Q4 2021 Robert Half International Inc Earnings Call
Okay.
Hello, and welcome to the Robert half fourth quarter 2021 conference call. Our hosts for todays call are Mr. Keith Waddell, President and Chief Executive Officer of Robert half and Mr. Michael Buckley, Chief Financial Officer, Mr. <unk> you may begin.
<unk>.
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. These risks and uncertainties are described in today's press release and in our most recent 10-K and 10.
<unk> 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 as adjusted.
Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release.
Our presentation of revenues and the related growth rates for Accountemps office team, Robert half technology, and Robert half management resources includes 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 these divisions internally the combined amount of divisional inter segment revenues with Protiviti is also separately disclosed.
Supplemental schedule as just mentioned also includes a rather new schedule showing this information for 2019 through 2021.
For your convenience.
Paired remarks for today's call are available in the Investor Center of our Rep of our website Robert half Dot com.
2021 was an extraordinary year and we achieved record annual results all organically.
Fourth quarter revenues grew 36% and net income grew 78% exceeding the high end of our guidance and reflecting sustained broad based demand across our staffing and business consulting businesses.
Our permanent placement and Protiviti operations continued to show very strong results growing year on year revenues by 73% and 37%, respectively. Our temporary and consulting staffing operations also performed well and had a year on year revenue growth of 31%.
With particular strength in management resources, which grew 56%.
Compared with the pre pandemic fourth quarter of 2019, 2021 revenues were higher by 15% and net income was higher by 49%.
I continue to be impressed with the energy drive and enthusiasm of our entire global workforce, including staffing and Protiviti and corporate services professionals without whom our success would not be possible.
Companywide revenues were $1 77 billion in the fourth quarter of 2021 up 36% from last year's fourth quarter on both a reported and adjusted basis net income per share the fourth quarter was $1 51, increasing 81% compared to 84.
In the fourth quarter, one year ago cash.
Cash flow from operations during the quarter was $145 million in December we distributed <unk> 38 per share cash dividend to our shareholders of record for a total cash outlay of 42 million. We also acquired approximately 540000, Robert half shares during the quarter for 60 years.
1 million, we have seven 2 million shares available for repurchase under our board approved stock repurchase plan.
Arnold invested capital for the company was 50% in the fourth 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 77 billion in the fourth quarter on.
On an as adjusted basis fourth quarter staffing revenues were up 36% year over year U S. Staffing revenues were $992 million up 37% from the prior year non U S. Staffing revenues were $283 million up 32% year on year on an as.
Adjusted basis.
We have 321 staffing locations worldwide, including 85 locations in 17 countries outside the United States.
In the fourth quarter. There were 60 61, seven billing days unchanged from the same quarter one year ago.
The current first quarter has 62, four billing days compared to 62, three billing days from the first quarter of 2021.
Currency exchange rate movements during the fourth quarter had the effect of decreasing reported year over year staffing revenues by $5 million.
This impacted our year over year reported staffing revenue growth rate by 0.5 percentage points.
Temporary and consulting bill rates for the quarter increased eight 5% compared to one year ago adjusted for changes in the mix of revenues by line of business currency and country.
This rate for the third quarter of 2021 was five 4%.
Now, let's take a closer look at results for Protiviti.
Global revenues in the fourth quarter were $495 million.
$387 million of that is from business within the United States and $108 million is from operations outside the United States.
On an as adjusted basis Global fourth quarter, Protiviti revenues were up 37% versus the year ago period with U S. Protiviti revenues up 32%.
Non U S revenues were up 61% on an as adjusted basis.
Exchange rates had the effect of decreasing year over year, Protiviti revenues by $2 million and decreasing its year over year reported growth rates by 0.5 percentage points.
Protiviti and its independently owned member firms serve clients through a network of 87 locations in 28 countries.
Turning now to gross margin.
In our temporary and consulting staffing operations fourth quarter gross margin was 39, 8% of applicable revenues compared to 38, 5% of applicable revenues in the fourth quarter one year ago.
Gross margins were positively.
Positively impacted by expanding pay bill spreads and higher conversion revenue, which were three 8% of revenues in the quarter and two 8% of revenues in the same quarter one year ago.
Our permanent placement revenues in the fourth quarter were 12, 4% of consolidated staffing revenues versus nine 7% of consolidated staffing revenues in the same quarter one year ago.
When combined with temporary and consulting gross margin overall staffing gross margin was 47, 2% an increase of two eight percentage points compared to the year ago fourth quarter.
For Protiviti gross margin was 28, 7% of Protiviti revenue compared to 26, 5% of Protiviti revenue one year ago.
Adjusted for deferred compensation related classification impacts gross margin for Protiviti was 29, 3% for the quarter just ended compared to 28% one year ago <unk>.
Protiviti gross margins improved primarily due to an increased mix of higher margin services.
Companywide SG&A costs were 38% of global revenues in the fourth quarter compared to 32, 6% in the same quarter one year ago.
Adjusted for deferred compensation related classification impacts companywide SG&A costs were 29, 7% for the quarter just ended compared to 29, 9% one year ago.
Staffing SG&A costs were 37, 7% of staffing revenues in the fourth quarter versus 39, 7% in the fourth quarter of 2020.
Adjusted for deferred compensation related classification impacts staffing SG&A costs were 36, 2% for the quarter just ended compared to 36% one year ago.
The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding one six percentage points to the quarter's adjusted SG&A ratio.
We ended 2021 with 8900 full time internal employees in our staffing divisions up 14% from the prior year.
Fourth quarter SG&A costs for Protiviti were 12, 9% of Protiviti revenues compared to 14, 1% of revenues in the year ago period.
In 2021, we had 11400 full time protiviti employees and contractors. This is up 56% from the prior year and is consistent with productivity overall increase in billable hours.
Moving on to segment income.
Operating income for the quarter was $200 million adjusted for deferred compensation related classification impacts combined segment income was therefore $223 million in the fourth quarter.
Combined segment margin was 12, 6%.
Fourth quarter segment income from our staffing divisions was $142 million with a segment margin of 11, 1%.
Segment income for Protiviti in the fourth quarter was $81 million with a segment margin of 16, 4%.
Our fourth quarter tax rate was 24% compared to 27% one year ago, the lower tax rate for 2021 can be attributed to better coverage and non deductible expenses due to higher income in 2021, as well as higher stock compensation deductions due to the rising.
The company's stock price.
At the end of the fourth quarter accounts receivable were $985 million and implied days sales outstanding DSO was 50 days.
Before we move on 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 our.
Our temporary and consulting staffing divisions exited the fourth quarter with December revenues up 31% versus the prior year compared to 32% increase for the full quarter.
Revenues in the first two weeks of January were up 42% compared to the same period one year ago.
Permanent placement revenues in December were up 73% versus December 2020. This compares to 74% increase for the full quarter.
For the first three weeks of January permanent placement revenues were up 51, 7% compared to the same period in 2021, we.
We provide this information so you have insight into some 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 that.
With that in mind, we offer the following first quarter guidance revenues $175 5 billion to $1 835 billion.
Income per share $1 39.
Two $1 49.
Midpoint revenues of $1 795 billion or 30% higher than the same period in 2021 on an as adjusted basis.
Midpoint EPS of $1 44 is 47% higher than 2021.
The major financial assumptions underlying the midpoint of these estimates are as follows.
Revenue growth on a year over year basis, staffing up 32% to 34% Protiviti up 19% to 21% overall.
Overall up 28% to 30%.
Gross margin percentages temporary and consulting staffing 39% to 40%.
Protiviti, 27% to 28% overall, 41% to 43%.
SG&A as a percent of revenues, excluding deferred compensation classification impacts staffing, 35% to 36% productivity, 13% to 15% overall, 29% to 30%.
Segment income for staffing, 11% to 12% for productivity, 13% to 14% overall, 12% to 13%.
Tax rate, 26% to 27%.
Shares outstanding $110 million to $111 million.
2022 capital expenditures and capitalized cloud computing costs $95 million to $105 million with $20 million to $25 million during the first quarter.
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.
The labor market is undergoing extraordinary change as remote and hybrid models continued to gain traction.
Professionals change jobs at record levels.
Any candidates have a strong preference for working remotely and our clients are also increasingly willing to recruit from outside their geography and embrace remote working arrangements.
Our clients benefit by gaining access to a deeper talent pool and or lower price points than they may be able to find locally.
Remote work is here to stay and creates a significant opportunity for us it brings together our numerous strengths, including our global brand our global Office network, Our global candidate database and advanced AI, driven technologies and data analytics.
At the scale needed to excel at out of the market recruitment and placements.
This strengthens our competitive position significantly since our traditionally toughest competitors local and regional staffing firms simply do not have these capabilities.
National Federation of independent business NFIB.
Recently reported that 95% of those hiring or trying to hire had few or no qualified applicants for open positions and 49% of all small.
Small business owners had job openings that cannot be feel.
This continues to bode well for us as we see increases in demand for our services on a very broad basis spanning across industries client size skill levels geographies and lines of business.
This robust demand coupled with our continuing ability to successfully recruit candidates for our clients has contributed to our staffing results recovering at a faster pace than we've experienced in the past our permanent placement and temporary and consulting staffing segments included blended solutions with British.
<unk> have achieved cumulative sequential growth of 125% at 63% respectively. During the six quarters since the pandemic trough similar numbers for the financial crisis, and dotcom recoveries or 56% and 25%.
And 52% and 39% respectively.
Protiviti continues to be a strong differentiator for the company with multiple years of consecutive growth in a highly diversified client base and suite of solution offerings.
Growth remained strong across internal audit technology consulting risk and compliance consulting and business performance improvement technology consulting is the largest solution group with particular strength in cyber security and privacy solutions as well as enterprise applications and data.
Analytics.
We also continued to see remarkable results on the collaboration between Protiviti and staffing, which payers Protiviti is world class consulting talent with staffing staffing <unk> deep operational resources to provide a cost effective solution to clients skills and scalability needs.
Protiviti has benefited in the last several quarters from project work in the public sector, resulting from various governmental stimulus programs fourth quarter revenues were $103 million with the $89 million component from protiviti, providing accretive growth to its core commercial.
A growth rate of 25% for the quarter.
Public sector work has created new credentials and deep relationships with a new client base as well as strong relationships with candidates, whose skills are applicable to both public sector and commercial engagements as.
As stimulus Squirt continues to moderate we're building a significant pipeline of other opportunities, including finance and it modernization and transformation projects.
We expect first quarter 2022 public sector revenues to be flat to up 10% compared to the first quarter of 2021.
We also expect additional revenues for our staffing operations from the redeployment of a substantial number of public sector candidates onto commercial staffing engagements.
In mid 2021, we completed a multiyear process to unify our family of Robert half endorsed divisional brands to one single specialized brand Robert half.
Simplifies our go to market brand structure for clients and candidates reduces fragmentation and provides leverage for greater brand awareness and allows future flexibility to expand our existing practice groups without the need for new brands.
Beginning with Q1 2022, our financial disclosures for contract operations, who will be based on functional expertise rather than the previously branded divisions.
The functional specializations will be finance and accounting.
Administrative and customer support and technology.
Finance and accounting combined the former Accountemps and management resources.
Administrative and customer support was previously office team and technology was former formerly Robert half technology. There is no change to our underlying business operations organization.
<unk> and our permanent placement operations will continue to be reported separately.
Also when distinguishing from Protiviti, we now call our staffing operations by a new name talent solutions and temporary professionals are now referred to as contract professionals.
2021 was an extraordinary year for Robert half the record revenues and earnings and our pace of recovery. Unlike anything we've experienced before.
We begin the new year with tremendous momentum and optimism into step steadfast focus on our people our technology, our brands and our business model. We remain laser focused on our time tested corporate purpose to connect people to meaningful and exciting work and provide clients with.
The talent and deep subject matter expertise they need to constantly compete and grow.
Finally, we'd like to thank our employees around the world for making possible a number of new company accolades in just the last 24 hours. We were once again named to the Bloomberg gender equality index and also recognized as the best place to work for <unk>.
<unk> plus equality by the human rights campaign burning 100% rating opponents corporate equality index, we are particularly proud of the recognition we continue to receive for our commitment to diversity equity and inclusion efforts.
Now, Mike and I would be happy to answer your questions. Please ask just one question and a single follow up as needed. If there is time, we'll come back to you.
Okay.
At this time, if you would like to ask a question press star one on your phone.
Your question press the pound.
Yeah.
Your first question comes from the line of Mark Marcon with Robert W. Baird.
Yes.
Good afternoon, and congratulations on a great year I was wondering if you could talk a little bit more about productivity.
Particularly with regards to the.
The expectations on the government side versus the commercial side.
Just how sustainable do you think.
Commercial growth.
It certainly seems like there are more digital transformation opportunities you're obviously.
Now my logic.
And your Bill.
It gets practice area.
Wondering how sustainable do you think that that.
That's where our commercial growth is.
And then you also discuss the growth that youre seeing internationally.
Within the U S. It's pretty clear that productivity is really distinguishing itself as a brand name and getting a lot of recognition I'm wondering to what extent that's spreading internationally.
Well, let's see several questions there.
Protiviti continues to expect to expand significantly commercially we talked about the public sector being flat to up 10%, which frankly is an improvement versus our expectation 90 days ago on the commercial side.
The expectation is that the 25% growth in the fourth quarter ex public sector would remain intact through the first quarter there.
There would be some dilution by the flat to up 10% on the public sector.
<unk> issue is not demand and in fact as internal employee staff its aggressively adding to staff as we speak.
The business backdrop has never been better.
The SG&A assumptions for the first quarter.
Consider and contemplate additional significant additional recruiting and training cost for all the additional many of which are experienced hires are going to bring on board.
The IC versus U S.
Protiviti.
You named the country also doing very well.
We've had particular success in Germany, the UK, Australia, where the brands are also well recognize there I think we now do business with 60% of the fortune five.
The fortune 1000.
In the U S and so brand recognition.
Is increasing as we get better penetration from those accounts.
That's great.
Follow up.
I'd like to ask about the eight 5% bill rate expansion and how you juxtapose that with.
The increased level.
A virtual work.
Being done it seems like there is a labor cost arbitrage and so.
The eight 5% increase on a like for like basis.
Interesting I'm wondering if you can comment on that.
Well the eight 5%.
Is certainly higher than we've seen.
Early cycle in prior recoveries, where the range would tend to be 4% to 6%. So it's a little high it's not a hugely high.
That eight 5% is not limited to any practice group.
Irrespective of its remote versus on premise mix, so I wouldn't necessarily.
Tribute the higher bill rate percentage to a higher portion of remote work, but but instead just the firmness of the labor markets all across the board cross skill levels, all cross practice areas.
The good news is.
While wage inflation is elevated we're certainly able to pass that through and expand our gross margins just a little at the same time.
It's a good place to be in.
Absolutely congratulations again.
Yes.
Your next question comes from the line of Andrew.
J P Morgan.
I just wanted to ask you more about supply and if you could answer it kind of both for Protiviti, which you mentioned a little bit Protiviti, you know aggressively adding to staff, but my question really is when you look at F&I professionals in the United States. We just generally here labor is.
It is tight.
And maybe even two tight we hear often but if you could just focus on finance and accounting professionals, Keith and tell us how you feel the supply of finance and accounting professionals are now versus other times.
<unk> experienced in the past.
Well, we've used the term before and I'll use it again and I would say manageable tight.
It's true candidates get multiple offers that get counteroffers.
Generally they will remote engagements and we want to be paid a premium to go on site.
Even though current unemployment levels are low theyre not at historical lows.
College.
People with a college degree their unemployment rate currently is 2.1.
That's been sub too in the past.
<unk>.
Our staff are very skilled at recruiting they.
They have access to our proprietary database that use our proprietary AI and data science.
Remote work significantly expands the pool.
They can recruit from this is not a tool they've had in recoveries past further we've got a bunch of full time professionals that are also available for assignment, which also addresses the supply side of the equation. So for all of those <unk>.
<unk>, we've been able to manage through the supply side of this and we expect we will continue to be able to manage given all of the traditional tools. We have given the experience of our people and given the access to remote workers and the ability to use remote workers, which range from.
20%, 70%, depending on the practice group that Youre talking about.
Maybe just be a little more specific about F&I and like do you feel like when you're recruiting for F&I positions versus when you recruited for I T position that there might be a little more availability of F&I professionals again compared to it professionals for example.
Well.
I'd say, they're both tight.
At the on the F&I side is probably tighter at the operational level than it is at higher levels.
The higher levels tend to be more conducive to a remote work than the operational levels, where clients tend to want people on site.
So relative to.
I guess you could make the case that it's not as tight I think thats fair, but it's tight but again manageable tie we think we can manage our way through this got it. Thank you so much I appreciate it Keith.
Your next question is from Hamzah <unk> with Jefferies.
Hi, This is Hans Hoffman filling in for Hamzah <unk> Macquarie.
My first question is it looks like technology in temp staffing slowed in Q4 could you just provide some color on the drivers there.
Well technology.
<unk>.
Through 2021%.
Again.
Different than some of the other divisions technology fared well.
Fair better during the pandemic than some of our others did so generally speaking theyre going to have tougher comps than some of the others are but frankly, we were pleased with technology in the fourth quarter and it was above our own internal forecast for that period.
Okay.
Alright, great. Thank you and then my next question is can you just give us a sense.
How much capacity you have within your <unk> business in terms of recruiters given your demand outlook or do you kind of have to go out there and hire more people and labor availability.
All becoming an issue for you.
I'd say on the recruiter capacity side on.
Contract side of the business.
We do have capacity that said, we are beginning to add to staff. There we have less capacity with permanent placement given its elevated growth rates and we're much more aggressively adding to staff there.
But I think one thing that in my 10 year here that you can always count on is when you give our people the requisition approval to add to staff. They deliver if you think about it they recruit all day for a living and some of those people. They are looking to place ultimately end up as <unk>.
Recruiters are working for us, placing others and so.
As I sit here today I don't have any.
Issue with we'll be able to recruit internally the number that we have.
Another point there we are very pleased with the lack of turnover. We've seen there's all this talk about the great resignation the great reshuffle.
But if you look at our internal stab at Robert half, our attrition is actually down and we're very proud of that.
Great. Thank you so much.
Your next question comes from the line of Jeff Silber with BMO capital markets.
Thanks, So much wanted to continue the discussion on your internal head count first of all I just want to clarify something the numbers that you gave for Protiviti is that a year end number or an annual number.
Okay.
Well, it's an average over the.
For the year, the full year, that's right, but it was <unk>.
Somewhat back ended and therefore the.
The cost as we enter 2022, we'll have the full <unk>.
In fact of that whereas the fourth quarter only had the average portion of that.
Got it in prior years did you always give any average or was the year end because I know for staffing you gave a year end.
Protiviti.
This consist of.
The methodology hasn't changed.
The contractor versus employee counts at Protiviti.
Yet.
A little confusing, but we tried to explain that the combined head count for Protiviti inclusive of the full time equivalents for contractors is what we disclosed and by the way about 50% of the hours.
Work for Protiviti at least here in the fourth quarter or worked by contractors rather than its own employees.
Great sorry to get into weeds, there, let me let me ask my bigger picture bigger picture question. So.
Speaker 1: started getting the week there let me let me ask my bigger picture bigger picture question so you know if it looks like your productivity at that all-time high door revenue
It looked like your productivity head count is at an all time high so our revenues.
Speaker 1: Staffing, you seem to be back at pre-pandemic levels, but your internal headcount is much lower. I mean, I know you've talked in the past about some of the productivity tools. You mentioned briefly that you're gonna be ramping up hiring perms, but should we expect these productivity levels to continue to improve going forward?
Staffing you seem to be back at pre pandemic levels, but your internal head count is much lower I mean, I know you've talked in the past about some of the productivity tools, you mentioned briefly that youre going to be ramping up hiring firms, but should we expect these productivity levels to continue to improve going forward.
We're proud of our productivity levels I would say.
Speaker 2: We're proud of our productivity levels. I'd say it's a reflection of A, the average experience level of who we now have is higher than has been in the past. B, we've introduced all these technology tools that I'd be happy to talk about for the next 45 minutes if you'd like to listen. Further.
It's a reflection of a the average experience level of who we now have is higher than than it has been in the past B. We've introduced all these technology tools that I'd be happy to talk about it for the next 45 minutes, if you'd like to listen.
Further.
Our own people or working remotely, which means when we fill orders we can spread that workload.
Cros.
A larger.
Area of internal recruiters.
Therefore per se, making them more productive and so we have all of that going for us.
We're focused on productivity, we think those productivity levels are here to stay we think we've got upside from where we are but we do need to began hiring we've already begun aggressively hiring in perm and we will we will begin to do that as well on the contract side I've talked.
Speaker 2: We're focused on productivity. We think those productivity levels are here to stay. We think we've got upside from where we are.
Speaker 2: But we do need to begin hiring. We've already begun aggressively hiring in PERM. And we'll begin to do that as well on the contract side. I've talked a couple of times about these people that work for us full time that we place on assignment. We're aggressively adding to the internal staff.
A couple of times about these people that work for US full time that we place on assignment we are aggressively adding to the internal staff that manages that part of our business as well.
Speaker 2: that manages that part of our business as well. Ok, fantastic.
Okay fantastic. Thanks, so much for the color.
Yes.
Your next question comes from the line of Kevin Mcveigh with Credit Suisse.
Speaker 3: Your next question comes from the line of Kevin McVeigh with Credit...
Great. Thanks, so much.
Speaker 4: Great, thanks so much, and congratulations on the results. Hickey, I went back, and I think my numbers are close, but the revenue overall since 2019 is up about 6.5%. But if you look at temp, it's down 8.5%. You know, PERM is up almost seven, and then productivity's up 64%. Is there any way to think about, obviously, a pretty wide delta there?
Congratulations on the results I went back and I think my numbers are close but.
The revenue overall since 2019 is up about six 5%, but if you look at campus down eight and a half.
AUM is up almost seven and then productivity is up 64%.
Is there any way to think about how do we see a pretty wide delta there.
How are you thinking about demand pull forward versus where we are in the cycle.
Speaker 4: How are you thinking about demand pull forward versus where we are in the cycle? I mean, it's been so unprecedented. Is there any way to think about how you're thinking of the kind of each one of the segments and
So unprecedented here any way to think about how you're thinking of it kind of each one of the segments.
From a demand perspective, I guess is where I wanted to start and so some of that structural as a result of remote workforce within protiviti as opposed to the tepid consulting.
Speaker 4: you know, from a demand perspective, I guess, is where I wanted to start. And some of that structural is a result of, you know, remote workforce within productivity, as opposed to the Tepid consulting, just, you know, such a kind of tricky cycle we're in, just trying to understand, you know, when he puts some cakes across three segments.
As such it is tricky cycle. We're in just trying to understand any puts and takes across the group segments.
So clearly.
First staffing or talent solutions that we now call it.
Speaker 2: for staffing or talent solutions, as we now call it.
This recovery has been different in that unemployment rates have recovered much more quickly than.
Speaker 2: This recovery has been different in that the unemployment rates have recovered much more quickly than they've done in the past. Typically, early cycle the unemployment rates stay high.
And they've done in the past typically early cycle of the unemployment rates stay high.
Speaker 2: with that larger pool of people.
With that larger pool of people.
We feel elevated orders from small business clients, who were lean and whose transaction volumes recover and they get into matrix.
Speaker 2: We fill elevated orders from small business clients who were leaned and whose transaction volumes recover and they get into projects.
And so clearly the labor markets are tighter stronger sooner.
Speaker 2: And so clearly the labor markets are tighter, stronger, sooner than they've been in prior recovery.
And then they have been in prior recoveries.
Speaker 2: As to creativity, creativity didn't go down during the pandemic, so it had uninterrupted growth.
As to Protiviti Protiviti Didnt go down during the pandemic. So it had uninterrupted growth.
Speaker 2: So when you look at a point in time now versus a point in time 2019, given that it never had...
When you look at a point in time now versus a point in time 2019, given that it never had it never went down it's at a higher place and its benefit it's been the primary beneficiary.
Speaker 2: It never went down, it's at a higher place.
Speaker 2: and it's benefit it's been the primary beneficiary
Speaker 2: not only a public sector contractor were
Not only our public sector contractor work, but commercial sector contractor work as well and you could just as easily give our talent solutions operations created for that work as you would protiviti because it's blended that they both work on so the distinction between.
Speaker 2: but commercial sector contractor work as well. And you could just as easily give our talent solutions operations credit for that work as you would for activity because it's blended that they both work on. So the distinction between one versus the other is blurred to some degree.
In one versus the other is blurred to some degree.
As we talked or as we said in our prepared comments for the fourth quarter relative to 2019, I think was your reference point.
Speaker 2: as we talked or as we said in our prepared comments, you know, for the fourth quarter relative to 2019, I think was your reference point.
Speaker 2: Overall revenues are 15% higher and earnings are almost 50% higher, which is pretty incredible.
Overall revenues are 15% higher and our earnings are almost 50% higher which is pretty incredible.
And then just could you repeat.
Speaker 4: And then just could you repeat and you were clear on it, but I just missed him the project work the public work versus the commercial within productivity in the quarter.
You were clear on it but I just missed the project work.
Is the commercial within productivity in the quarter.
Sure.
And so.
For the quarter, we talked about Protiviti.
Speaker 2: For the quarter, we talked about productivity, public sector. We gave you the number, the 89 million.
Public sector, we gave you the number.
89 million.
Speaker 2: took its core commercial growth rate of 25 percent to the overall growth rate of 37 percent.
Took its core commercial growth rate of 25% to the overall growth rate of 37%.
Speaker 2: So without public sector, it grew 25. With public sector, it grew 37. So that's the impact of public sector.
Without public sector grew 25 with public sector grew 37, so that's the impact of public sector.
We expect that 25, just to remain intact into the first quarter, which is built into that guidance.
Speaker 2: We expect that 25 to remain intact into the first quarter, which is built into the guidance.
Even though year on year.
Speaker 2: even though year on year the public sector work slows, we're still optimistic that for the full year 2022, we'll be at or better than 2021, notwithstanding the moderation and unemployment claims processing that's been so large a part of what happened in 2021 and to some degree late 2020.
Public sector work slows.
We're still optimistic that for the full year 2022 will be at or better than 2021, notwithstanding the moderation in unemployment claims processing. That's been so large a part of what what happened in 2021 and to some degree.
Late 2020.
Speaker 2: So core commercial growth, productivity very strong.
So core commercial growth Protiviti very strong.
Speaker 2: 25 percent Q4, expected to be 25 percent again Q1, and then public sector adds or subtracts.
25% Q4 expected to be 25% again in Q1, and then public sector.
Adds or subtracts.
As I just talked about.
Underlying core very strong Protiviti is biggest issue is not demand.
Speaker 2: Underlying core very strong, productivity's biggest issue is not demand.
Speaker 2: not demand, it's getting internal staff for which they're hiring aggressively, primarily experienced staff that they're getting from other consulting firms, that they're getting from other accounting firms, and they're very successful at doing it.
Not demand its getting internal staff for which theyre hiring aggressively primarily experienced staff that they're getting from other consulting firms that they're getting from other accounting firms and they are very successful at doing it.
Thank you.
Your next question comes from the line of Tobey Sommer with Truest Securities.
Speaker 3: Your next question comes from the line of Toby Summer with truest security.
Okay.
Speaker 5: Thank you. If you could delve into wage growth, bill rate growth, and put it in some historical context. You know, I believe there was a period of four or five consecutive years we had 5% growth in the 2000s.
Thank you.
You could delve into.
Wage growth bill rate growth.
Put it in some historical context.
<unk>.
A period of four to five consecutive years, we had.
5% growth in the two thousands.
And with unemployment rate, where you said it is low but it is not at historic lows.
Speaker 5: And with unemployment rate where you said it is, it's low, but it's not a historic low, how long could we see this kind of, you know, high single digit, maybe a little bit above the normal band that you characterized earlier on the call?
How long could we see this kind of.
High single digit maybe a little bit above the normal band that you characterized it earlier on the call.
Well.
Speaker 2: As you just said, which is correct, if you look in the last recovery, we had four or five years where we had sustained bill rate growth between four and six percent. So I'd call that normal. So we're a bit higher than normal as we speak. Unemployment is lower than it is at a similar point in prior recoveries.
As you just said, which is correct. If you look in the last recovery, we had four or five years, where we had sustained bill rate growth between 4% and 6%. So I would call that normal so we're a bit higher than normal as we speak.
Unemployment is lower than it is at a similar point in prior recoveries.
We believe because we're still not at historical lows as you also mentioned that.
Speaker 2: We believe, because we're still not at historical lows, as you also mentioned, that
There is.
Speaker 2: that current rates can be sustained, but whether they're 6% or 8%, we're going to do well, and it's an environment where we can add to, enhance.
At current rates can be sustained but whether they are 6% or 8%, we're going to do well and it's an environment, where we can add to.
Enhance our margins.
Again wage inflation is our friend when we can pass it through with a little margin enhancement.
Speaker 2: Again, wage inflation is our friend when we can pass it through with a little margin enhancer.
Right.
Speaker 5: All right, and if we think about gross margins.
If we think about.
Gross margins.
Speaker 5: from a social cost perspective, given the payroll taxes, et cetera, are those, do we have a runway where those could add and contribute to gross margin expansion, or has the pace of this recovery just been so different that much of that is already sort of embedded in the income statement disclosure?
From a social cost perspective given.
The payroll.
Payroll taxes et cetera.
Are those do we have a runway where those could add and contribute to gross margin expansion or is the pace of this recovery has been so different that.
Much of that is already sort of embedded in your income statement at this point.
Well, we talked a little bit about this last quarter I'm happy to report that we expect our state unemployment cost for 2022 to be roughly flat with what they were as a percentage in.
Speaker 2: Well, we talked a little bit about this last quarter. I'm happy to report that we expect our state unemployment costs for 2022 to be roughly flat with what they were as a percentage in 2021. And that's dramatically better than prior recovery.
In 2021, and Thats dramatically better than prior recoveries were.
Speaker 2: where they're elevated for one to three years based on the higher claims filed against our account during the downturn.
There they are elevated for one to three years based on the higher claims filed against our account during the downturn.
Speaker 2: So, if anything, the historical drag we've seen from higher social cost, early cycle, we're not seeing as a...
So if anything to historical drag we've seen from higher social cost early cycle, we're not seeing so.
Speaker 2: So far this time, for reasons I explained on the last call, and I'm not going to bore everybody again.
So far this time for reasons I explained on the last call.
I'm not going to bore everybody again.
So there's good news on the social cost front.
Speaker 2: So there's good news on the social cost front.
Speaker 2: And in fact, if you talk about gross margins, generally, we think there's a lot of room for improvement. A, you've got mix going more toward management resources, good for gross margin. Mix going more toward...
And in fact, if you talk about gross margins generally we think theres a lot of room for improvement yes.
A you've got mix going more toward management resources, good for gross margin mix going more toward full.
Speaker 2: full-time contractors, good for gross margins. Mix going to higher conversions as full-time hiring stays robust, good for gross margins.
Full time contractors, good for gross margins mix going to higher conversions as full time hiring stays robust good for gross margins social cost not rising at the same pace. They had in prior recoveries could for gross margins. So we've got a lot goes.
Speaker 2: Our social costs, not rising at the same pace they had in prior recoveries, good for a gross margin.
Speaker 2: So, we've got a lot going for us at the gross margin line, not to mention as PERM grows faster than contract, that's also good for gross margin.
For us at the gross margin line not to mention as perm grows faster than contract.
That's also good for gross margins.
And again, if you would like to ask a question at this time simply press Star then the number one on your telephone keypad.
Speaker 3: And again, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. Your next question comes from the line of George Tong with Goldman Sachs.
Your next question comes from the line of George Tong with Goldman Sachs.
Hi, Thanks, good afternoon.
Speaker 5: Hi, thanks, good afternoon. You provided guidance on public sector productivity demand for 1Q. Can you provide thoughts around when you would expect public sector COVID-related relief work on productivity to normalize, how that timeline would look like over the next several quarters?
You provided guidance on public sector Protiviti demand for <unk> can you provide your thoughts around when you would expect public sector related will be worked on for it to be to normalize all of that timeline.
Over the next several quarters.
Speaker 2: Well, George, we believe that for full year 2022, we'll be at or above what we were.
Well, George we believe that for full year 2022.
At or above what we were.
Speaker 2: in 2021. Notwithstanding, we have headwinds on unemployment, we have tailwinds on education, we have tailwinds on housing assistance, and we have tailwinds on finance and IT modernization projects.
In 2021, notwithstanding we have headwinds on unemployment we.
We have <unk> on education, we have tailwind on.
Housing assistance, and we have <unk> on financing it modernization projects for which the backlog is growing significantly.
Speaker 2: for which the backlog is growing significantly. So just as 2021 ramped up with public sector, we expect 2022 to ramp. It'll just, the nature of the projects that ramp 2022 will be different than those that ramp 2021.
Just as <unk> 2021 ramped up with public sector.
We expect 2022 to ramp it'll just the nature of the projects that ramp 2022 will be different than those that ramp 2021, but.
Speaker 2: For the full year, we actually think we'll be flat or grow.
For the full year, we actually think will be flat or grow.
Not down and that will normalize over the course of the year.
Speaker 2: not down and that will normalize over the course of the year.
And as we said earlier for the first quarter alone. We say, we said, we think will be flat to up 10% with public sector.
Speaker 2: And as we said earlier, for the first quarter alone, we said we think we'll be flat to up 10% with public sector.
Speaker 2: Public sector measurement gets a little confusing because part of it's recorded as talent solutions and part of it's recorded as productivity. And as we move forward, the educational component of public sector is more talent solution centric, the unemployment.
Public sector measurement.
Gets a little confusing because part of its recorded as talent solutions and part of is recorded as Protiviti.
And as we move forward the educational component of public sector.
Is more talent solution centric.
Unemployment and.
Speaker 2: and housing assistance portion is more productivity centric and this modernization, IT accounting modernization is blended and so it will be in both places so you have to stitch together.
And housing assistance portion is more protiviti centric and this.
Modernization.
Accounting modernization.
Is bohlen did and so it will be in both places so you have to stitch together the.
Speaker 2: the pieces of this to come to an overall number, which is a little confusing when you look at the numbers, but when you stitch all of the pieces together in 2021 and you stitch all the pieces together for 2022, we think we'll actually be flatter up.
Pieces of this to come to an overall number which is a little confusing when you look at the numbers, but when you stitch all of the pieces together in 2021 and you stitch all the pieces together for 2022 we think will actually be flat or up.
Speaker 2: And that's a more positive outlook than we had 90 days ago, which is a function of A, the pretty dramatic increase in the pipeline for new projects, and B, our success rate, which has been very high.
And that's a more pass a more positive outlook than we had 90 days ago, which is a function of a.
The pretty dramatic increase in the pipeline for new projects and be our success rate, which has been very high.
Got it very helpful and then with respect to the impact of Covid.
Speaker 6: Got it. Very helpful. And then with respect to the impact of COVID, which sectors and end markets would you say have seen the most impact from Omicron from a temp staffing demand perspective at Robert?
Sectors in end markets would you say.
<unk> seen the most impact from omicron from attempts staffing demand perspective at Robert half.
Well and so we disclosed that for the first two weeks out of the gate right. During the teeth of Omicron, our contract side grew 40%, which is an acceleration from where we exited 2021 and so while clearly we saw.
Speaker 2: Well, and so we disclosed that for the first two weeks out of the gate right during the teeth of Omicron, our contract side grew 40 percent, which is an acceleration from where we exited 2021. And so while clearly we saw
<unk>.
Speaker 2: contract professional absenteeism due to Omicron, the numbers would have been even higher. Perttivity also saw some absenteeism from Omicron.
Contract professional absenteeism due to omicron the numbers of would've been even higher Protiviti saw also saw some absenteeism from omicron.
Speaker 2: But it was fairly short-lived, you know, a week or two, and viewed as a short-term thing that's in the scheme of a full quarter, not a huge impact. But again, like I say, we came out of the gate hot, up 40 percent year-on-year, which was an acceleration notwithstanding a small drag from Omicron.
But it was fairly short lived.
<unk> and viewed as a short term thing that's in there.
In the scheme of a full quarter, it's not a huge impact, but again like I say, we came out of the gate Hot up 40% year on year, which was an acceleration notwithstanding a small drag from Accra.
Great. Thank you.
Okay.
Your next question comes from the line of Kevin Mcveigh with Credit Suisse.
Speaker 3: Your next question comes from the line of Kevin McVay with Credit
Yes.
Speaker 2: I'm going to apologize in advance. I'm dense on this. So just so we're clear, the comments on productivity, was that overall productivity, flat to up, or just the commercial and government work? Was that flat to up or? The flat to up, all right? So first of all, in our guidance for the first quarter.
I'm going to apologize in advance some dent on that so just to clear the comment on Protiviti was that overall protiviti black where just the commercial and government work.
For the flat.
Alright, so first of all.
Our guidance for the first quarter we.
Speaker 2: We said protivities revenues would grow 19 to 21 percent. So let's call it 20 percent. So that's overall protivity.
We said Protiviti revenues would grow 19% to 21% so let's call it 20% so thats overall protiviti.
Speaker 2: Then, if you just look at the public sector impact on productivity, which is about 18% of their revenues, we said that piece would be flat to us.
Then if you just look at the public sector impact on Protiviti, which is about 18% of their revenues, we said that piece would be flat to up.
So what that means then is that the commercial part of Protiviti call it 80% will be growing 25%.
Speaker 2: So what that means then is that the commercial part of protivity, call it 80 percent, will be growing 25 percent, and the balance will be flat to up 10 percent. But protivity overall, our guidance has growing 20 percent.
And the balance will be flat to up 10%, but <unk> overall, our guidance has growing 20%.
You talked about 22 overall, Keith I apologize I know you said flat to up for the full year.
Speaker 7: I thought you talked about 22 overall, Keith. I apologize. I thought you said flat out for the full year. I just want to clarify that. Well, well, okay.
Just wanted to clarify that as well.
So.
That's public sector overall for the full year, we do expect to be flat to up for the first quarter, we expect it to be flat to up 10%. So the explanations of the same frankly, whether you talk in the quarter or the year for the public sector piece.
Speaker 2: That's public sector overall. For the full year, we do expect to be flat to up. For the first quarter, we expect it to be flat to up 10%. So the explanations are the same, frankly, whether you're talking the quarter or the year for the public sector piece only, but that's less than 20% of the total. The other 80% is growing 25%.
Only but that's less than 20% of the total.
Other 80% is growing 25%.
And not slowing down demand isn't the issue they need the staff.
Speaker 2: and not slowing down. Demand isn't the issue, they need the staff.
Yes.
Thank you.
Your next question comes from the line of Mark Marcon with Robert W. Baird.
Speaker 3: Your next question comes from the line of Mark Marcon with Robert W. Baird.
Speaker 8: You just answered my question, which is, basically, it's...
You just answered my question, which is basically.
Speaker 8: Public work for all of 2021 was 18% of productivity or was it.
Public work for all of 2021 was 18% of Protiviti or was it.
80%.
Speaker 2: So, we're saying for the first quarter, proactivity consolidates.
So we're saying for the first quarter.
Protiviti consolidated everything.
Speaker 2: The guidance says grows 20 percent, everything, commercial and public sector, everything. If you just focus on the public sector piece.
The guidance says grows 20% everything commercial and public sector everything.
If you just focus on the public sector piece.
Which is less than 20% of Protiviti is total.
Speaker 2: which is less than 20% of protivities total, it will be flat to up 10%.
It will be flat to up 10%.
Speaker 2: So the commercial side will grow faster than the public sector side for the first quarter.
So the commercial side will grow faster than the public sector side for the first quarter.
Speaker 8: Keith, I got all that, what I was trying to get at.
Keith I got all that what I was trying to get a.
Precision on the percentage of Protiviti revenue that came from the public sector in all of 2021.
Speaker 8: percentage of proactivity revenue that came from the public sector in all of 2021.
Speaker 2: for the full year, I wasn't sure if that 18% that is public sector was a fourth quarter reference number or a 2021 reference number. It was a calculated fourth quarter. It was $89 million on $495 million. And how much was it? That's the 18%. I don't have those same numbers right here in front of me.
For the full year I wasn't sure if that 18% that is public sector was up fourth quarter reference number 2021.
It was a calculated fourth quarter, it was $89 million on $495 million.
How much of the <unk>.
18% I don't have those same numbers right here in front of me.
<unk>.
Speaker 2: So we had ramped it probably it started less than that in the first quarter of 2021, it ramped to more than that in the second and third quarter, my guess is 20 to 25% for the full year.
So we had ramped it probably started less than that in the first quarter of 2021, it ramped to more than that in the second and third quarter. My guess is <unk>.
20% to 25% for the full year.
It would be where it ended up but I'm guessing I don't have numbers in front of me.
Speaker 2: would be where it ended up but I'm guessing I don't have numbers in front of me.
Speaker 8: Okay, and but regardless, you've gone through the calc
Okay, but.
Regardless you have gone through the calculation and that's for the full year you would expect Ulta.
Speaker 8: for the full year, you would expect it ultimately will end up being up in for the full year of 2022. And then that's notwithstanding the fact that some of the
Ultimately, we will end up being up for the full year of 2022, and then that's notwithstanding the fact that some of the.
Speaker 8: jobless claims work is going to be tailing off, which means that the other parts are growing faster, which means that
Jobless claims work is gonna be tailing off which means that the other parts are growing faster which means that.
Conceivably, we should see growth even in 2023 for the public sector.
Speaker 2: Conceivably we should see growth even in 2023 for the public sector area as well. We believe public sector will be a nice permanent additional revenue source for productivity 2023 and beyond.
Area as well.
We believe public sector will be a nice permanent additional revenue source for Protiviti 2023 and beyond.
Speaker 2: and we absolutely believe for the full year 2022, productivity will grow nicely.
And we absolutely believe for the full year 2022, <unk> will grow nicely.
Notwithstanding for 2022.
Speaker 2: Notwithstanding, for 2022, the public sector component will grow somewhat more slowly. I'm now being told that for the full year 2021, public sector was 19% of the total.
The public sector component.
We'll grow somewhat more slowly.
Now being told that for the full year 2021 public sector was 19% of the total.
Perfect. Thank you.
There are no further questions in queue at this time I will turn the call back over to Keith for closing remarks.
Speaker 3: There are no further questions in queue at this time. I'll turn the call back over to you, Keith, for a
Speaker 2: Okay, thanks everybody for joining today. Thank you very much.
Okay. Thanks, everybody for joining today, thank you very much.
This concludes today's teleconference.
Speaker 3: This concludes today's teleconference. If you have missed any part of the call, it will be archived in audio format in the Investor Center of Robert Haaf's website at www.roberthaaf.com. You can also dial the conference call replay. Dial-in details and the conference ID are contained in the company's press release issued earlier.
Any part of the call it will be archived in audio format any investor Center of Robert Half's website at Www Dot Robert half Dot Com you can also dial the conference call replay.
In details and the conference I'd are contained in the company's press release issued earlier today.
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