Q1 2021 Robert Half International Inc Earnings Call
Hello, and welcome to the Robert half of first quarter 2021 conference call.
For today's call part of Mr. Keith Waddell, President and Chief Executive Officer of Robert half and Mr. Michael Buckley, Chief Financial Officer.
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 are subject to the risks and uncertainties that could cause actual results to differ materially from the forward looking statements the.
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 the uptake the statements made on today's call.
During this presentation, we may mention some non-GAAP financial measures and reference these figures as as adjusted reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release or presentation of revenues and the related growth rates for accounts.
Office team, Robert half technology, and Robert half management resources include their inter segment revenues from services provided to Protiviti in connection with the company's blended staffing and consulting solutions.
This is how we measure and manage of these divisions internally.
Combined the amount of divisional inter segment revenues with Protiviti is also separately disclosed the supplemental schedules. Just mentioned also include of revenue schedule showing of information for 2018 through 2021.
For your convenience our prepared remarks for today's call are available in the Investor Center of our website Robert half Dot com.
We're extremely pleased that our first quarter results exceeded the high end of our guidance and reflect a broad based recovery that's well underway for.
<unk> revenues grew 35 per cent year on year, reflecting continuing momentum across its wide awake wide array of service offerings, including very strong managed solutions with staffing.
This is activity its 14th consecutive quarter of year on year of revenue gains our staffing operations significantly outperformed their historical sequential trends.
Led by small and medium sized businesses, the permanent placement, which grew 22% sequentially.
I continue to be impressed with the adaptability of our teams and the.
The other gating, the new hybrid and remote work models with our clients and candidates, helping them grow and find meaningful work.
Wide revenues were 1.398 billion in the first quarter of 2021 down 7% from last year's first quarter on a reported basis and down 8% on an as adjusted basis.
Net income per share in the first quarter was 98 cents, increasing 24 per cent compared to 79 cents in the first quarter of year ago cash flow from operations. During the quarter was 68 million in March we distributed a 38 cents per share cash dividend to our shareholder.
A record for a total cash outlay of 44 million.
We also acquired approximately 797000, Robert half shares during the quarter for 61 million.
We have $9 2 million shares available for repurchase under our board approved stock repurchase plan or return on invested capital for the company was 37% in the first quarter now I'll turn the call over to our CFO Mike Buckley.
Thank you Keith and Hello, everyone, let's start with revenues as Keith noted global revenues were $1 398 billion in the first quarter.
On an as adjusted basis first quarter staffing revenues were down 18% year over year U S. Staffing revenues were $759 million down 19% from the prior year.
Non U S staffing revenues were $242 million down 15% year over year on an as adjusted basis.
We have 322 staffing locations worldwide, including 86 locations in 17 countries outside the United States.
In the first quarter, there were 62, three billing days compared to 63, one billing days in the first quarter one year ago. The current second quarter has 63, four billing days equivalent to the second quarter one year ago.
Currency exchange rate movements during the first quarter had the effect of increasing reported year over year staffing revenues by 17 million of.
This impacted our year over year reported staffing revenue growth rate by 1.4 percentage points.
Now, let's take a closer look at results for Protiviti.
Global revenues in the first quarter were $397 million.
316 $316 million of that is from business within the United States and $81 million is from operations outside the United States on an as adjusted basis Global first quarter Protiviti revenues were up 35% versus the year ago period with the U S. Protiviti revenues up there.
37 per cent.
Non U S revenues were up 26% on an as adjusted basis.
Exchange rates had the effect of increasing year over year, protiviti revenues by $6 million and increasing its year over year reported growth rate by two percentage points.
<unk> and its independently owned member firms serve clients through a network of 86 locations in 28 countries.
We remind you of that changes to the company's deferred compensation obligations are classified as SG&A or in the case of productivity cost of services.
With completely offsetting changes and the related trust investment assets classified separately below SG&A.
Previously they were both classified as SG&A.
Our historical discussion of consolidated operating income has been replaced with the non-GAAP measure of combined segment income.
This is calculated as consolidated income before income taxes adjusted for interest income and the amortization of intangible assets for.
For your convenience we've included a supplemental schedule to today's earnings release on page seven highlighting the impact of changes in the deferred compensation accounts to the summary of operations for the first quarter of 2021 in 2020 the.
This is a non-GAAP disclosure. So we also show a reconciliation to GAAP.
Turning now to gross margin.
In our temporary and consulting staffing operations first quarter gross margin was 38, 8% of applicable revenues compared to 37, 8% of applicable revenues in the first quarter from one year ago.
Our permanent placement revenues in the first quarter were 11, 2% of consolidated staffing revenues versus nine 9% of consolidated staffing revenues in the same quarter one year ago.
When combined with temporary and consulting gross margin overall staffing gross margin increased 160 basis points compared to the year ago first quarter to 45, 6%.
For Protiviti gross margin was 26, 5% of Protiviti revenues compared to 27, 6% of Protiviti revenues one year ago adjusted.
Adjusted for the effect of deferred compensation expense related to changes in the underlying trust investment assets. As previously mentioned gross margin for Protiviti was 26, 9% for the quarter just ended compared to 26, 3% one year ago.
Company wide SG&A costs were 33% of global revenues in the first quarter compared to 29, 4% in the same quarter one year ago.
Changes in deferred compensation obligations related to increases in underlying trust investments had the impact of increasing SG&A as a percentage of revenue by 0.8% in the first quarter and decreasing SG&A by two 4% in the same quarter one year ago.
When adjusted for these changes companywide SG&A costs were $29 five per cent for the quarter just ended compared to 31, 8% one year ago.
Staffing SG&A costs were 37, 3% of staffing revenues in the first quarter versus 32, 3% in the.
The Q1 in Q1 2020.
Included in staffing SG&A costs was deferred compensation expense related to increases in the underlying trust investment assets of 1% in the first quarter compared to income of 3% related to decreases in the underlying trust investment assets in the same quarter one year ago.
When adjusted for these changes staffing SG&A costs were 36, 3% for the quarter just ended compared to 35, 3% one year ago.
First quarter SG&A costs for Protiviti were 12, 5% of Protiviti revenues compared to 17, 3% of revenues in the year ago period.
[noise] operating income for the quarter was $139 million. This.
This includes $12 million of deferred compensation expense related to increases in the underlying trust investment assets.
Combined segment income was therefore $151 million in the first quarter combined segment margin was 10, 8%.
First quarter segment income from our staffing divisions was $93 million with the segment margin of nine 3%.
Segment income for Protiviti in the first quarter was $57 million with a segment margin of 14, 4%.
Our first quarter tax rate was 26% compared to 32% a year ago the.
2020 rate was elevated based upon the estimated lower coverage of non deductible tax items due to lower pandemic impacted revenues.
Moving onto accounts receivable at the end of the first quarter accounts receivable was $800 million and implied day sales outstanding or DSO was 51 point for 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.
Our temporary and consulting staffing divisions exited the first quarter with March revenues down 12, 5% versus the prior year compared to an 18, 9% decrease for the full quarter.
Revenues for the first two weeks of April were up 9% compared to the same period one year ago.
Permanent placement revenues in March were up 24, 2% versus March of 2020. This.
This compares to an eight 1% decrease for the full quarter.
For the first three weeks of April permanent placement revenues were up 154% compared to the same period in 2020.
We provide this information so that you have insight into some of the trends we've seen during the first quarter and into April but as you know these are very brief time periods, and we caution against reading too much into them.
With that in mind, we offer the following second quarter guidance revenues, one point for three 5 billion to 1.515 billion.
Income per share $1 to $1 10.
The midpoint of our guidance implies a year over year revenue increase of 31% on an as adjusted basis, including Protiviti.
The midpoint EPS of $1.05 would represent an all time high for the company.
The major financial assumptions underlying the midpoint of these estimates are as follows revenue growth on a year over year basis.
Staffing up 23% to 26% Protiviti up 47% to 49% overall up 30% to 32%.
On the gross margin percentages.
Temporary and consulting staffing 38% to 39%.
Protiviti, 27% to 29% and.
And overall, 40% to 41%.
SG&A as a percent of revenues, excluding deferred compensation investment impacts of staffing, 35% to 37% protiviti, 12% to 14% overall, 29% to 30%.
And segment income staffing, 9% to 10% protiviti, 14% to 15% and overall, 10% to 11%.
Full year capital expenditures and capitalized cloud computing costs, 85% to 95 million with $15 million to $20 million in the second quarter.
Our tax rate 27, 26% to 27% and.
And shares at $112 million.
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 Keith.
Thank you Mike.
Our staffing results accelerated during the quarter, indicating a faster early cycle pace of recovery than we've experienced in the past.
This was very broad based and seen across geographies lines of business client size and skill levels.
As I mentioned earlier small and medium sized businesses led the way after being more negatively impacted during the peak of the pandemic.
The NFIB recently reported that 42% of small businesses had job openings, they could not pill, which was a record level this bodes well for us.
Our investments in advanced AI technologies have allowed us to adapt quickly to a new marketplace for remote and hybrid work has become commonplace together with our people. These technologies enable us to find solutions to meet the critical talent and consulting needs of our clients across broader resource pools.
Protiviti continues to thrive with multi year double digit growth in our pipeline that is highly diverse the car diversified across both solution offerings and client segments, our blended solutions complementing protiviti as offerings with contract talent.
The allows us to be extremely nimble and cost effective in response to client needs and we expect this offering to be an increasing part of our business going forward.
We're excited about our current momentum and our prospects for the balance of 2021 and beyond buoyed by the strength of our brands our people our technology and our professional business model.
Wed also like to thank our employees for making possible to recognition awards. We've received just in the last few days. These are fortune's 100 best companies to work for in 2021.
And Forbes best employers for diversity 2021.
Now, Mike and I'd be happy to answer your questions. Please ask just one question in the single follow up as needed. If there is time, we'll come back to you for additional questions.
At this time.
To ask a question press star one on your telephone.
Yeah.
The question.
Yes.
Your first question comes from the line of Andrew <unk> with J.
P Morgan.
Hi, It's Andrew Keith I wanted to ask you. If you felt the U S has entered a brand new economic expansion, which you know bodes for particularly strong years of of revenue growth.
At Robert half or is there something about the 'twenty 'twenty recession that was just different than past recessions and it really kind of land that's more where we were in 2019 in terms of the economy, which really only supported mid single digit revenue growth on an ongoing basis for Robert half.
Well, Andrew we would say that it feels very traditional early cycle and just to quantify that a little bit we looked at the first three quarters post trough for the recovery post dotcom further recovery for a post financial crisis and for the REIT.
And as an example, three quarters post trough.
First time tip up 13% per of up 18% after the financial crisis tip up 9% per them up 34%.
And this time tip up 18% per about 56%.
Further if you look at the peak to trough decline those declines on the temp side are pretty consistent across those three cycles. Our people would tell you that the.
The recovery feels very classic.
That there.
Improving demand broadly across all of the dimensions of that I talked about debt as always clients cut deep they've got lean staff has transaction volumes improve as projects restart they need more help they need to restore their work force many times upskill.
And so for us it feels very classical.
Traditionally we've got a nice three to five year runway.
Once we get into recovery, which we believe were well underway as we've spoken about.
Perfect. Thank you.
Your next question is from Mark Marcon with Robert W. Baird.
Good afternoon, Keith for Michael.
Hmm.
First of all congratulations on the stellar results I'd like to talk about productivity specifically.
Quickly I'm wondering if you can give us a little bit more color on the stellar results that they ended up having as you mentioned.
14 straight quarters 35 per cent growth.
If we take a look at the.
What you're forecasting here going into the second quarter can you just dimensionalize.
How much of the of the uplift is because youre getting more opportunities broadly speaking more at bats.
Vs and improvements in terms of the win rate and really gaining share and then can you also talk a little bit about you know what are some of the drivers you did say it was broad based but I'm wondering if you could give us some commentary with regards to the public sector work.
T work.
The Sparks.
And obviously, we can see the.
You know the results in terms of staffing in terms of what's being eliminated for the inter segment revenue. So obviously that continues to go well, but I'm. Just wondering if you can give some more color there.
Sure and so as you said, we're very proud with the 35% growth rate.
And it's split pretty evenly between what I'll call core their core solutions tack risk and compliance internal audit, which grew 18% year on year.
Totally exclusive of public sector and blended solutions blended.
The blended solutions then grew 124%.
Adding 17 points to the growth rate. So you've got 18 points of the growth rate coming from core you've got 17 points of the growth rate coming from blended solutions and Oh by the way those blended solutions then split about 50 50 between public sector and non <unk>.
Like sector, so that sizes, if you will the contribution of public sector.
If you didn't look at their core solutions.
In tech, which they've been very strategic about picking their shots as two practice areas they've been very strategic about making the right hires at the right levels, including very senior levels, and so they're gonna cyber or other and privacy either in digital transformation data.
Analytics as I've talked before tech consulting is now the largest core solution area for Protiviti risk and compliance remains very strong anti money laundering consumer lending of regulatory enforcement of our regulator exam preparation all very good.
Internal audit as you spoke about clearly benefiting from Ipos and Spacs are further they've got clients reinstating of their internal audit budgets that have been cut last.
The last year during the pandemic, which also lead to our very aggressive of conservatively aggressive we would call for Q2 with the.
The budget for the for the guidance.
The interesting thing about the public sector is it's Inc.
And blended solutions with staffing generally is it's not just the U S and we now have some sizable engagements outside of the U S, which are contributing so we're very pleased with that.
Talked to them for those public sector engagements are around unemployment housing assistance.
A new and large opportunity we're seeing is in the education space Theres, a lot of funding going to K to 12 and higher level.
College level, our institutions that are going to get a lot of funding that are going to need help distributing in the accounting for those funds. We've been pleased about the renewals that we've gotten where we already are and we're organizing or of mobilizing as we speak to take.
Of this education opportunity. So it's one of those times, where virtually every core solution area as well as all of the additional work, we're getting and blended solutions not only from public sector, but from non public sector as well so that we've got our Q2 revenue guide for <unk>.
<unk> for up 40%.
That's great. Thank you for the color of just this to the 100% clear I mean, it sounds like Youre, obviously getting all sorts of different opportunities can you comment a little bit just on the win rate relative to the big for because I suspect you are continuing.
The performance of confirm that number one number two.
On the public sector, one of the things that we sometimes hear of pushback on is the the sense as well those are the temporary they're only going to be here for another few months to a year and then theyre going to say what's your sense.
Well, one big for win rates.
Understand that the big for our frenemies.
One hand, we compete with him one of the other hand, when they're conflicted because of their external audit engagements.
We're the first party they refer to because we don't compete with them on the external audit like the other big for so I'd say our win rate win rate is consistent and rising, particularly in the blended solutions area or are they simply don't have the capabilities that we have.
And on this issue of sustainability with public sector.
And I guess transitory as a word debt our federal reserve chairman likes to use.
We've been very transparent debt clearly there's a.
Bulge dimension to the transaction volume, so we're helping with.
But we've also been clear that we believe we're building new relationships that we can leverage.
As they improve their processes as they improve their controls as they modernize their technology. So.
We're certainly aware that.
There is a window of time, where we're going to have a very intense relationship with these state and local government and even local school districts and were working very hard to extend those.
We've been very positively surprised or per.
Pleased with the extensions, we're seeing you know sometimes into the second and third quarter with this the work of we're already doing so clearly there is a a bulge eligible element to what's going on in public sector, but it's not only bulge and we think there's an opportunity.
And the point I've tried to make it and oh by the way totally excluding at Protiviti still growing 18%.
And so that other 17 points of growth in the gravy and we love It and we think we can leverage it for a longer term, but their core business is growing 18%.
That's a big number.
Totally agree thank you.
Okay.
Your next question is from Jeff Silber with BMO capital markets.
Thanks, So much I wanted to shift the discussion over to the.
Segment, which really had off of really good quarter much better than I think most people expected can we get a little color.
Being the street either in the type of clients of the type of job the complacent.
Well the great news, Jeff is that it's across clients and I would say.
Perm placement is more S. M. B then.
The temporary side than we are overall, so almost by definition, if it's perm its SMB.
But as I referred to earlier, it's by functional area, meaning its accounting and finance and its technology and its illegal and its marketing and creative it's by skill level. So as for the transactional level people accounts payable accounts receivable payroll of general ledger as of.
Well as the higher senior accountants counting managers controllers. So it's very broad it's broad across geographies not only within the United States by the outside the United States as well.
Good news is candidates are getting more confident to make job changes.
Plus being at home frankly, it makes it easier for them to confidentially interview with our recruiters. So that's good for Perm.
Very broad very robust.
We've got huge momentum going into the quarter. We gave you our post quarter numbers, which were triple digit growth.
Perm.
As our people would say is white hot at the moment.
Okay, that's great to hear.
Can we shift over to the international piece of your business.
Can you just give us a little bit color by country and also do you of any exposure in Mexico.
Well the the latter part is easy we do not have exposure to Mexico.
We don't do a lot of country by country discussion I would call out debt, Germany, and the U K had particularly good quarters, but frankly, there was a nice recovery across our geographies in Europe and in Asia.
So okay.
Alright.
Alright, Great day here. Thanks, so much.
Your next question is from.
Our claim.
Yes.
The piece of the early cycle.
Of these being <unk>.
Lastly than you've ever seen but I guess I was just curious if you could compare it to 2019 levels I guess, what I'm trying to get an idea of is how much more of is just net in terms of just pure catching up to.
Pandemic before we start thinking about what the future growth looks like right. Good question. So we're about just over 20% below 2019 for the temp side and we're about 15% below 2019 on the perp.
Syed.
And at our current pace, we fully expect to blow by 2019.
Sooner rather than later.
Okay.
And just the other question on I'll conclude was in terms of competition are you seeing any changes of the competitive behavior.
Just given the all of US he is the big catch up going on and I'm wondering if things of the same dynamics.
Dynamics have changed.
And is your question regarding <unk>.
Sure contract employees, we put on engagements are in our internal staff.
No I meant just more from the.
The competition with the on assignment in the other vendors in the low.
Well I'd say.
Yes.
On assignment as a competitor at a very specific.
At a relatively small part of our business, particularly since they focus on mid of large cap companies EBIT of intact. We we focus a lot on smbs as well, so theres not a lot of apples and apples, there, but I'd say the competitive landscape as to pricing.
Visa fee our competitors generally has it changed much at all.
Got it thank you.
Your next question is from Kevin Mcveigh.
Yes.
Great. Thanks, so much and congratulations on the results.
You talked about some high earnings things like that.
With the way this business is geared your position for structurally higher margins or is it maybe some inability to talk.
Higher or excess capacity amongst the staff.
Are you thinking about the margin trajectory of the business relative to where your staffing levels are internally.
Yeah.
Well and so when we talk about.
Profitability.
Those discussions have to start with gross margins.
And was the we talked before traditionally in a in a downturn peak to trough were down 300 basis points. This time, we were only down 100.
Now back to pre pandemic levels pay bill spreads have recovered.
We've got lower fringe rates because of our higher pay rate divisions make up more of our mix, meaning more of the payroll is it subject to payroll tax.
And we've also got this tranche of full time contractors, we've talked about that have higher margins and that's growing as well temp to hire conversions currently 3.1%. They got they were 3.5% of 2018 2019, they've been as high as 4% to 5%.
So there were some ups so there's upside there.
We would caution in the short term.
For Q2 Q3.
We are projecting some sequential reduction in temp gross margin up to 40 basis points, because we've got to pay our temporary of contract staff for time off to to get their vaccine and time off to recover from that if needed.
That's a that's a short term or hopefully transitory.
On the SG&A front.
From a head count level, given we're still below even 2019 as I. Just said, we still think we've got capacity with the existing staff, which on average has more tenured debt.
And in the past that set particularly on the carbon replacement because of its very rapid growth rates, we're going to be we're going up again, the slowly add to internal staff there as well.
Yeah.
Super helpful and it sounds like from us.
Sourcing candidates.
There's no issue. There is is that right or is it how is it from a candidate perspective.
But I'd say the candidate supply is more nuanced than meets the eye.
On the one hand, they are resistant for onsite opportunities either because of there if you're concerned about COVID-19. They don't like the commute times. They don't have childcare, they've got school uncertainty for other children, they've got unemployment benefits.
They've also got out of market opportunities as well as local opportunities and many times.
If they don't live in a big city, they live outside of the Big City, but they've got an opportunity now to get big city pay without even having to move there. So it's a very nuanced situation with candidates.
But the good news is.
It allows us to add more value because it's more complicated for our clients for themselves to source candidates, particularly outside their local markets. So the the combination of our experienced recruiters and the technology that we've developed.
Give us an opportunity to add value I would argue in a new way and at an increased way because of all of these candidate nuances.
I think clients are understanding as they try as they always do to some degree add people on their own it's a different world. It's a more complicated world and I think relative to clients of doing it themselves and relative to our traditional competitors, which are of local regional.
Firms. They just don't have the capabilities. They don't have the recruiter relationships, particularly out of market such that if anything our competitive positioning is better than ever.
Thanks, so much.
Your next question is from Gary Bisbee with Bofa Securities.
Hey, good afternoon.
First one on the blended staffing tremendous success you continue to have the.
Do you have any.
Discernible impact on gross margins in the temp staff.
<unk> business, either up or down or is it ease of gen.
Relatively representative of.
You know what they are when you're staffing those people out to an external client well. So first of all the the staffing chip gross margins. We report are not impacted at all by that because it's been pushed over to protiviti.
If youre asking.
How the gross margins on the business.
With clients that serviced by both compares to our general our normal gross margins I'd say, they're at or maybe a little above which is fantastic given that the client base skews much larger.
And typically staffing by itself going to those larger clients would have some margin pressure.
That's been avoided by going to market together with Protiviti.
But so is it safe to then say hey, temp gross margin of 10 points roughly above for.
<unk> so the revenue growth there is helping productivity.
Because of that Delta or is that the way you price it well and so I would say.
The.
The blended solutions reported in Protiviti.
Are accretive to Protiviti margins in large part because there's no.
Bitch time or utilization.
Reduction because of these people are 100% utilized there are only paid when they're working by and large.
So that utilization differential.
Makes them accretive for Protiviti gross margin because you know.
The large portion of Protiviti as a work force as full time and utilization management.
Has a huge impact on their margin structure.
The structure.
Got it and the and then even.
Give a sense of public sector versus non public sector, even if we back out of portion of that public sector of it really feels like the blended solutions have.
Gained tremendous momentum in the last year, but even the last several quarters I guess.
Absolutely.
Right you take you take half of total blended solutions away.
And what you have left is the blended solutions that are not public sector.
And those are doing quite well right here.
Half of year to year gross I think so.
It's 30 million or similar to what you said the last few quarters the.
The rest of it would be for.
Is that correct. The rest of it is doing very well.
Is the momentum picked up is it just you're selling it more aggressively or the clients are responding and just trying to think about the the durability of the.
The drivers of that momentum.
Well I'd say, we're selling it more aggressively we're consciously adding to developers.
Net debt focus on selling just that surface.
We're adding to subject matter expertise on the Protiviti side didn't manages those projects and so with the success. We've had success begets success as I said earlier, it's now gone international.
Which is which is really great. It's not just the U S thing we've got some wonderful wins outside of the U S. So globally people on the staffing side and the Protiviti side. They just see that it works and they also see that nobody else has it.
Right.
That sounds great. Thank you.
Yeah.
The question is from Tobey Sommer with true.
Yeah.
Thank you.
Given the sort of odd nature of the decline.
The robust rebound to date, how do you think about bill rates and sort of compensation.
Compensation inflation.
In this cycle.
It's I would say.
Wage inflation is usually our friend.
And as the candidate side Titans, which it's already doing it and it is expected to further.
That not only do we traditionally pass through the higher pay rate, but it also gives us an opportunity to also.
Widen our spread a bit. So you can look back 25 years and you can see the wage inflation is our friend.
Any reasonable person would project that just going to be some wage inflation as things improve.
Okay.
On the social costs that typically dampen gross margins ex.
During the recession, and then provide a nice tailwind for subsequent years of recovery how is the cycle perhaps different.
Well the.
Interesting one is unstable unemployment.
And this time around.
The states to get the federal subsidies had to agree not to charge the claims to individual company accounts, but instead to keep them in a general pool.
And I could make the case that.
Net going to benefit by that because.
The general pool increase will likely or could be argued to be less than what the increases would be had all of the claims have been charged to our account I mean, it's been forever. The case all across the staffing industry that during downturns.
The previously working temporary employees file of lot of unemployment claims that stay with us for three to five years as the state's average of that into their rates.
So I'm cautiously optimistic that because.
The elevated claims that we read about every day by enlarge haven't been charged to our individual accounts.
Of that.
The one pool concept will benefit us more of than it'll hurt us, but only time will tell I don't know that.
Thank you.
Your next question is from Hamzah <unk>.
With Jefferies.
Over the past few calls there's been questions about just your capacity and you mentioned it a little bit earlier on in the call.
The padding capacity remaining in the business.
I guess, just maybe ask it slightly differently I.
I guess at the current capacity level and given the trends in the business that Youre seeing right now how long do you think you can go without having to hire internally it sounds like you're doing a little bit in perm or expect to.
I guess any overall business when should we expect debt to rent or at what point in the cycle would you would you want to ramp hiring.
Well clearly.
On the temp side, we think we've got a couple of quarters anyway debt will be just fine with the existing staff.
And understand that.
There is a productivity benefit to us with internal remote work.
Because we no longer half two staff every single office.
For.
Peak demand.
But instead of one office can be assisted by a neighboring office or distant office remotely when they have peak demands.
The point is we should be more efficient going forward than we've been in the past.
We can share our internal resources across larger areas.
It's not just a matter of.
Because we're recovering given prior productivity levels, we need X number of staff as I've also talked about the average tenure of our existing staff is much longer than normal, which also impacts our need to hire low.
So long story short.
As you referenced we're beginning to hire as herm.
Probably a couple of quarters from starting in temp, but even there it'll be at a slower pace than it might otherwise have been.
Because we've got the benefits of remote work, we've got the benefit of our technology tools that we've seen really pay off from us for the last three or four quarters.
Yeah.
Great. Thank you I'll, just one more and I'll turn it over.
Just on M&A.
I know you've done some smaller deals within productivity.
Is there anything specific to productivity that you.
You guys are looking at currently are there any chunkier deals or should we expect any smaller deals throughout the remainder of 2021.
Well I'd say that.
Protiviti is always looking for solution areas for practice groups.
That fit culturally and strategically or the what they're trying to do.
They did the identity management deal last quarter and so.
I'd say stay tuned, but it's just it's part of.
Ordinary course of business that Theyre looking for the.
Practice areas are smaller consulting firms. Many of you times that have the same kind of cultural big for background that they have.
Great. Thank you very much.
Our next question is from George Tong with Goldman Sachs.
Hi, Thanks, good afternoon.
Mentioned net public sector work lifted for activity growth by 17% in the quarter, how much did it benefit temp staffing gross body.
Virtually zero and it's at an very important point and I'm glad you asked the question.
The public sector work, while it starts in the lines of business on staffing. It gets eliminated so that intersegment elimination line Youll see eliminates all of that work so the growth rates for temp staffing.
Not impacted by the public sector work.
It's ex public sector. The public sector is over on the Protiviti side and as I. Just mentioned you just mentioned, it's about half of their growth rate, but half of 35 is still a really big number.
Got it very helpful. And then if you look at performance in the temp staffing business in the U S and compare that the Europe, how would you.
Compared the various trajectories of the.
Recovery.
Amazingly consistent.
If you look at chip and Perm and we disclose.
Versus non U S I would say, they're amazingly consistent.
So it's amazingly consistent.
Got it very helpful. Thank you.
Okay I think that's of our last question thanks, everyone for joining.
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Center of Robert half.
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Www dot of Robert Dot Com you can also dial the conference replay Alan details and the conference I'd are contained.
And in the company's press release issued earlier today.
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