Q2 2022 Robert Half International Inc Earnings Call
[music].
Hello, and welcome to the Robert half second quarter 2022 conference call.
This conference call is being recorded.
If you'd like to ask a question during the Q&A portion of the call. Please press star and the number one on your phone.
Host for todays call are Mr. Keith Waddell, President and Chief Executive Officer of Robert.
And Mr. Michael Buckley, Chief Financial Officer.
Mr. <unk> 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 risks and uncertainties that could cause actual results to differ materially from the forward looking statements.
These risks and uncertainties are described in today's press release and in our most recent 10-K and 10-Q filed with the SEC.
We assume no obligation to update the statements made on today's call.
During this presentation.
You mentioned, 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 wed.
We'd like to remind you that beginning of 2022, our financial disclosures for contract operations, formerly temporary and consulting staffing.
Or based on functional specialization rather than our previously branded divisions, the functional specializations, our finance and accounting administrative and customer support and technology.
It's an accounting combines our former accountemps and management resources administrative and customer support was previously office team and technology was formerly Robert half technology, Protiviti and our permanent placement operations continued to be reported separately also what we previously referred to as our staff.
<unk> operations are now referred to as talent solutions. There is no change to our underlying business operations organization.
Our presentation of revenues and the related growth rates for each of our contract functional specializations includes inter segment revenues from services provided to Protiviti in connection with the company's blended talent solutions and consulting operations.
This is how we measure and manage these businesses internally.
The combined amount of inter segment revenues with Protiviti is also separately disclosed the supplemental schedules. Just mentioned also include a revenue schedule showing this information for <unk> 'twenty 'twenty through 2022.
For your convenience our prepared remarks for today's call are available at the Investor Center of our website Robert half Dot com.
Okay.
We are pleased to once again report very strong results, which continued to reflect a robust global labor market and demand environment.
<unk> solutions led the way with permanent placement and contract talent solutions growing 39% and 19% respectively on a year on year basis.
For Protiviti solutions also remains strong I'd.
I'd like to acknowledge the dedication and exemplary efforts of our entire global workforce, including talent solutions, Protiviti and corporate services professionals, who make our success possible.
Companywide revenues were 1.863 billion in the second quarter of 2022 up 18% from last year's second quarter on a reported basis and up 20% on an as adjusted basis.
Net income per share in the second quarter was $1 60, increasing 20% compared to $1 33 in the second quarter, one year ago cash flow from operations. During the quarter was 233 million in June we distributed a 43 cents per share cash dividend.
And to our shareholders of record for a total cash outlay of 49 million.
Per share dividend has grown 11, 6% annually since inception in 2000 and for.
The June 22 dividend was 13.2% higher than 2021.
So acquired approximately 900000, Robert half shares during the quarter for 79 million.
We have five 8 million shares available for repurchase under our board approved stock repurchase plan.
Return on invested capital for the company was 48% in the second quarter now I'll turn it over to our CFO Mike Buckley.
Thank you Keith and Hello, everyone.
Keith noted global revenues were 1.863 billion in the second quarter.
On an as adjusted basis second quarter talent solutions revenues were up 24% year over year U S. Talent solutions revenue were 1.071 billion up 25% from the prior year non U S talent solutions revenues were 295 million up 20 <unk>.
Percent year over year on an as adjusted basis, we have 316 talent solutions locations worldwide, including 85 locations in 17 countries outside of the United States.
In the second quarter, there were 63, four billing days unchanged from the same quarter one year ago.
Current fair at 64.3 billing days compared to 64.4 billing days one year ago.
Currency exchange rate movements during the second quarter had the effect of decreasing reported year over year total revenues by $37 million.
$26 million for talent solutions, and 11 million for Protiviti.
Negatively impacted our year over year overall revenue growth by two three percentage points.
Two three percentage points for talent solutions, and 2.4 percentage points for Protiviti.
[noise] contract talent solutions Bill rates for the quarter increased eight 2% compared to one year ago adjust.
Adjusted for changes in the mix of revenues by functional specialization currency and country. This rate for the first quarter of 2022 was nine 1%.
Now, let's take a closer look at the results for Protiviti.
Global revenues in the second quarter were $497 million.
$396 million of that is from business within the United States and $101 million is from operations outside of the United States.
On an as adjusted basis Global second quarter, Protiviti revenues were up 11% versus the year ago period with U S. Protiviti revenues up 8%.
Non U S revenues were up 21% on an as adjusted basis.
<unk> and its independently owned member firms serve clients through a network of 88 locations in 29 countries.
Companywide second quarter public second sector revenue was 94 million of which 770 million was reported by Protiviti and the balance reported by talent solutions currency exchange rates had the effect of decreasing year over year public sector revenues by $4 million.
We expect third quarter 2022 public sector revenues to be $90 million to $100 million and we continue to expect full year 2022 public sector revenues to be flat to up 10% for the year.
Turning now to gross margin.
And contract talent solutions second quarter gross margin was 39, 9% of applicable revenues compared to 39, 7% of applicable revenues in the second quarter one year ago.
Conversion revenues or contract a higher were four 1% of revenues in the quarter.
Our permanent placement talent solution revenues in the second quarter were 14, 7% of consolidated talent solutions revenues versus 12, 8% of consolidated talent solutions revenues in the same quarter one year ago.
When combined with contract Count solutions gross margin overall talent solution gross margin was 48, 7% an increase of 1.3 percentage points compared compared to the year ago second quarter.
For Protiviti gross margin was 34% of Protiviti revenues compared to 29, 1% of Protiviti revenues one year ago.
Adjusted for deferred compensation related classification impacts gross margin for Protiviti was 28, 1% for the quarter just ended compared to 30% one year ago.
Margin in the current period was impacted by higher staff resource costs, including continued expansion of head count in the quarter.
Enterprise selling general and administrative costs were 27, 3% of global revenues in the second quarter compared to 39% in the same quarter one year ago.
Adjusted for deferred compensation related classification impacts enterprise SG&A costs were 33% for the quarter just ended compared to 29, 4% one year ago.
Talent solutions SG&A costs were 32, 2% of talent solutions revenues for the second quarter versus 38, 4% in the second quarter of 2021.
Adjusted for deferred compensation related classification impacts.
<unk> solutions SG&A costs were 36, 2% for the quarter just ended compared to 36, 3% one year ago.
The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding 0.9 percentage points to the quarter's adjusted SG&A ratio.
Second quarter SG&A costs for Protiviti were 14% of Protiviti revenues compared to 12, 5% of revenues in the year ago period.
Operating income for the quarter was $306 million.
Adjusted for deferred compensation related classification impacts combined segment income was $241 million in the second quarter.
Combined segment margin was 12, 9%.
Quarter segment income from our talent solutions divisions was 171 million with a segment margin of 12, 5%.
Segment income for Protiviti in the second quarter was $70 million with a segment margin of 14, 1%.
Our second quarter tax rate was 27% the same as one year ago.
At the end of the second quarter accounts receivables was 1.092 billion and and implied days sales outstanding or DSO was 52 six days.
Before we move to third quarter guidance, Let's review some of the monthly trends we saw in the second quarter and so far in July all adjusted for currency and billing days.
Contract Count solutions exited the second quarter with June revenues up 18% versus the prior year compared to a 21% increase for the full quarter.
Revenues for the first week of July were up 16% compared to the same period one year ago.
Permanent placement revenues in June were up 38% versus June of 2021. This compares to a 43% increase for the full quarter.
For the first two weeks of July permanent placement revenues were up 3% compared to the same period in 2021.
This period includes the historically variable impact of the fourth of July holiday.
We provide this information so that you have insight into some of the trends we saw during the second quarter and into July .
But as you know these are very brief periods of time, we caution against reading too much into them with.
With that in mind, we offer the following third quarter guidance.
Revenues 187 billion.
Two $1 95 billion.
Income per share $1 60.
To one dollar and 70 cents.
Midpoint revenues of 1.911 billion or 14% higher than the same period in 2021 on an as adjusted basis.
MIT midpoint earnings per share of $1 65 is 8% higher than 2021.
Notwithstanding a five cent negative impact for currency and a higher tax rate.
Note that in the prior year Q3, 2021 revenues and EPS had very strong year over year growth rates of 43% and 129% respectively.
The major financial assumptions underlying the mid point of these assumptions are as follows.
Revenue growth on a year over year basis.
<unk> solutions up 16% to 19%.
Protiviti up 6% to 9%.
Overall up 12% to 16%.
Gross margin percentage contract talent, 38% to 40% productivity, 28% to 30% overall, 42% to 44%.
SG&A as a percentage of revenue, excluding deferred compensation classification impacts talent solutions, 36% to 37% productivity, 14% to 16% overall, 30% to 32%.
Segment income talent solutions, 11% to 13% Protiviti, 13% to 15% overall, 11% to 13% tax rate, 26% to 27% shares $108 million to $110 million.
Third quarter capital expenditures and capitalized cloud computing cost $25 million to $30 million we.
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.
Global Labor markets remained strong in the United States job openings and quit rates remained elevated and only modestly below all time highs.
Unemployment rate continues to hold near a record low, particularly those with a college degree weather rate is two 1%.
For small businesses the National Federation of independent businesses are NFIB recently.
Reported that 94% of those hiring or trying to hire had few or no qualified applicants for open positions and 50% of small business owners had job openings they could not be filled.
Remote and hybrid working models are here to stay and provide us with a significant opportunity to capitalize on the structural shift in how companies source talent.
This plays to our numerous strengths.
Our global brand Office network candidate database and advanced AI driven technologies.
The demand environment remains strong on a broad basis spanning industries company size skill level and geographies. We continue to see our talent solution results recovering at a faster pace than we've experienced in the past.
Permanent placement and contract talent solutions segments included in blended solutions with Protiviti have achieved cumulative sequential growth of 180% and 63% respectively. During the eight quarters since the pandemic trough.
Similar numbers for the financial crisis, and the dotcom recoveries were 78% or 36% and 121% and 47% respectively.
Protiviti reported double digit year on year adjusted revenue growth.
Notwithstanding the previously disclosed and expected wind down of a very large financial services regulatory remediation project and the anticipated moderation in stimulus related public sector revenues internal audit and technology consulting solutions led the way.
Protiviti is pipeline remained strong across each of its solution areas, particularly internal audit.
As clients struggle to internally staff the rising demands of this function.
We continue to be optimistic about our growth prospects for the remainder of 2020 to.
Propelled by the strength of our people our technology, our brand and our business model.
We made we remain steadfast in our focus on our purpose to connect people to meaningful work and provide clients with the talent and subject matter expertise they need to confidently compete and grow.
Finally, we'd like to thank our people who are our greatest asset and what differentiates us in the marketplace for the significant company recognition received this quarter.
We are proud to have recently ranked number one by Forbes on three prestigious list Amira.
America's Best professional recruiting firm America's best temporary staffing for America's Best Executive recruiting firm.
This is the first time any company has placed first in all three categories.
This is a credit to all of our employees and their incredible drive to deliver outstanding service to our clients and our candidates now Mike and I'd 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 for additional questions.
Right.
At this time.
Question. Please take it all by pressing star one on your telephone keypad.
We're using a speaker phone please make sure your mute function.
All right.
You may remove yourself.
Okay.
Darcie.
Q.
Once again that is.
Sure.
Like to ask a question.
And welcome.
And your first question comes from that line of Mark Marcon.
With Baird.
Hey, good afternoon, Keith and Mike and congratulations on the recognitions.
From Forbes I was wondering can you talk a little bit more about what you're seeing in productivity from the prepared remarks, it sounds like the overall public sector, including talent solutions. You know it was going to be flat to up I'm wondering do you expect the public sector or productivity to be flat.
And can you talk a little bit about more about the areas of strength that youre seeing within productivity since it looks like our productivity was up 17.4% ex public sector. You mentioned internal audit I'm wondering is that you know primarily young companies or is that established.
In 2010.
So protiviti has a very strong pipeline across our solution areas its aggressively adding staff in part to fund growth and in part to bring its mix of contractors to full time staff below 50%.
You had got above 50% there was a view that that was a little too much towards the contractor, so theyre, bringing that mix down by half, adding more full time staff tech.
Technology consulting I E. The hottest as we talked about.
As clients struggle to hire their own people for internal audit.
There's also increasing demands if you think about all the modernization all of the innovation projects that companies of all sizes have there's the internal audit element to bringing the results of those projects online that stimulates demand and again, that's all all sizes of <unk>.
<unk> clients and technology consulting you've got data analytics enterprise applications.
That are also strong.
If you combine the impact of public sector, plus the wind down of the large regulatory project their growth rate was impacted by about 12 points and so you can take what's reported at 12 to get the impact of those two projects that have wound down the good news is the.
The regulatory project the people have been redeployed, but just to replace that means flat growth not increasing growth on that element of their business. The point the point being apart from those two very specific areas Protiviti is core is growing.
A very strong double digit oh, they're very bullish about their prospects, they're competing very effectively with the big four there are margins are recovering up 200 basis points this quarter to 14% I understand its not the 17 that you had last year.
But last year had no travel had no training had very little recruiting had no practice development, we're very happy with a 14% to 15% margin range, which is where they are so again apart from the two areas that we've talked about before at the end today opportunities growing.
Right nicely.
Frankly their biggest issue is not demand their biggest issue is attracting people, which they're working on aggressively and are being successful doing so they've won many awards have their own type I think just this week. They want a best place to look for millennials to work award Bob by the.
Places to work organization, so they're doing quite well. So we're pleased with Protiviti were pleased with the results. We're pleased with its pipeline they're working through are these.
These two issues and I'd say two on public sector. Since you asked the question that's pretty much tracking as expected housing assistance Education services project management those engagements are leading the way public sector also struggling to compete in a tight labor market.
There's been a mix shift to talent solutions and public sector as we've talked about as we've expected. So protiviti is down by more than were down overall, because talent solutions public sector is growing the public sector pipeline.
Excuse me is two <unk>, what it was a year ago. So we're very pleased with that but bottom line on public sector. It pretty much tracked as expected there were some FX impact if you add that back we're right in the range that we talked about so pleased with public sector, it's a whole new.
Line of business for US if you will both talent solutions in Protiviti, but tracking as expected.
That's great and then you know Robert half did an amazing job of navigating through Covid with an eight 3% EBITDA margin for 2020 and.
Nobody knows you know if we're going to have a soft landing a mild recession or perhaps something worse.
Whats the philosophy, how would you guide investors to think about how you would navigate through the cycle. If we ended up having a you know a mild recession in terms of our expense controls and positioning Robert half for the for the snapback in the rebound when the inevitable up cycle comes.
<unk>.
Well I think you correctly point too and you don't have to look very very far as to how we perform in a downturn by just looking at how we did during the pandemic and just the playbook. We ran is no different than the playbook, we all always run on the talent solutions side.
When we look at the productivity of our internal staff and the under performers we become less patient with than we typically would be in typical times in normal times and so there are some right sizing of the staff on the talent solutions side.
The nice thing on the Protiviti side fertility did not go down Protiviti did not had negative revenue growth. During the pandemic said differently Protiviti continued to grow through the pandemic. It showed to be more resilient than is the case in staffing.
And we would expect that again so.
I think the other good thing about looking back pandemic and forward as we talked about in the call yeah. The eight quarters since the trough we've.
We've grown the fastest we've ever grown post a recession trough and so if a mild recession does come you don't have to look far to see how well we came out of it both from a revenue standpoint, and a profitability standpoint.
Terrific. Thank you.
[noise] comes from the line of.
<unk> with bank of America.
Hi, Thank you for taking my question can.
Can you talk a little bit about.
Permanent placement part of your business and kind of just the strength youre seeing in and you.
How long do you think that can last and your comfort in I guess that number higher.
Higher as a percent of revenue just how you're how you're thinking about that business.
Her replacement is actually one of the strongest part of talent solutions as we've talked earlier it grew 39% a year.
Year on year on tough compares.
Virtually to a person when you talk to our people, they're probably the most bullish about permanent placement given the state of the labor market, which remained strong.
Given the talent shortages that exist many companies even today prefer to hire full time and that's for the benefit of Perm placement. So.
To show our confidence in Perm placement, it's the area, where we're hiring the most aggressively internally.
It's frankly, the productivity level of our current staff is so high I mean, the only way we're going to grow permanent placement is to have some more internal resources. So we feel good about permanent placement, we just talked to all of our people.
They feel good about permanent placement so we're bullish on permanent placement.
Yeah.
So that all the concerns about a potential downturn how are you thinking about managing your cost.
He has strong environment today, but they given there is a potentially slower labor market in the near term given.
Thanks.
Okay.
Yes, I talked a little bit.
Mark about how we deal with our staff cost I think we've got a long track record across many downturns.
<unk>.
Right sizing our staff relative to expected revenue trends and we would do same but we're not going to do is make it self fulfilling and cut in advance of that there is so much noise about there about whether there's going to be a recession, how deep there's going to be a recession when.
The recession might occur there are so many conflicting signals. The one thing we are not going to do is cut in advance of that and we've told our people. It is business as usual we will continue to feed the hot hands, which include Perm placement, which include management resources, which include our full time engagement professionals, we're going to continue.
To feed those hot hands as long as they're hot we will manage everything else on a productivity basis, which is the way we've always managed the business and we're very confident and comfortable about that.
Thank you very much.
Your next question comes from the line of Andrew <unk> with.
J P Morgan.
Hi.
Andrew two questions. You you were very clear about that FX was a larger than expected revenue headwind in the second quarter could you just give the EPS impact on the second quarter for FX and then my second question has to do here's a kind of a interesting question what happens if we don't go into.
A recession and we have you know a more of a soft landing here and Theres more time on the cycle I wanted to ask you about your views on contract gross margins you know contract gross margins were 39 nine in the quarter or about the same as last quarter, but in the guide contract gross margins are guided to.
It'd be 38 to 40, and so youre actually guiding contract gross margins down sequentially. My question is like do you worry that if we have more years on this expansion that contract gross margins have already peaked.
Okay.
Okay first one easy the EPS impact Q2 foreign exchange has two pennies.
And for Q3, it's two and a half penny or FX in two and a half for tax rate.
On the what if theres, a not a recession and that's precisely why we say, we're acting business as usual and feeding the hot hands as it were not going to Miss out on any business that we do have as to contract gross margins.
Frankly, we're bullish on contract gross margins there's a.
Mix element as we move more to higher skills. They cover they have higher gross margins as we move more to full time engagement professionals they have higher gross margins.
As the labor market remains tight that's good for conversions that has higher gross margins and that further as perm stays.
Strong.
The mix of Perm versus contract.
Skews further per which also helps overall gross margins, so where are we a little bit conservative in the guidance overall, yes gross margins, specifically, yes, but I can assure you if there's not a recession.
Nothing but bullish on our contract gross margins.
That's perfect.
Your next question comes from the line of Kevin Mcveigh with Credit Suisse.
Great. Thanks, so much and congratulations again on the Forbes recognition.
Hey, keep circling back to productivity on the government side is there any way to think about the funding of the projects that occurred in productivity how much of that was kind of federal versus state and is there any kind of sequencing you'd call out as to some of that running off as opposed to maybe getting rid of.
Is there any way to think about that within the context of protiviti.
Well.
First of all it's more state and local and federal it's not all state and local but it's more state and local and federal so the the housing assistance and the education is more state and local.
As to the run off.
We've been very transparent about what our numbers or by quarter split between town solutions in Protiviti for all of 2021, we've now broken that out for 'twenty 'twenty. Two we've said that for full year 2022 notwithstanding some of the stimulus related has run off we expect to be.
Flat to up and so we've said about as many ways as we know how that sure. Some of the stimulus related work is declining we are back filling that particularly on an enterprise basis with all of the other project work that I talked about Saturday when you put all the pieces together.
On a companywide basis, we think we'll be flat to up slightly notwithstanding the run off that you described.
Got it and then the remixing of kind of full time versus.
Supplemental staff on Protiviti.
What's the optimal mix, there and I guess, what what you'll decision was it kind of service delivery or just the.
The Remixing I guess.
Yeah.
Okay.
So it went north of 50% of the hours work to contract. The last couple of quarters had you asked me five years ago.
What the highest contract or a percentage that we could ever even dream about at Protiviti I wouldn't have said higher than 30%.
And so the fact that they've taken it beyond 50 is pretty incredible.
But.
There is a practical level, there's a there's a career or impact to the people that work at Protiviti.
50 50.
And below.
Feels reasonable to me its not theres nothing magic about it its subjective it's the nature of work right. There's one mix for certain types of special projects. There's another mix for recurring annual internal audit engagement, it's not one mix for across all.
Their projects.
But 50 50 is is unbelievably good an unbelievably strong and it just shows.
How the resources of the entire enterprise can be brought to bear for the benefit of Protiviti and its clients and have catalyzed its growth in a major way.
But.
Let's pause, let's kind of look at 50 50.
Which is certainly closer to traditional at least over the last couple of three three years and then reassess.
Yeah.
But it's an incredible success story overall.
The way Protiviti and catalyst solutions have come together for the benefit.
First for the whole enterprise, but particularly for <unk> clients.
Makes sense. Thank you.
Okay.
Yeah.
Your next question comes from the line of George Tong with Goldman Sachs.
Hi, Thanks, good afternoon.
You expect full year 2022 public sector revenues to be flat to up 10% for the year can you discuss how much public sector Protiviti revenues will will go up by or how the how it will perform for the year and what will drive potential growth in public sector procurement spend.
Well George.
Frankly, the split between talent solutions and Protiviti as to how it's reported.
Somewhat arbitrary.
Many times the very same people on one project <unk>.
Because of how the contracting took.
Took place it gets reported on Protiviti. The very same people on the next project might be reported and talent solutions. So we think it's it's better to think about from a company wide or enterprise basis, but there's no question as we've talked about.
Things that are growing fastest at the moment and public sector tend more towards talent solutions, then protiviti be it housing assistance be it education.
That said Protiviti is very active with Rfps Protiviti has a very good success rate with the rfps, they have where they have the contract but.
Even during the heyday of public sector, 90% of the hours worked or work by contractors answer whether those contractors get reported as talent solutions revenue or Protiviti revenue is often as arbitrary as who had the contract with the client and the contract with.
The client many times related to the GSA schedules that only protiviti had so there's some arbitrariness between talent solutions versus Protiviti on public sector, which is why I think it's fair to look at it overall and we've said overall will be up it will be flat to up 10 per.
<unk>.
Got it and this is a higher level question I guess stepping back as you think about the overall macro environment, what are some areas where you're seeing.
Potential weakness, if you had to rank order.
Hinted out areas of strength, what are the areas, where you see potential cracks in New York.
Well I'm not sure I would call it cracks in the armor I would I would start by saying.
Labor markets and demand environment is very strong it's not quite as strong as it was last quarter.
I'd say clients are taking a little longer to make offers.
Often they want to see one more candidate or they want to interview their finalist one more time or they wanted to insist on the person work on site, particularly if it's at the operations level.
That said they also understand if they drag their feet too long or they're going to lose the candidate.
So I would say.
If anything if if we're going to talk on the negative side clients are taking a little longer to make their offers that said candidates are still in demand.
Candidates are still short I talked about the multiple offers I talked about the counter offers.
Still a candidate driven market, but clients are taking a little longer with an underscore the word little.
To make their offers.
Yes.
Got it very helpful. Thank you.
Your next question comes from the line of critique.
Research.
Hi, Good afternoon, I know you've talked about talent procurement that its still difficult I'm, just wondering compared to maybe three months six months ago if.
If it's got any easier if youre seeing more if you're able to see more candidates.
If it just loosened up at all.
Theres been no significant easing of candidate shortage and in fact, if anything.
Higher gas prices candidates won't remote work and don't want to have to commute into our client even more so.
And so there's.
Yeah.
Sometimes there is conflict between what the client works once.
<unk> would be at the operational level for the person to be on site, two or three days versus what the candidate wants and if anything the candidates won't remote even more than they wanted 90 days ago, and if anything clients want a couple of days on site more than they did 90 days.
[noise] ago, So our people have to bridge that gap between the parties to make deals happen.
And just as a follow up any change in wage inflation seems like based on your comments, probably not since it's still difficult to get down but.
Curious if you've seen any change in growth rate on wage inflation.
No. It it tracks closely with bill rate changes and we talked about.
This quarter. It was eight ish percent in the last quarter. It was nine ish percent I'll take the quarter before that it was eight ish percent. So it's it's been eight or nine on the bill rate side.
You can take a couple of points off of that to get what they pay rate is.
Thank you very much I really appreciate it.
Your next question comes from the line of Manav Patnaik with Barclays.
Thank you Keith I was just wondering like what are some of the leading indicators.
Keith would you would look for in terms of you know when it wont be business as usual I guess, particularly on the consulting side something that'll give you that lead.
You showed some deceleration, but it's only supposed to needs of July . So just curious you know, we'll keep track of what you need to see to change.
Change some of the symptoms bathrooms.
Well I'd first say from the first few weeks of July are very holiday impacted so we read virtually nothing into that one way or the other.
Leading indicators if you look back over.
Prior downturns when you first look at Perm placement versus contract, they're mostly coincident, maybe perm leads a little bit versus contract, but there's certainly no external data, we can look to and whether it be b L. S. S. I E.
A S a.
Any other of the economic ISI.
You name it.
There is no magic external data.
We've found that helpful. In gets predicted this or as a leading indicator we get weekly data on the contract side, we get daily data on the Perm placement side and so there's nothing like our own data that help us out.
And as I said, we just talk to our key people this week.
In.
While they said, it's not quite as strong as it was last quarter, it's still very strong and they feel very good.
Frankly, the numbers they submitted for the coming quarter are stronger than.
What we published because we were just a little more conservative, but our people feel good.
Okay and.
Pretty good obviously and the stock has pulled back I mean, I guess I'm just curious any changes in your capital allocation philosophy.
[noise].
Our capital allocation policy.
For ever has been you know first do what's necessary for the business, which is principally around.
Technology innovation spending, which we're doing.
Then we look to continue the dividend grow the dividend we talked on the call earlier about we've grown the dividend double digits since inception.
And with the balance we dollar cost average the balance of our free cash flow, we dollar cost average stock buybacks and so.
Sometimes the socks up sometimes its down sometimes you feel like it's undervalued, sometimes you felt like it's overvalued.
What we do is where there were consistent we dollar cost average and over time it works its way out.
And we continue to do that as we speak you can look at our free cash flow you can look at our financing on our cash flow statement and we're pretty much spending all of our free cash flow between.
<unk> Tec internal innovation dividends and repurchases.
Got it thank you so much.
Okay.
Question comes from the line of Tobey Sommer with Securities.
Thank you.
Given your long tenure in the industry.
Is there an example in any geography.
With some people are now calling oh.
Job full recession should we use the software.
The firm labor market maintain that characteristic.
[laughter] as I sit here nothing comes to mind.
I think the head scratcher for many is given how strong the labor markets are if in fact, we're beginning a recession.
How impactful is that strong start to how the labor markets will perform and is there enough slack and all of those job openings that actual jobs won't be that impacted or instead, well actual jobs will actual.
<unk> be impacted.
All we can say is what I've already said.
As we speak and as we look forward to the coming quarter.
People are very positive the markets are very strong.
Theres a lot of demand from our clients.
Not quite as much as the prior quarter, but it's very strong.
Well, we can do very well in that environment like the one we're in.
Excellent my follow up is.
You're talking about a previous question you asked about external data that you may look at in.
In your prepared remarks, you cite some N.
Data stable and there are some hiring component that they do.
The street, yet that the overall survey fell to a 13 year low.
How do you how do you square the overall sentiment declining so precipitously and then site or the labor components.
And so I think you were talking about the optimism index.
And one of the reasons why their optimism fell is because their heart, having a hard time finding people.
And so that's how you square the two pieces.
There's some there's somewhat pessimistic because they're having trouble finding the people that they need to grow their business. The other piece of that is inflation.
Sure.
Thank you very much.
[noise]. Your next question comes from the line of Jeff Silber with BMO capital markets.
Thanks, So much I apologize I joined late so if this question was asked just please ignore me I'm just curious in terms of your own internal hiring recruiters account managers et cetera, how that's been tracking so far this year and what plans you have for the rest of the year.
And so we've aggressively added to the areas that are growing the fastest and for us that starts with permanent placement.
Management resources and full time engagement professionals all three of those areas are still strong as we sit here and we have plans to continue to add the staff in those areas because the productivity of those people currently in those areas is high and the only way we can.
Can take advantage of those hot markets is to continue to add to staff for our other practice groups, we manage on a productivity basis and only as productivity <expletive>.
Dictates do we add to staff there, but we haven't changed our policy and as I said I don't know whether you're on the call. The last thing we're going to do is make a downturn self fulfilling by not feeding the hot hands that I just described.
Okay. That's really helpful. And then I know there was an FX impact on revenues in the rest of the business in the quarter, but specifically focusing on revenues if I take that out.
You still came in at the low end of guidance or maybe at the midpoint of guidance are there any specific segment that either outperformed or underperformed during the quarter.
I'd say the one that.
<unk>.
Struggled the most was our administrative and customer service and that's the one most clot most closely tied to public sector.
So other than that there was no big story.
Most of the revenue differential was currency related.
Alright, I appreciate you pointing that out thanks, so much.
Sure.
Yes.
Your next question comes from the line of David Silver with CL, King and associates.
Yeah, Hi, thank you.
I have a basically a kind of a very naive sounding question about your perm business. So.
You know I think of that business is.
The striking a balance between the demand for full time candidates on the supply.
And for years now I think.
The jolts data the unfilled positions data indicate there's a.
Shortfall on the candidate supply side when I look at your first half revenues of $387 million or so from Perm.
It's up 29% over the first half of.
2021, and up 23% over the back half of 2021 and I'm just kind of wondering on a very naive basis too.
Drive that growth you need more candidates.
Where are the candidates in your opinion, you know where are you finding them to make these incremental placements. Thank you.
And so on the permanent placement side by and large we recruit people that already have a full time job to change jobs and take a new job and so we've got the entire universe of people currently employed that we recruit from.
On the permanent placement side.
Okay.
Okay and I'd like to maybe my second question would be to build on that answer.
And I guess some people use the moniker of the great resignation, but.
I would just say churn or job hopping.
How does how does Robert Half's strike that balance you know between the clients, who want a candidate who's going to stick around for a long time and justify the fees that we're paying.
And you know the candidates desire to.
The advantage of a hot job market and go for either higher pay or more amenable.
<unk>.
Remote in person balance in other words.
Is there a slight con.
Conflict or how do you manage that trade off between serving the candidate in a certain way serving the employer. Thank you.
Yeah.
But.
I'd say most of the great reshuffle is not Canada makes a change and then shortly after makes another change it's more that first change for a career and or compensation purposes. They makes a change and so.
While there are some of the former that's the exception rather than the rule.
And so.
Well I mean, we care and T that if they do leave we replace them on a reduced basis, but other than that I don't think we've seen a major business problem.
Candidates, we place the first time in large numbers then leave in a relatively short period of time for yet a better opportunity.
Yeah.
So I guess it is possible, but I'm just saying.
On the ground, that's certainly not the norm.
Okay, we're not there yet okay no I appreciate that context, thanks very much.
Okay.
Your next question comes from the line of Mark.
With Baird.
Okay.
Keith I had a couple of quick follow up questions number one there weren't any questions with regards to international on the call. I'm wondering can you talk a little bit about what you're seeing on a country by country basis any sort of.
We can see the overall trends, but just wondering you know are you seeing any sort of distinct patterns emerging between the countries, particularly in Europe .
Well I'd say were strong in the U K.
Were particularly strong in Germany, and the really nice thing about Germany.
Is that Germany talent solutions in Protiviti are going to market very well and in fact, it may be our most successful country, where protiviti and talent solutions go to market together and both are benefiting accordingly and their outlook notwithstanding.
Turning all the talk about energy, Russia et cetera.
German outlook is still quite good because of those.
Manage business solution opportunities they jointly have.
Yeah.
Great.
Any areas that are that are pulling back or that seem a little bit weaker.
Does that seem in Belgium was a little softer this quarter than normal but is expected to be better.
In the coming quarter, but there's no real major outlier in a negative way in Belgium included.
Great and then just the.
Pipeline for Protiviti, how much visibility do you have into the pipeline for projects that would start in Q4. The reason why I'm asking is because you know the comps become significantly easier.
When we get to Q4, you you, obviously had really strong comps for productivity in Q2 and Q3. So just.
I'm wondering if maybe we even have an inflection point in Q4.
Well I haven't looked at their pipeline based on when it starts and my guess is they actually have it I just don't have it off the top of my head, but their pipeline is strong there are people constraint there not demand constrained and internal audit is by leaps and bounds their hottest area.
As I talked about their clients can't staff their own internal audit department they need help their clients as they have their answer there.
Modernization and innovation projects those projects usually require internal audit before they go live theres more of that so good all internal audit, which is <unk> as a long term core business is its strongest and it's a wonderful thing.
In Q4 is a strong quarter for that.
That's correct you have seasonally Q3, you have a step up or a lot of the Sarbanes Oxley work gets done.
Mostly hold that because of that work continues into Q4.
So those seasonal patterns in the guidance, we'd given assumes a seasonal step up in productivity in large part because of Sarbanes Oxley slash internal audit.
Great. Thank you.
Okay. I believe that is our last question. We appreciate everybody joining thank you very much.
Yeah.
This concludes today's teleconference.
Well it will be archived in audio format in the investor.
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