated staffing revenues in the fourth quarter one year ago.
When combined with temporary and consulting gross margin overall staffing gross margin decreased 10 basis points compared to the year ago fourth quarter, 244.3%.
For Protiviti gross margin was 93 million in the fourth quarter were 30.4% of Protiviti revenues.
One year ago gross margin for Protiviti was 80 million or 30.2% Protiviti revenues.
[noise] companywide SGN any costs were 31.6% of global revenues in the fourth quarter compared to 31.5% in the fourth quarter one year ago.
Stepping SGN a costs were 35.2% of staffing revenues in the fourth quarter versus 34.5% in Q4 2018.
The increase in staffing SDMA as percentage of revenue is a continuation of what we saw last quarter and is primarily the result of negative leverage from our non U.S. staffing operations.
We ended 2019 with 11500 full time internal staff in our staffing divisions up 3% from the prior year.
Fourth quarter SGN, a cost productivity were 17.1% of productivity revenues compared to 17.3% of revenues in the year ago period.
We ended 2019 with 5500 full time protiviti employees and contractors.
Up 17% from the prior year.
[noise] companywide operating income was 153 million in the fourth quarter.
Operating margin was 10%.
Fourth quarter operating income for our staffing divisions was 113 million with an operating margin of 9.1%.
Operating income for Protiviti in the fourth quarter was 40 million within the operating margin of 13.3%.
At the ended the fourth quarter accounts receivable were 833 million in implied day sales outstanding or D.S., So 48.7 days.
Before we move on to first quarter guidance, Let's review some of the monthly revenue trends, we saw in the fourth quarter of 2019, and thus far in January two to 2020, all adjusted for currency and billing days.
Our temporary and consulting staffing divisions exited the fourth quarter with December revenues of 2.1% versus the prior year compared to a 2.2% increase for the full quarter.
Revenue for the first three weeks of January 2020 were up 3.2% compared to the same period one year ago.
Permanent placement revenues in December were down 3.7 per cent compared to December 2018.
This compares to a 0.9% increase for the full quarter.
For the first four weeks in January permanent placement revenues were up 4% compared to the same period in 2019.
As Keith as noted on prior calls 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, we caution against reading too much into them.
With that in mind, we offer the following first quarter guidance.
Revenues 1.515 billion to 1.580 billion.
Income per share 90 cents to 96 cents.
The midpoint of our guidance.
Implies year over year revenue growth of 4% on an as adjusted basis, including productivity.
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 key.
Thank you Mike as discussed at the start of the call Protiviti had a very strong fourth quarter, Robert half technology, and Robert half management resources also performed well largely because of intensifying labor shortages and technology disciplines, and highly skilled accounting and finance specialties.
We serve.
On the last call, we talked about how the shortage of ITC talent is negatively impacting companies trying to make technology enhancements, particularly in the digital space.
This is also resulting in higher demand for our ITD staffing solutions.
In December the U.S. unemployment rate held at 3.5%.
Until the last half of 2019 unemployment had not been that low and 50 years protracted skill shortages romaine a problem for employers. The U.S. economy added 145000 jobs in December the vestige CEO confidence index also improved in the fourth.
Quarter moving from 85 in the prior quarter to 91.5.
63% of Ceos said, they plan to expand their workforce in the year ahead up six points from the third quarter.
Our activity teams are also reporting higher demand across all of their practice areas, which runs the gamut from internal audit to a wide range of business and technology consulting solutions.
Collaboration between productivity in our staffing operations has become a key differentiator for us our unique ability to provide businesses with a full spectrum of staffing and consulting solutions under one roof makes us at attractive alternative to working with multiple service providers.
[noise] customers demand more from companies today than ever before our investments in technology, including enhancements to our website personalized job and candidate recommendations and our own mobile app allow us to meet their changing expectations by offering more choice.
Voice and how and when they work with US these innovations paired with the expertise of our local staffing specialists are making it easier and faster to higher or be hired through Robert half.
Whether customers engage with us online or in person.
[noise], we feel very good about how the company has positioned right now.
Our brand is the best recognized in the industry supported by over $1 billion and advertising over the last 25 years.
Our business model continues to focus on professional level engagements at small and middle market companies.
Attractive areas of the market.
Our people are among the most driven and tenured and the industry, our senior field leaders average more than 20 years with Robert half.
Our technology tools, our state of the yard and we continue to invest in digital transformation and finally, protiviti is performing well not only in its traditional consulting and solutions areas, but also as it goes to market together with our staffing professionals now Mike and I'd be happy to answer your question.
Please ask just one question at a single follow up as needed. If there is time, we'll come back to you for additional questions [noise].
[noise] at this time, if he would like to ask the question. Please press Star then the number of launch on your telephone keypad.
First question comes from the line of Mark Mccollum from Baird. Your line is open. Please go ahead.
Good afternoon key Mike and Max if you're listening.
During if you can.
Talk a little bit more about the strong growth that you're seeing domestically in protiviti and just to what extent.
You know the momentum can be continued because it certainly seems like you went up against a pretty tough comp.
You know when the year ago period, and still delivered 16%.
Total gross and.
Clearly the blended workforce.
Solutions is helpful, but it looks like you're expanding the number of areas of solutions that you're providing some just wondering if you can give some context, there and then I've a follow up thank you.
Sure.
So protiviti is performing very well, it's had seven straight quarters of double digit growth.
It achieved an 11.
0.3% operating margin for the year, So we had double digit growth and double digit margins, which we belong to talk talked about as the standard we've set for protiviti.
Their growth and their strength was broad based internal audit or key audit is particularly strong technology consulting or cyber security and cloud privacy are strong.
Yes, I regulatory we've long talked about anti money laundering, but they're also getting nice traction in consumer lending as well.
And then our joint solution, which we call management business solutions and managed set now managed technology solutions.
Well, we combined subject matter expertise from Protiviti scalable resources from staffing that continues to do well.
Back to growth there has accelerated for several quarters at a row.
The pipeline is strong.
They feel good going into 2020.
The normal Q1 seasonality.
We expect to be pretty much like it's been in the past such that year on year. When you look at our guidance, we pretty much perceive protiviti staying at the same growth rates you saw in the fourth quarter, which is strong.
That's fantastic and then can you talk a little bit about what you're seeing in the international markets. We look good.
Correct.
Okay.
You know productivity.
You know listening to some other professional services firms that are.
Based in Europe .
Not a surprise, but just wondering what you're seeing there and then what we should think about with regard to.
You know some of the de leveraging that you mentioned earlier.
In terms of how thats going to impacted the near term.
Right. So we have built into our guidance for the last few quarters and we continue to for the for the coming quarter that we'd see some moderation of growth rates that has been the case.
On the good news front, Germany, which is our largest non U.S. market.
Their growth rates are still positive.
No single digit but positive they held in the fourth quarter versus the third and the expectation is they hold again in the first quarter. So we're very pleased with how Germany's doing the other strong spot outside the U.S. would be Australia and thats on both the staffing.
And the Protiviti side.
We do have negative growth in France, the UK Belching, Canada pretty much all the other countries, but I would observe.
We are faring better than most of the industry is in that way in large part because we're not near as exposed to manufacturing as as most of the industry.
Keith would you say that France in the UK were somewhat episodic either from the French pension strikes or the UK election.
Yes, it's hard to put but.
Causation precisely on what you described it they clearly contribute to it.
But hopefully those clear as the quarters progress, particularly as Brexit.
Hopefully.
The major disruption and uncertainty around that is behind us, but we'll see.
Great appreciate the color. Thank you.
Your next question comes from Andrew Steinerman.
JP Morgan. Please go ahead your line is hi, hi, keep in mind.
My question is about the 3.2% growth rate in early January for temp and consulting Rabbit just start remind everybody I believe it's that even though you say consulting thats without Protiviti. My question is really that's on a global basis could you give us a sense of how you ask.
Good in January in temp revenues.
So you are correct to 3.2.
His staffing on late does not include anything for Protiviti.
It is a global U.S. is stronger.
There is a continuation of some negative growth outside the U.S. So if anything.
If you look at the fourth quarter November was particularly strong December was not as strong in part because there was a bigger holiday impact than we typically see so we see January .
Getting closer to what we had seen in November and I must say that re entry points we saw.
Once we got past January six.
Our fuel people are quite energetic and enthused about.
Right, maybe just answer the question why keep why do you feel like US temp revenue growth picked up in January from December .
Well.
One factor is the comps get a little easier.
That's not the told message, but there was clearly some holiday impact to December more so than we typically see we talked about the winter the holidays on the last call.
We saw a broad based strong re entry point in January and U.S. temp staffing, which were very pleased with.
Thank you.
Your next question comes from the line of Kevin.
Credit Suisse. Your line is open. Please go ahead.
Thank you Hey, let me add my congratulations to Max.
Keith talked to replace alleging but if anybody is going to diluted share.
In terms of just you know really nice trends are protiviti I just wanted you to remind us if we could.
The impact on management resources, and just what percentage of that business is tied into protiviti today.
On that and just how that's trended over I guess 2019, if we could.
Well first of all.
The numbers you see externally for management resources, including zero as it relates to Protiviti because all of the people management resources place on Protiviti engagements are reported as Protiviti.
Not management resources and in fact, if you look at Protiviti overall.
20, 528% of there.
Staff hours come from the staffing divisions collectively not just management resources and that's up versus it was a year ago, but that revenue gets reported as productivity but.
Orders of magnitude about a quarter of the staff level resources in positivity come from staffing and we're delighted with that.
Thanks, a lot of flexibility and then just real quick Keith.
Said it I apologize.
The tax rate in the first quarter and then what we should model for 2020.
So the tax rate the we expect in Q1 would be in the 26% to 27% range.
For the full court for the full year 2019, the tax rate was 27%, we expect to full year 2020 to be in a similar range say, 27% to 28%.
Great. Thank you.
Your next question comes from the line of Jeff Silber BMO capital markets.
Lines open. Please go ahead.
Thank you so much.
When you typically give your outlook.
Core earnings per share you typically give us a little bit a color on what kind of margins. We should expect I just wonder if you can go through that right now thanks.
Sure. So let me provide context as add a little bit.
Some commentary on the fourth cool.
And then I'll segue into guidance from that so in the fourth quarter on the tip side.
It was pretty much as we expected with office team being a little lighter as open enrollment didnt get to seasonal lift we've gotten in years past and we exited some low margin accounts, our project divisions management resources and technology did very well.
And I understand that this much supply as it is a demand because management resources and technology have access to career consultants abroad or talent echo system than do accountemps and office team, which pretty much deal with the traditional people between full time engage.
Fronts.
The once the holidays had a little more of an impact as I said earlier Europe modest slow and continues.
Encouraged that Germany appears to be bottoming.
Term demand remains strong holidays, even more impactful to perform as both clients and candidates were not around to close deals fixed issue for Perm is we continue to lose candidates to counter offers from existing employers from multiple offers from outside.
But demand there remains strong and Thats continued into the into the first quarter and then get to getting to the first quarter.
Our 2020 guidance says overall revenues up 4% consistent with Q4 staffing would be 2% consistent with Q4 us strong Europe continuing to decline modestly remember, Germany strong as the offset partly.
Given the growth rates stay.
Pretty close to where they were in Q4, which was a strong double digit 14%.
Gross margins.
Year over year flat with last year, plus or minus 10 to 20 basis points as we continue to pass through wage increases in our bill rate increased 5.2% in the fourth quarter versus a year ago. When we would expect to see that trend into the first quarter.
Protiviti, Steve going back to guidance again, Protiviti gross margins would be up 100 basis points plus or minus 20.
They get more leverage from their outsized revenue growth.
Staffing ESG today up 80 basis points again relative to last year, plus or minus 10 to 20 basis points, we talked about.
The international Zone negative leverage the tech spending that we ramped up starting a couple of years ago, we're continuing at those levels.
Tivity ESG today versus a year ago up 50 basis points, plus or minus 10 to 20, principally training and marketing as they add more people to support their growth.
Which means that overall operating income.
The percentage versus revenues would be down.
80 basis points, plus or minus those same tend to 20 range that we've been talking about.
Tax rate as Mike mentioned will be up a point versus a year ago will have fewer grand fathered nondeductible cost, which drives up the rate and then the share counts and 114 million range, but all in all we're pretty pleased with.
The U.S. environment, how we're performing in the U.S. environment, and we're hopeful that things are going to bottom out in Europe .
Now for the fourth time, we're particularly encouraged with Germany.
All right well sounds like you were prepared for that question I really appreciate that im sorry to ask this one I just want to admit take a little bit but did you change the way that you calculate full time internal staff.
Finished 2019 with 11500 I had my notes that yet.
14900 last year media had the wrong number but was there a different way of calculating it this year.
So yes, we did make a change and the change relates to the.
Number of people that we have full time that are out on engagements and build to clients. It's long been the case outside the United States and in some cases, its mandatory starting with Germany.
The people you place on engagements are your full time employees.
As you know in the technology staffing sector. Its long been the case that many of those consultants are full time to the staffing company and then they are put on their engagements from there and so what we've done is we've taken from.
The full time number those that are actually billable on engagements and Weve reported an internal number so whereas the prior distinction was full time versus.
Tipperary the distinction, we're now making internal versus.
On engagement.
Which is a subtly different distinction but.
The reason being that one of the strategies, we have to deal with the candidate shortage as that we are beginning to put.
A single digit number of the people we have on billing.
On our full time payroll and then putting them on engagements because we believe.
Our scale allow us to do that and keep them highly utilized.
10 further we get to access the same pool of people for Accountemps, Officeteam et cetera that were already getting to access for management resources and Robert half technology, because that's a common way of doing business in those sectors.
So it's a long winded way of saying, yes, we made a change and we made a change because it reflects that some of the people. We have on billing are in fact, our full time employees, which has long been the case outside the United States, which has long been the case for a portion of our technology staffing.
And is more recently, the case and accounting and finance.
Got it in the important thing is is that on a like for like basis. It was up 3% year over year, correct, the percentages or death.
On a like for like basis.
Thank you so much of the clarity.
Your next question comes from the line of Manav.
From Barclays. Your line is open. Please go ahead.
Hi, guys. This is Ryan on for Mark.
Just a question on you kept the growth rate in Tim you're seeing that it should be kind of similar to the fourth Q.
The fourth quarter.
You are obviously getting pricing the comps are easing a little bit is that.
Element of conservatism or is there the volume slipping a little bit more maybe you can help bridge that gap.
We hope we're being conservative we understand that our guidance as at the same growth rates as Q4 with easier compares but I understand that the compares our easiest outside the United States or Theres more uncertainty as to how the quarter will play out.
But we hope we have upside we began the quarter.
Stronger than we exited the fourth quarter.
On top of that we have easier comps. So hopefully we have some upside relative to what we forecast.
Got it thanks, and then just on Protiviti you mentioned in the last call there were some kind of big contracts.
In the mix for the fourth quarter, maybe can give some comment on how those progressed as I guess just generally the pipeline activity.
Well the pipeline is very strong and we feel great about that.
As we talked last quarter, if you'll look at Protiviti international growth went from 9% to 3% between quarters three and four.
And that's the deceleration.
We talked about because that they lost a couple of big.
Excuse me contracts that hadn't yet anniversary so that was consistent with expectations. The good news is we had more than enough acceleration in the us to more than cover that but pipeline protiviti very good.
And whats incredible about it it's virtually every one of their solution areas and then the go to market was staffing is just gravy on top of that.
Got it thank you.
Your next question comes from the line of Gary Bisbee from Bank of America Securities. Your line is open. Please go ahead.
Hi, good afternoon. So I guess, it's interesting when we look at your international you've seen deceleration as one would expect but the deceleration has been significantly after.
Sort of the typical Kemp data in a lot of these countries outside the U.S. turned down and I I caught the comment less manufacturing and understand you have very different mix, but.
As part of the timing of the deceleration just at higher skilled professional tends to lag low skill and I guess to the extent that part of.
Why things are weakening now would it be reasonable to expect that re acceleration might lag.
Sort of the re acceleration seen in some of those markets at some point in the future. Thanks.
We've been around over 30 years and.
At least the first half of that period, there was clearly a fear re up there that manufacturing lead and that ultimately that made its way to the back office and then the back office has impacted later.
I no longer buy into that Terry.
A manufacturing is not near as larger percentage of the total as it once was and I don't think theres any empirical data that would support and todays.
Digital World.
And very intertwined supply chains.
It happens.
Such for quickly and pretty much coincidently.
That it did 15 years ago and longer so I believe it's more coincident I don't think the principal reason why we were impacted later is because of the traditional manufacturing back office lag.
I think it's in part.
Which countries were in its which markets, which disciplines within those countries what investments have we made particularly in head count what's the quality of leadership, which was quite good I think it's it's way more company specific and.
Specific and granular market exposures than it is the old general theme of.
Back office lags manufacturing.
Okay. Thanks for that color and then just do you have on hand, what you expect the number of workdays in staffing to be for for all four quarters of this year.
Yes, Mike Mike will give you that yes, so by quarter 63.1 quarter to 63.43rd quarter 64.3, and in the fourth quarter 61.7 for a total of 252 and a half billing days for the year. Thank you.
Your next question comes from Tobey Sommer Suntrust. Your line is open. Please go ahead.
Hey, good afternoon, Mrs Jasper bit bond for Tobey I was wondering what you're seeing with respect to pricing for Protiviti and also how you're thinking about headcount growth in that segment.
Actually the second part cut out the high what.
Hiring in productivity, okay hiring.
And so.
Protiviti clearly is having to pay its new staff more.
It's impacted by wage inflation generally, which it has successfully passing through as we talked earlier in the call. We're expecting a 100 basis points improvement in gross margin year over year.
So thats a good thing as to hiring of two sources as I talked earlier about a quarter of their staff resources, there sourcing from staffing on adjust and time basis.
And beyond that they're very aggressive on campus. They have been forever. That's that's how the big four.
Grow their staff in Protiviti is right there with some.
They've got a very aggressive campus hiring program for 2020 in fact, even more so than it was in 2019.
Thanks, historically it seems there have been demand pauses due to watch and then tox uncertainty so kind of we approach new primary season, what extent, you think that might become a predominant factor and customer decision, making again.
It's hard it's hard to comment on political and tax uncertainty I don't think it's it's a risen to everyday conversation yet at this point.
I appreciate it thanks guys.
Our next question from the line of Seth Weber from RBC capital markets. Your line is open. Please go ahead.
Hi, This is only Mclaughlin on first does Tonight.
Sorry, I missed it but did you talk about well part of the margin a little bit better than we expected in the fourth quarter was stop utilization better or to somebody else drive that.
Oh, it's a combination of utilization inclusive of using contractors sourced through staffing and I'd say the biggest piece of upside is probably related to the number of people sourced through staffing.
Which by net definition that have 100% utilization, which helps their margins.
Okay and can you just talk about your capex expectations this year and any spend on.
Technology and digital strategy.
So we finished 19 with Capex 90 million for 2020, we're expecting a range of 102 110 million with Q1 coming in in the 20 to 25 million range.
The increase in Capex is largely the result of ongoing investments in technology, and specifically, a new project to implement workday financials globally.
Our legacy financial system is 17 years old enough support and so this move will bring our financial systems.
Up to date in out of the data center and into the cloud.
In addition, we've already transitioned to workday HCM on a global basis. In this implementation will result in a full integration between these systems.
And then talking more generally about digital transformation and technology strategy, we've talked several quarters in a row about where about providing a world class personalized digital experience for clients and candidates that focus on our website that's focused on our mobile app.
We continue to refine and improve our AI for our matching engines, we micro target recommendations to clients and candidates we prioritize leads for our staff.
The good news is we're now starting to see quantifiable benefits, we've seen a significant increase in traffic to our sites. Both in terms of client candidate excuse me candidate applications and client leaves.
As importantly, we've also seen an improvement in the quality of those candidates because in many cases they were pre match before we invited them to apply.
Also I'm very pleased with our field adoption of our technology tools and in fact, we're told by sales force. We're one of a top 10 users in the world of their software, which is pretty impressive because we're certainly not one of the top 10 largest companies in the world.
Our mobile App is got nice traction. It's currently rated 4.8 in the Apple App store, we've gotten over 100000 applications since we launched it in July .
And further.
Weve launched Robert half direct earlier last year, it's our online hiring platform, where our clients have direct access to a short list of candidates. It leverages our technology. It Leverages. Our candidate database that is maintained by live recruiters around the world.
We piloted data doesn't offices it extends traditionally our full service offerings to the self service market. So were upbeat about that as well, but the bottom line is in the thing. That's most encouraging to me is that we're beginning to see quantifiable benefits of upside.
Nick its from the investments we've made so far and we continue to make those investments.
That's great. Thanks for all the detail.
As a reminder, you would like to ask the question. Please press Star then the number one on your telephone keypad.
Your next question comes from George.
Your line is open please.
Hi, Thanks. Good afternoon, you mentioned, you're still seeing negative growth in France, the UK, Belgium, and Canada can you elaborate on client sentiment and sales cycles in those countries.
[noise] sentiment in sales cycles I'd say.
Sentiment hasn't changed much it's carted its cautious it's measured and it's been that way for awhile and we've included that in the guidance that we've given.
Only on the flip side, we've talked about what appears to be stabilization in Germany, which is our largest non us operation, but not a lot of change George from what we saw in the fourth quarter, if anything some stabilization in Germany.
Got it that's helpful.
Cycle has been previously characterized as one that is relatively supply constrained from it.
Perspective, what evidence might you be seeing that suggests that there might be some give with demand as well.
Well as as we've talked about a couple of times on the call demand is good.
And this if you asked me what needs to happen for our growth rates to improve particularly in the United States. The first thing I would say is we need more fee eligible candidates if a client needs of personally with 10 years experience to the extent, we have more people with 10 years' experience our revenues are going to grow.
And in a nuanced way or our clients could have more urgency and that when we present, a seven year person to their 10 year requirement. They take the seven year person. So the combination of more fee eligible supply and or.
More client urgency would help us grow our revenues as I just talked about.
Clearly our in our technology investments are helping with supply.
As we talked earlier.
Our approach to higher full time some of the people we put out on engagement should also help with supply.
But to this point, we're not seeing particularly in the United States any moderation in demand demand is strong.
If we had more fee eligible candidates we had report more revenue full stop.
Got it very helpful. Thank you.
Question comes from the line.
From Jefferies. Your line is open. Please go ahead.
Hi, This is merial portal actually filling in for Hamzah.
Just wanted to comment on the management change congratulations to both of you.
But I also had a question about that as well.
Just wanted to know if you're thinking about any type of change in strategy or if you guys have discussed how you guys are approaching the business.
You guys have done business.
Same way with slight changes to it over the over the past a decade or so.
Just didn't know if there is a change in thought process or discussion that you guys have had about that.
The the fact that I've been here 33 years, and Mike spent here 24 years and we've been both been very involved and the strategy and the execution of that for those periods of time I don't think you can expect any material changes because of the management change.
That's what I figured I just wanted to ask and then on Protiviti I'm just wanted to see if you can kind of frame for us what the competitive environment looks like there and maybe share with us whether or not you think you're gaining share.
Well Protiviti is principal competitors are the big for accounting firms and that's been true since day one in 2002.
Gaining share I don't think Theres any question that our joint go to market with staffing is unique differentiated and growing more quickly.
And the big four generally and the consulting market specifically.
Yes.
Because the big four and doesn't break out there like for like solutions similar to Productivities.
It's hard to say per se, whether we're gaining share, but I can say overall the big four aren't growing at the same rates of Protiviti and I suspect that we are gaining share.
We've always majored in internal audit and are known as such more so than even the big four.
And we've gotten tremendous traction NFS I regulatory consulting as I said earlier.
We're extending.
The base of anti money laundering into consumer lending, where we've gotten some very good engagements of late.
Technology security privacy is a hot area.
Where we're able to attract people into those practices success breeds success, we get all types of awards as an organization we were just named.
For the 23rd straight year to Fortune's most admired list, we made Forbes best employers for diversity, we may Bloomberg gender and a quality index. We made the human rights Foundation for Best Places for LPG TQ equality and that's just.
In the last couple of months, so all of those Hello, Protiviti attract and Robert have generally to attract the best and brightest, which then propels their client satisfaction engagement growth.
Thank you very much.
Your next question comes from David Silver from C.L. King. Your line is open. Please go ahead.
Okay. Thank you.
So I'm going to ask a question and I are too that I think.
I have been answered in part but.
First thing I was going to ask was maybe about your staffing intense your your internal staffing needs for maybe the first quarter and the full year, but you talked about an aggressive plan to staff up the productivity.
In the past that gets your first quarter bps has been affected by the additional hiring and the time it takes to absorb that incremental overhead.
How should we think about that may be for your first quarter and in the full years, the staffing as well as productivity. Thank you.
By and large we try to match internal headcounts too.
Topline growth and we just reported for the full year that was the case, 3% on the staffing side and double digit on to Protiviti side and that would be our plan as we move forward.
The principal issue.
Quint, Chile for the first quarter is that Protiviti has a seasonality impact from your post Sarbanes Oxley compliance and post internal audit ramp up for year end, which happens in the first in the fourth quarter. So the following first quarter.
There always is lower by 5% to 7% and I think our guidance has has something similar to that for this year, so with that seasonal pattern.
Inclusive of all of their raises our effective Jan one, which then take some time to absorb as well the combination of those.
So quint, Chile because of that seasonality.
We back up somewhat at S. line, but if you look a year on year, which which effectively the gates that.
Protiviti is growing nicely and double digit.
But that seasonal impact we've had per every year of the 17 years, we've had protiviti, it's very unexpected and very well managed and the fact it.
25% of their workforce hours come from staffing makes their costs even more variable.
Okay.
Thanks, and then I have a question about the Capex budget.
And there's a couple of parts to it so I hope I get this out in an organized fashion.
So Mike highlighted an increase in budgeted capex for this year and if I understand his the description correctly. It was focused on I guess, improving the back office.
Reporting and the administration side of your business.
So first question there would be do you anticipate a year over year.
Efficiency gain or or cost reduction from updating what you said was a fairly outdated or older system.
Second thing I would say I wanted to know about Capex was you mentioned a couple of years ago. The major.
I T investment you made and.
You were about as a few sort of as I've ever heard you on this call today discussing the revenue generation potential of that two to three year old investment.
So what's the opportunity or what's the possibility Keith.
You might be contemplating.
A step change in your digital capabilities, and maybe kind of a stage two.
Development on the I.T. side to further enhance the.
Agencies and the opportunities.
That that your first stage front office I'll call it.
T effort has generated thank you.
So on the workday financials front.
Typically changing financial systems.
As a efficiency slash cost reduction driven.
Endeavor, although I will say.
We will be Golan from on premise to cloud and that should drive some cost reduction in some efficiency, but it's basically a new.
Financial system counts few accounts payable accounts receivable so it's it's.
Accounting infrastructure, if you will.
On the on the second point.
As I look at our initiatives.
As we sit here today, it's more.
Additional refinement of our AI, it's additional refinement of our recommendations marketing, it's additional refinements of how we helped a field generate and prioritize leaves.
Systematically there's no one big thing that's going to be new to what we're already doing.
But don't discount the benefit of the refinements, we're talking because.
We're pretty much first generation of everything we've already done.
But again the candidate sourcing.
Benefits, we're already seeing are very encouraging and into future make us less dependent on third party sources for candidate for which we spend.
Significant sums that wouldn't be our plan in years. Following we not continue to spend at those amounts.
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Alright, thanks for that appreciate it.
Question comes from the line of Mark.
Baird.
Please go ahead.
Just a quick question with regards to 85.
Are you seeing any sort of impact.
Well clearly mark maybe five for California, which is independent contractor versus employee and other states have their own versions of it.
Many clients throw their hands up and say I don't understand it I don't want to understand at the easiest way to deal with it is to only use employees and not use independent contractors. It's early there a lot of exceptions already in that Theres, a lot of flux about whether they're going to be ballot initiatives.
Change it so I would say it's early we havent seen significant movement, but we clearly have seeing particularly with larger clients that rather than try to figure. It out. They just say, let's make this easy we will not allow independent contractors, which would be good for staffing firms generally on us.
Specifically.
Terrific. Thank you.
Okay.
Okay. So that was our last question. Thank you for joining us today.
This concludes today's teleconference, you Miss any part of the call. It will be archived audio format in the Investor Center of Robert Half's Web site.
Www Dot Robert half Dotcom, you can also dial the conference call replay dial in details and the conference I'd are contained in the company's press release issued earlier today.
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