Q3 2023 Robert Half Inc Earnings Call

Please standby.

Hello, and welcome to the Robert half third quarter 2023 Conference call. Today's conference 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 telephone keypad our hosts for todays call are Mr. Keith Waddell.

<unk>, President and Chief Executive Officer of Robert half and Mr. Michael Buckley, Chief Financial Officer, Mr. Waddell you may begin.

Hello, everyone. We appreciate your time today before we get started I'd like to remind you that the comments made on today's call contain forward looking statements, including predictions and estimates about our future performance.

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 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 S E C.

We assume no obligation to update the statements made on today's call.

During this presentation, we made mention some non-GAAP financial measures and reference these figures as as adjusted reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release or presentation of revenues and the related growth rates for each of our contract.

Functional specializations, including inter segment revenues for services provided to Protiviti in connection with the company's blended talent solutions. It consulting operations. This is how we measure and manage these businesses internally the combined amount of intersegment revenues with Protiviti is also.

Separately disclosed for your convenience our prepared remarks for today's call are available in the Investor Center of our website Robert half dotcom.

We delivered above consensus top and bottom line results for the third quarter.

Notwithstanding the ongoing macroeconomic uncertainty that Linkedin about client and job candidates decision cycles, both talent solutions and Protiviti exceeded expectations gross margins remained strong due to pricing discipline and the ongoing benefit from the rising.

Mix of revenues from higher skilled services, our operating cost base also benefited from the targeted actions, we've taken to align cost with revenues.

We remain confident both in our ability to weather the current climate and in our future growth prospects as the macro landscape improves for the third quarter of 2023 company wide revenues were at 1.564 billion down 15% from last year's third quarter on a reported.

Basis, and down 14% on an as adjusted basis.

Net income per share in the third quarter was 96 compared to $1 53 in the third quarter a year ago cash flow from operations. During the quarter was 176 million in September we distributed a 48 cents per share cash dividend to our shareholders of record for a total cash outlay.

51 million.

Our per share dividend has grown 11, 4% annually since its inception in 2000 and for the September 2023 dividend was 11, 6% higher than in 2022.

We also acquired approximately 1.2 million Robert half shares during the quarter for 90 million. We have 11 5 million shares available for repurchase under our board approved stock repurchase plan return on invested capital for the company was 24% in the third quarter now I'll turn the call over to ours.

Yeah, So Mike Buckley.

Thank you Keith and Hello, everyone as Keith noted global revenues were 1.564 billion in the third quarter.

On an as adjusted basis third quarter talent solutions revenues were down 17% year over year U S talent solutions revenues were $823 million down 20% from the prior year's third quarter.

Non U S talent solutions revenues were $260 million down 7% year over year on an as adjusted basis, We have 319 talent solutions locations worldwide, including 89 locations in 18 countries outside of the United States.

In the third quarter, there were 63, one billing days compared to $64 three billing days in the same quarter one year ago.

The fourth quarter of 2023 has 61.1 billing days compared to 61.2 billing days during the fourth quarter of 2022.

Currency exchange rate movements during the third quarter had the effect of increasing reported year over year total revenues by $13 million.

10 million for talent solutions and $3 million for productivity.

Contract talent solutions Bill rates for the third quarter increased four 6% compared to one year ago adjusted for changes in the mix of revenues by functional specialization currency and country. This rate for the second quarter was 6%.

Now, let's take a closer look at results for Protiviti.

Global revenues in the third quarter were 481 million $386 million of that is from business within the United States and $95 million is from operations outside of the United States on an as adjusted basis Global third quarter, Protiviti revenues were down 5% versus the year ago Pierre.

<unk> U S. Protiviti revenues were down 6%, while non U S. Protiviti revenues were down 2%.

Protiviti and its independently owned member firms serve clients through a network of 89 locations in 29 countries.

Turning now to gross margin.

In contract talent solutions third quarter gross margin was 39, 8% of applicable revenues versus 39, 4% in the third quarter one year ago.

Conversion revenues or contract to hire.

We're three 5% of revenues in the third in the quarter compared to four 1% of revenues in the quarter one year ago.

Our permanent placement revenues in the third quarter were $12, 9% of consolidated talent solutions revenues versus 13, 8% in the same quarter one year ago.

When combined with contract count solutions gross margin overall.

Overall gross margin for talent solutions was 47, 5% compared to 47, 8% of applicable revenues in the third quarter last year.

For Protiviti gross margin was 26, 2% of Protiviti revenues compared to 30 point percent of Protiviti revenues one year ago.

Adjusted for deferred compensation related classification impacts gross margin for Protiviti was 25, 6% for the quarter just ended compared to 30% last year.

Yeah.

Moving on to SG&A enterprise.

Enterprise SG&A costs were 31, 8% of global revenues in the third quarter compared to 29, 9% in the quarter one year ago.

Adjusted for deferred compensation related classification impacts enterprise SG&A costs were 32, 5% for the quarter just ended compared to 36% last year.

Talent solutions SG&A costs were 39, 3% of talent solutions revenues in the third quarter versus 35, 3% in the third quarter of 2022.

Adjusted for deferred compensation related classification impact Alex.

Talent solutions SG&A costs were 44% for the quarter just ended compared to 36, 3% last year.

The lower mix of permanent placement revenues this quarter versus one year ago had the effect of decreasing the quarter's adjusted SG&A ratio by 0.5 percentage points.

Third quarter SG&A costs for Protiviti were 14, 7% of Protiviti revenues compared to 16% of revenues last year.

Operating income for the quarter was 144 million.

Just it for deferred compensation related classification impacts combined segment income was 130 million in the third quarter <unk>.

Combined segment margin was eight 3% third quarter segment income from our talent solutions divisions was 78 million with a segment margin of seven 2%.

Segment income for Protiviti in the third quarter was $52 million with a segment margin of 10, 9%.

Our third quarter tax rate was 30% up from 20%, 26% for the same quarter, one year ago. The higher tax rate for 2023 can be attributed to an increased impact from non deductible expenses and fewer tax credits.

At the end of the third quarter accounts receivable were $941 million and implied days sales outstanding or DSO was 54.2 days.

Before we move to fourth quarter guidance, Let's review some of the monthly revenue revenue trends, we saw in the quarter and so far in October all adjusted for currency and billing days.

Contract talent solutions exited the third quarter with September revenues down 17% versus the prior year compared to a 16% decrease for the full quarter.

Revenues for the first two weeks of October were down 17% compared to the same period last year.

On a week on week sequential basis, the rates of decline have narrowed over the past 10 to 12 weeks.

Permanent placement revenues in September were down 26% versus September 2022.

This compares to a 23% decrease for the full quarter for.

For the first three weeks of October permanent placement revenues were down 24% compared to the same period in 2022.

We provide this information so that you have insight into some of the trends we saw during the third quarter and into October 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 fourth quarter guidance revenues 141, 5 billion to 1.515 billion.

Income per share.

75 cents to <unk> 89 cents.

Mid point revenues of 1.465 billion or 15% lower than the same period in 2022 on an as adjusted basis.

The major financial assumptions underlying the midpoint of these estimates are as follows.

Our revenue growth year over year as adjusted.

<unk> solutions down 15% to 20%.

Activity down 8% to 10%.

Overall down 13% to 18%.

Gross margin percentage for contract talent.

39% to 41%.

Productivity, 25% to 27%.

Overall, 39% to 41%.

For SG&A as a percentage of revenues, excluding deferred compensation classification impacts.

For talent solutions, 39% to 41% <unk>.

Protiviti, 15% to 17%.

Overall, 32% to 34%.

And for segment income talent solutions, 5% to 8% Protiviti, 9% to 12%.

And overall, 6% to 9%.

Tax rate, 27% to 28% shares 104 point.

Five to $105 5 million.

2023 capital expenditures and capitalized cloud computing costs.

$80 million to $90 million with $20 million to $25 million in the fourth quarter.

We limit our guidance to one quarter.

All estimates we provide on this call are subject to there 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.

Assistant with prior quarters job openings remain elevated unemployment rates remain low and monthly job gains remained healthy.

Macroeconomic forecast are mixed and this has reflected that clients continuing hiring caution.

Clients are budget sensitive and very selective in their hiring activities, including the approval of new projects also many are of maintaining their internal head counts based on the anticipated difficulty in finding suitable replacements.

Many times. This is funded with a reduction in their contract staff. In addition job candidates are more reluctant to make career moves fearing they may become the last in and first out in their new roles. The net result is less churn in the labor market.

And talent solutions, we continue to strategically invest in services involving higher skilled positions across our practice groups.

This carries many advantages higher bill rates and gross margins longer assignment lengths increased client openness to remote talent or full time engaged with professionals and less economic sensitivity.

The cumulative sequential revenue declines during the first five quarters of the current downturn are less than half what they were compared to the same periods of the dotcom and financial crisis downturns.

A significant factor is that and this improvement is the relative greater resiliency of higher skilled services.

Our current mix of contract rather.

From higher skilled positions is over 50% nearly double the percentage during the dotcom downturn, we expect this positive mix shift to continue.

Protiviti is that regulatory risk and compliance practice continues to be strong and again posted significant double digit revenue growth for the quarter internal audit and to a lesser extent technology consulting.

Modestly impacted by client budget pressures for activities pipeline continues to be very strong although economic conditions are impacting the average deal size and the time it takes to close contracts and again, new engagements Protiviti continues to compete effectively in the marketplace and it's <unk>.

Specs are very positive.

We've weathered many economic downturns in the past each time emerging to achieve higher peaks with our current portfolio of talent and Protiviti solutions, we are even more confident about the future.

We remain committed to our time tested corporate purpose to connect people to meaningful and exciting work and provide clients with a talent and consulting expertise they need to confidently compete and grow finally, we'd like to thank our employees across the globe are there efforts, which made possible.

Operator: Please stand by. Hello and welcome to the Robert Half 3rd quarter 2023 conference call. Today's conference is being recorded.

Operator: If you'd like to ask a question during the Q&A portion of the call, please press star in the number one or telephone keypad. Our host for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half and Mr. Michael Buckley, Chief Financial Officer.

<unk>.

Prestigious new accolades in the third quarter.

Robert half was honored by time magazine as one of the worlds best companies and by Forbes as one of the world's best employers and just today, we were again recognized as one of Fortune's best workplaces for women.

Keith Waddell: Mr. Waddell, you may begin. Hello everyone. We appreciate your time today.

Keith Waddell: Before we get started, I'd like to remind you that the comments made on today's call contained forward-looking statements, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds. However, they're subject to the risks and uncertainties that could cause actual results to differ materially from forward-looking statements. These risks and uncertainties are described in today's press release and are in our most recent 10K and 10Q filed with the SEC. We assume no obligation to update the statements made on today's call.

Now, Mike and I'd be happy to answer your questions. Please ask just one question and a single follow up as needed. If theres time, we'll come back to you for additional questions.

Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone.

If you would like to remove yourself. Please press star two if you're joining us today use a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Star One if you would like to see more questions Star one.

Keith Waddell: During this presentation, we may mention some non-GAAP financial measures and references figures as adjusted. Reconciliation 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 each of our contract functional specializations includes intersegment revenues from services provided to fertility and 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 intersegment revenues with fertility is also separately disclosed.

The first question will come from Andrew Steinman with J P. Morgan.

Hey, Keith them, what do they give you a kind of a tough question.

Obviously, our revenues are down here, but not quite like a recession. So like what environment would you describe this as like do you feel like the next step could be mid cycle slowdown that has recovery that follows or does this really feel more pre recession.

Terry T M.

Oh, what environment are we in now or or in an environment, where it's just factual that we've had five quarters of sequential slowing.

Keith Waddell: For your convenience, our prepared remarks for today's call are available in the investor center of our website, RobertHalf.com. We delivered above consensus top and bottom line results for the third quarter, notwithstanding the ongoing macroeconomic uncertainty that lengthens both client and job candidate decisions cycles. Both talent solutions and fertility is seeded expectations. Gross margins remain strong due to pricing discipline and the ongoing benefit from the rising mix of revenues from higher skilled services.

And that sequential slowing as about half is what we said of dotcom and great financial crisis as far as the cumulative impact.

As an aside we've done a better job of the gross margin and we've done a better job of SG&A and we've done a better job with operating margins over those same five quarters as to what's next hard to say clearly on the one hand.

<unk> are getting somewhat more positive like last time with Wall Street Journal last week was maybe 50 347, there won't be a recession, but that still close to 50 50. So there's still a lot of uncertainty to remain.

Keith Waddell: Our operating cost base also benefited from the targeted actions we've taken to align costs with revenues. We remain confident both in our ability to weather the current climate and in our future growth prospects as the macro landscape improves. For the third quarter of 2023, company-wide revenues are 1.564 billion, down 15 percent from last year's third quarter on a reported basis, and down 14 percent on an as-adjusted basis. That income per share in the third quarter was 90 cents compared to $1.53 and the third quarter a year ago.

We've long taken the stance that we would not anticipate a downturn and how we manage our cost they always lag a bit relative to our top line. The same has been true here, we're more focused on having the right kind of dry powder when things get better.

<unk>, then optimizing trough margins.

Okay.

The characterization of the current environment I think for 18 months now Andrew economists have struggled most times have been wrong about what was going to happen.

Keith Waddell: Cash flow from operations during the quarter was 176 million. In September, we distributed a 48 cent per share cash dividend into our shareholders of record for a total cash outlay of 51 million. Our per share dividend has grown 11.4 percent annually since its inception in 2004. The September 2023 dividend was 11.6 percent higher than in 2022. We also acquired approximately 1.2 million Robert half shares during the quarter for 90 million. We have 11.5 million shares available for our purchase under our board approved stock repurchase plans. Return on the invested capital for the company was 24 percent in the third quarter.

Yeah.

As we sat on the call. We are encouraged that during the last 10 to 12 weeks. Our weekly revenues have declined to less than that same rate a quarter ago. As an example from start to finish this.

Most recent quarter, our weekly revenues are down two or 3%.

Cumulatively that same statistic last quarter was down 8% to 10%. So clearly the rate of decline has narrowed and or improved significantly we're encouraged by that.

Michael Buckley: Now I'll turn the call over to our CFO Mike Buckley. Thank you, Keith, and hello everyone. As Keith noted, global revenues were 1.564 billion in the third quarter. On an as adjusted basis, third quarter talent solutions revenues were down 17% year over year. US talent solutions revenues were 823 million, down 20% from the prior year's third quarter. On US talent solutions revenues were 260 million, down 7% year over year on an as adjusted basis.

But how we overall SaaS what's next.

Given how bad everybody's guess is including professionals in the field.

Not really inclined to make an overall assessment.

That makes sense. Thank you so much Keith.

And our next question will come from Mark Mark Hahn with Baird.

Hey, good afternoon, and thanks for taking my questions.

I wanted to focus on productivity.

Michael Buckley: We have 319 talent solutions locations worldwide, including 89 locations in 18 countries outside of the United States. In the third quarter, there were 63.1 billion days compared to 64.3 billion days in the same quarter one year ago. The fourth quarter of 2023 has 61.1 billion days compared to 61.2 billion days during the fourth quarter of 2022. Currently exchange rate movements during the third quarter had the effect of increasing reported year over year total revenues by 13 million, 10 million for talent solutions and 3 million for productivity.

Yeah.

You mentioned, you know areas of strength, where regulatory risk and compliance practices I'm wondering how big is that and then.

The areas, where you're seeing some weakness how would you characterize the size there and trying to narrow in on.

You know the environment doesn't seem to be getting that much worse, but we are anticipating you know what.

A continued decline at a faster rate here in terms of the guidance for Protiviti revenues. So I'm just trying to put those pieces together and to think that part through.

Michael Buckley: Contract talent solutions bill rates for the third quarter increased 4.6% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the second quarter was 6%.

Okay as to size.

Protiviti basically has four major solution areas.

Regulatory risk and compliance internal audit technology consulting and business process improvement, while theyre not all exactly equal orders of magnitude there are approximately equal technology consulting a little larger regulatory risk and compliance a little smaller but orders of magnitude.

Michael Buckley: Now let's take a closer look at results for productivity. Global revenues in the third quarter were 481 million, 386 million of that is from business within the United States, and 95 million is from operations outside of the United States. On an as adjusted basis, global third quarter productivity revenues were down 5% versus the year ago periods. US productivity revenues were down 6% while non-US productivity revenues were down 2%. Productivity and its independently owned member firms served clients through a network of 89 locations in 29 countries, turning out a gross margin.

They are in the ballpark of being fairly equal.

As far as the guidance.

Frankly.

If you take the.

The average.

Daily or monthly billings in Protiviti for the third quarter and you apply that to the fourth quarter that has fewer days because not only the holidays, but cause of the soft close many clients have around the holidays.

Michael Buckley: In contract talent solutions, third quarter gross margin was 39.8% of applicable revenues versus 39.4% in the third quarter one year ago. Conversion revenues or contract to higher were 3.5% of revenues in the third quarter compared to 4.1% of revenues in the quarter one year ago. Our permanent placement revenues in the third quarter were 12.9% of consolidated talent solutions revenues versus 13.8% in the same quarter one year ago. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 47.5% compared to 47.8% of applicable revenues in the third quarter last year.

You get a five or 6% shorter corridor in the fourth quarter and that's precisely what the revenues are at mid point projected to decline.

And so the intention is.

Pretty stable revenues on a daily basis, if you will for the fourth quarter, It's just a short or a quarter and it's an even shorter quarter than we see in talent solutions because of the soft closes.

That.

Stan the number of days of impact.

Yeah.

Great and then you mentioned the pipeline is strong.

How would you compare the pipeline.

Michael Buckley: For productivity gross margin was 26.2% of productivity revenues compared to 30.5% of productivity revenues one year ago. Adjusted for deferred compensation related classification impacts gross margin for productivity was 25.6% for the quarter just ended compared to 30% last year. Moving on to SGNA, Enterprise SGNA costs were 31.8% of global revenues in the third quarter compared to 29.9% in the quarter one year ago. Adjusted for deferred compensation related classification impacts, Enterprise SGNA costs were 32.5% for the quarter just ended compared to 30.6% last year.

You know at this time of the year relative to say a year ago.

And to what extent does that portend.

Our next year is going to shape up and along those lines I'm wondering if you can give us any sort of color with regards to.

You know campus recruiting and what you ended up doing new additions from campuses.

You know the summer and you know this is the time of the year. When offers are going out for people for next year.

How does the size of the recruiting class coming in that will start up next summer.

So first of all the pipeline is growing it's larger than it was a year ago. However, the velocity.

Michael Buckley: Talent solutions SGNA costs were 39.3% of talent solutions revenues in the third quarter versus 35.3% in the third quarter of 2022. Adjusted for deferred compensation related classification impacts, Talent solutions SGNA costs were 40.4% for the quarter just ended compared to 36.3% last year. The lower mix of permanent placement revenues this quarter versus one year ago had the effect of decreasing the quarter's adjusted SGNA ratio by 0.5% in points. Third quarter SGNA costs for fertility were 14.7% of fertility revenues compared to 16% of revenues last year.

Of converting pipeline opportunities to close contracts and project starts has slowed so it's not a matter of.

Demand per se, it's the speed with which its the urgency with which that demand gets converted to.

A project start.

Arguably that portends well for next year Protiviti feels good about.

Where they are in this journey.

Of 2023.

That started with they're having to pay a high single low double digit digit raises to their staff given how competitive the market was too quickly became less than half of the attrition, which they typically experience which put pressure.

Michael Buckley: Operating income for the quarter was 144 million. Adjusted for deferred compensation related classification impacts combined segment income was 130 million in the third quarter. Combined segment margin was 8.3%. Third quarter segment income from our talent solutions divisions was 78 million with a segment margin of 7.2%. Segment income for fertility in the third quarter was 52 million with a segment margin of 10.9%. Our third quarter tax rate was 30% up from 20% to 26% for the same quarter one year ago.

On utilization, which they've managed through quite well.

Taken their operating margins from high 7% in the first quarter to now back to over 10, we think that's.

A very positive result, given those conditions, which then segways into campus recruiting.

Kevin.

The significantly less attrition that they're now seeing there'll be somewhat more conservative with their campus hires in the coming months than they have traditionally, but they're still doing so are they still had they just finished.

Michael Buckley: The higher tax rate for 2023 can be attributed to an increased impact from non-deductible expenses and fewer tax credits. At the end of the third quarter accounts receivable were 941 million and implied day sales outspanning or DSO was 54.2 days.

Pretty sizable intern class many of which become.

Employees via campus so.

Still recruiting on campus, but not quite the extent to what they have before given the significant decline in attrition.

Michael Buckley: Before we move to fourth quarter guidance let's review some of the monthly revenue trends we saw in the quarter and so far in October all adjusted for currency and billing days. Contract talent solutions exited the third quarter with September revenues down 17% versus the prior year compared to a 16% decrease for the full quarter. Revenues for the first two weeks of October were down 17% compared to the same period last year.

Which gets to this.

Less churn in the marketplace, that's true across employers, but what is also seeing internally ourselves.

Thank you.

And our next question will come from Josh Chan with UBS.

Michael Buckley: On a week on week sequential basis the rate of decline have narrowed over the past 10 to 12 weeks. Permanent placement revenues in September were down 26% versus September 2022. This compares to a 23% decrease for the full quarter. For the first three weeks of October permanent placement revenues were down 24% compared to the same period in 2022. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. But as you know these are very brief time periods. We caution against reading too much into this.

Hi, good afternoon, Keith and Mike Thanks for taking my questions.

I guess, Keith could you talk about the resilience in the contract talent solutions gross margin I guess, it's been very stable despite kind of a softening environment. I know you mentioned types of pricing and mix.

Kind of wanted get your thoughts on whether that can sustain going forward.

At these levels.

So given the tightness of the labor market.

We see no reason why we should be discounting pricing. If you have a solid qualified talent you shouldn't give it away and so our pricing has held up there.

Michael Buckley: With that in mind, we offer the following fourth quarter guidance, revenues 1.415 billion to 1.515 billion, income per share, 75 cents to 89 cents. Midpoint revenues of 1.465 billion are 15% lower than the same period in 2022 on an as adjusted basis. The major financial assumptions underlying the midpoint of these estimates are as follows. A revenue growth year-over-year as adjusted count solutions down 15 to 20% productivity down 8 to 10 percent overall down 13 to 18 percent.

Our assumption is that the labor market remains relatively tight and that bodes well for pricing has to mix. We've been on this long term journey across our practice groups to move up the scale curve and.

There is a meaningful gross margin benefit to the higher level skills versus the more operational level skills and accounting operational level skills will be accounts payable accounts receivable payroll general ledger et cetera, while the higher level skills would start with senior accountants and move.

Up and so.

Fat migration.

This skill curve has been.

Planned and ongoing for several years now we continue to March in that direction, which includes by the way are full time engagement professionals, which are more prevalent at higher skill levels than at the operational skill levels.

Michael Buckley: Gross margin percentage for contract talent, 39 to 41 percent, productivity 25 to 27 percent, overall 39 to 41 percent. For SGNA as a percentage of revenues excluding deferred compensation classification impacts for talent solutions, 39 to 41 percent, productivity 15 to 17 percent, overall 32 to 34 percent. And for segment income talent solutions 5 to 8 percent, productivity 9 to 12 percent, and overall 6 to 9 percent. Tax rate 27 to 28 percent shares 104.5 to 105.5 million. 2023 capital expenditures and capitalized cloud computing costs 80 to 90 million with 20 to 25 million in the fourth quarter.

We feel great about gross margins, both as to what we've done and as to the outlook.

That's good color thanks Keith.

For my follow up could I ask about the revenue comparisons you gave the October.

The first two weeks of October.

Given the fact that last year you saw deceleration in November and December.

Would you expect that if there is a somewhat stable environment that the revenue declines would lessen as you go through the fourth quarter.

Oh this hole.

Weekly sequential versus quarterly sequential versus year over year.

Yes, it has many moving parts and it's complicated.

That's why for us to understand.

Michael Buckley: 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 violence.

How we are performing right now we believe the best thing to look at is how our weekly revenues are progressing on a sequential basis. So the fact that we've had three quarters of sequential declines by definition youre going to have negative.

Keith Waddell: Now I'll turn the call back over to Keith. Thank you Mike. Consistent with prior quarters, job openings remain elevated on employment rates, remain low, and monthly job gains remain healthy.

Year on year growth rates, because you're starting in the hole, but the but to the effect that you've.

Keith Waddell: Economic forecast or mixed and this is reflected at clients continuing hiring caution. Clients are budget sensitive and very selective in their hiring activities, including the approval of new projects. Also, many are maintaining their internal head counts based on the anticipated difficulty in finding suitable replacements. Many times this is funded with a reduction in their contract staff. In addition, job candidates are more reluctant to make career moves, fearing they may become the last in and first out in their new roles. The net result is less churned in the labor market.

Flattened out most recently, that's certainly helpful on a year on year basis, but you still have the issue of the past three quarters have been down less than what they were a year ago.

And so year on year has a lot of moving parts, including what happened a year ago, obviously, but how were doing right now sequentially on a weekly basis is what we think is most indicative of what our market conditions.

That's helpful color. Thanks, Keith Thank you both for your time.

And our next question will come from Stephanie Moore with Jefferies.

Keith Waddell: In talent solutions, we continue to strategically invest in services involving higher skilled positions across our practice group. This carries many advantages. Higher bill rates in gross margins, longer assignment links, increased client openness to remote talent, more full-time engagement professionals, and less economic sensitivity. The cumulative sequential revenue declines during the first five quarters of the current downturn are less than half what they were compared to the same periods of the .com and financial crisis downturns.

Got it. Thank you so much I appreciate the question.

Maybe continuing on that last question as you think about the fourth quarter and you know maybe the trends you're starting to see at the end of the September I've had ended the third quarter or maybe in October.

Any feedback you've been hearing from your clients or customers any seasonality to think about I think we're all just trying to get our heads around where are we in the cycle and I think this is a cycle, where you had a lot of pockets of weakness you know, whether it's tech or elsewhere financial institutions over the last year or so maybe any customer color that you can point to.

Keith Waddell: A significant factor is if in this improvement is the relative greater resiliency of higher-scaled services. A current mix of contract revenue from higher-scaled positions is over 50 percent, nearly double the percentage during the .com downturn. We expect this positive mix shift to continue.

Particularly you know towards the end of the third quarter and Ive seen so far going into the fourth quarter would be helpful. Thanks.

Well I'd say customers are still cautious.

That said it feels like it's beginning to stabilize.

The numbers are the numbers as I just described from beginning to end our average weekly only changed by 2% that's not much and that's a lot better than it that it was 90 days ago and so there are signs of stabilization.

Keith Waddell: Retivities' regulatory risk and compliance practice continues to be strong, and again posted significant double-digit revenue growth for the quarter. Internal audit and to a lesser extent, technology consulting are being modestly impacted by client budget pressures. Retivities pipeline continues to be very strong, although economic conditions are impacting the average deal size, and the time it takes to close contracts and begin new engagements. Retivities continues to compete effectively in the marketplace, and its prospects are very positive.

Customers still have requirements still have demands consistent with the fact that job openings in the U S are still high so they still need people.

They're just very selective there waiting for the perfect person to come along and they feel like they can be patient and they have time to do so.

Keith Waddell: We've weathered many economic downturns in the past, each time emerging to achieve higher peaks with our current portfolio of talent and creativity solutions, we are even more confident about the future. We remain committed to our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to confidently compete and grow.

But to US the good news is when you look week by week for several weeks in a row.

It looks much better than it did 90 days ago.

Yeah.

So absolutely no that's crystal clear I appreciate it maybe just switching gears quickly could you talk a little bit about some of your tech investments and a lot of this call talking about some of that work you've done to kind of it.

Your mix in terms of maybe some of the other actions within your control can you talk a little bit about some of the digital and tech checking that investments in and the opportunity.

Keith Waddell: Finally, we'd like to thank our employees across the globe for their efforts, which made possible prestigious new accolades in the third quarter. Robert Half was honored by Time Magazine as one of the world's best companies, and by Forbes as one of the world's best employers. And just today, we were again recognized as one of Fortune's best workplaces for women.

24.

Also I presume you're talking in part about AI.

And.

We've been very pleased about what AI has done to our recruiting.

Kind of interesting this past quarter.

Keith Waddell: Now, Mike and I'd be happy to answer your questions. Please ask us one question in a single follow-up as needed. If there's time, we'll come back to you for additional questions.

We did a major three year back test of the effectiveness of our AI.

We randomly chose over 70000 candidates over the last three years.

Operator: Thank you. If you would like to signal with questions, please press star one on your touchstone telephone. If you would like to remove yourself, please press star two. If you're joining us today, use a speaker phone. Please make sure your mute function is turned off to lie your signal to reach our equipment. Again, that will be star one. If you would like to signal with questions, star one.

And we tested how accurate our motto was in predicting which candidates we placed in which we did not.

And the good news is it was highly accurate and making that prediction.

And the even better news is that clients gave us higher loyalty scores and had higher response rates, where we involved our AI model in the selection process than where we did not and so that just reinforced.

Andrew Steinerman: And the first question will come from Andrew Spiderman with JP Morgan. Hey Keith, I'm going to give you kind of a tough question. You know, obviously a reviewer down here, but not quite like a recession. So like what environment would you describe this as? Like you feel like the next step could be a mid-cycle slowdown that has recovery that follows, or does this really feel more pre-recession? Retail. Well, what environment are we in now?

What we are already believed about the our AI as we use it in recruiting as we said last quarter. We're in the process of customizing a large language model, which we think will further improve our AI and so we're excited about what it's done.

One for us on the recruiting side, we continue down the path of using AI to help our people and their outreach as to which current customers, which previous customers with prospects are the most likely to give them in order.

Andrew Steinerman: We're in an environment where it's just factual that we've had five quarters of sequential slowing. And that sequential slowing is about half, as what we said, of.com and great financial crisis as far as the cumulative impact. As an employee, and we've done a better job with operating margins over those same five quarters. As to what's next, hard to say, clearly, on the one hand, economists are getting somewhat more positive. Like last time, Wall Street Journal, last week was maybe 53-47.

When they call. So that's an effort that's ongoing there are some positive signs over that horizon, but that's.

Much less developed than we are on the recruiting side. So we're excited about our AI our investment no. We were in the AI well before a I was in the paper every day.

And it's very practical.

It Leverages data that only we have we have candidate performance data across millions of assignments that they work for us we leverage that information and it's a key portion of our AI as we now know it.

Andrew Steinerman: There won't be a recession, but that's still close to 50-50. So there's still a lot of uncertainty to remain. We've long taken the stance that we will not anticipate a downturn in how we manage our costs. They always lag a bit relative to our top line. The same has been true here. We're more focused on having the right kind of dry powder when things get better than optimizing trough margins. The characterization of the current environment, I think, for 18 months now, Andrew, economists have struggled.

I didn't want to say AI, but you did pardon me appreciate it thanks for the color.

And we'll take a question from Manav Patnaik with Barclays.

Hi, Keith Thanks for the question.

Thomas on for Manav.

Can you talk about any public sector impacts in exposure from.

W and other labor strike for Robert half.

Andrew Steinerman: Most times have been wrong about what was going to happen. As we settle in the call, we are encouraged that during the last 10 to 12 weeks, our weekly revenues have declined less than that same rate a quarter ago. As an example, from start to finish this most recent quarter, our weekly revenues are down 2-3%. Cumulatively, that same statistic last quarter was down 8-10%. So clearly, the rate of decline has a narrowed or improved significantly. We're encouraged by that.

Yeah. So there's there's very very very little impact from labor strikes or Robert half.

Either you a W or.

The.

L a.

Entertainment based I mean, small impacts, but certainly not enough to move the needle.

Switching gears.

Can you talk about any factors that are influencing your outlook for internal hiring.

Oh for internal hiring we're always looking at the productivity of our existing staff.

Keith Waddell: But how we overall assess what's next, given how bad everybody's guess is, including professionals in the field, not really inclined to make an overall assessment. That makes sense. Thank you so much, Keith.

We've been through a process where based on individual performance.

We've had to reduce staff that werent performing to expectation.

That said, we're always in the market for a highly talented experienced staff and would continue to look so but the point is given the current environment. We're certainly not aggressively adding to internal staff, we feel good about that drive.

Mark Marcon: And our next question will come from Mark, Marcon, Whitbert. Good afternoon, and thanks for taking my questions. I want to focus on productivity. You mentioned areas of strength or regulatory risk and compliance practice. I'm wondering how big is that, and then the areas where you're seeing some weakness, how would you characterize the size there? And trying to narrow in on, the environment doesn't seem to be getting that much worse, but we are anticipating a continued decline at a faster rate here in terms of the guidance for productivity revenues.

Powder, we have and the skill set of the dry powder, which is both sales oriented.

And recruiting oriented and those are the people that are performing best in this environment. Those are the people that have the best productivity in this environment, we feel like we've got some pretty.

Pretty decent.

Capacity in that way.

But.

We're always we're always on the lookout for great people.

Mark Marcon: So I'm just trying to put those pieces together and to think that part through. Okay, as to size, creativity basically has four major solution areas, regulatory risk and compliance and turn a lot of it, technology consulting and business process improvement, while they're not all exactly equal, orders of magnitude, they're approximately equal, technology consulting a little larger regulatory risk and compliance, a little smaller, but orders of magnitude, they're in the ballpark of being fairly equal.

Got it thank you.

And our next question will come from Trevor Romeo with William Blair.

Hi, good afternoon, thanks for taking the questions.

Okay.

On the talent solutions business could you talk maybe about demand by client industry vertical are there any types of clients that are maybe holding up better than others in this environment or vice versa.

Well on the talent solutions side, where 70% of F N b.

No.

We certainly don't have that many large clients.

Mark Marcon: As far as the guidance, frankly, if you take the average daily or monthly billings and creativity for the third quarter, and you apply that to the fourth quarter that has fewer days because not only the holidays, but because of the soft clothes many clients have around the holidays, you get a five or six percent shorter quarter in the fourth quarter, and that's precisely what the revenues are at midpoint projected to decline, and so the intention is, pre-stable revenues on a daily basis, if you will, for the fourth quarter, it's just a shorter quarter, and it's an even shorter quarter than we see in talous solutions because of the soft closes that extend the number of days of impact. Great.

Financial services on the mid cap and larger cap on the Protiviti side is.

It's holding in there reasonably well probably down mid <unk>.

Single digits year on year, but theres no real industry story per se.

Outside of that.

It's pretty broad based.

So both by geography.

And by industry, maybe California, a little more impacted because it's big tech heavy.

But there are no major stories there.

Okay understood. Thanks.

And then one on Protiviti.

I think you mentioned some budget pressure on the internal audit and the tech consulting practices. Just wondering if you could maybe get some more detail on what those conversations with clients look like on consulting projects in particular since we're kind of approaching the year end budget cycle for a lot of companies.

Mark Marcon: You mentioned the pipeline is strong. How would you compare the pipeline at this time of the year relative to say a year ago, and to what extent does that pretend how next year is going to shape up, and along those lines, wondering if you can give us any sort of color with regards to campus recruiting, and what you ended up doing, new additions from campuses, this summer, and this is the time of the year when offers are going out for people for next year, how the size of the recruiting class coming in that will start up next summer.

Well part of what's happened, particularly in the internal audit with their large FSA clients. We've talked about in the past a lot of opportunity does is co sourcing where they split their responsibilities with clients as to their inter.

Internal audit work program and as clients get more budget conscious they allocate more of that work to their internal staff and less to third parties, such as Protiviti and I think that environment is expected to continue.

But as I said earlier Protiviti feels like.

The marketplace is pretty stable as it relates to their services as we speak and feeling pretty good about where they are including in the budget cycle for the coming year or the first quarter is a big quarter for signing new internal audit contracts and they're relatively.

Mark Marcon: The first one, the pipeline, it is growing. It's larger than it was a year ago. However, the velocity of converting pipeline opportunities to close contracts and project starts has slowed, so it's not a matter of demand per se, it's the speed with which, it's the urgency with which that demand gets converted to a project start. Arguably, that portends well for next year, productivity feels good about where they are in this journey of 2023 that started with they're having to pay high single low double digit raises to their staff, given how competitive the market was, to what quickly became less than half of the attrition, which they typically experience, which could pressure on utilization, which they've managed through quite well.

Bullish about that.

So we feel good.

Okay, great. Thank you Keith.

And moving on to car T data with Northcoast research.

Hey, good afternoon, Keith you talked about your ability to maintain pricing and I'm wondering from a competitive standpoint, you've seen any change if theres any pricing competition.

At all.

Or what your competitors might be doing.

Well the talent solution size, there's always price competition.

We've never operate in the absence of price competition, there are local regional firms that always in.

Every part of our cycle try to compete based on price, but given how tight the labor market is frankly.

He or she that has the best candidate wins.

Mark Marcon: They've taken their operating margins from high 7% in the first quarter to now back to over 10. We think that's a very positive result given those conditions, which then segues into campus recruiting given. The significantly less attrition that they're now seeing, they'll be somewhat more conservative with their campus hires in the coming months than they have traditionally, but they're still doing so. They still had, they just finished a pretty sizable intern class, many of which become employees via campus.

And given our brand given our positioning.

We typically can compete quite effectively on quality of talent. We can provide which is also aided by the AI I just talked about so it's more about candidate quality and price, but that's not to say we.

We don't get undercut everyday by a local competitor as to price on the Protiviti side I'd say the big four.

Based on how heavily they hired.

What's your position has been relative to the CAD.

<unk> campus hires that were coming some of which have been deferred some of them have certain locations that have excess capacity and in those locations. Those big four firms will get quite competitive as to price, but that's just part and parcel to the environment Protiviti has been operating.

Mark Marcon: So still recruiting on campus, but not quite the extent to what they have before, given the significant decline in attrition, which gets to this less churn in the marketplace that's true across employers, but is also seeing internally ourselves. Thank you.

And it's been that way for a couple of three quarters.

And just on E N Y Keith just now.

Now that they've decided to go another direction is that help hurt or is it neutral or do you think.

Joshua Chan: And our next question will come from Josh Chan with UBS. Hi, good afternoon, Keith and Mike. Thanks for taking my questions. I guess Keith, could you talk about the resilience in the contract talent solutions gross margin? I guess it's been very stable despite kind of a softening environment. I know you mentioned price pricing and mix, but just kind of want to get your thoughts on whether that kind of can sustain going forward at these levels.

For Robert half.

Yes.

I'd say neutral that helps a little bit we were already seeing.

Partners, managing directors that Werent happy with how they thought that was going to shake out.

The fact that it didn't happen wasn't a surprise given all the firsthand knowledge.

Protiviti M DS had of win Anderson Anderson consulting split.

Joshua Chan: It's so given the tightness of the labor market, we see no reason why we should be discounting pricing. If you have solid qualified talent, you shouldn't give it away. And so our pricing is held up there. Our assumption is the labor market remains relatively tight and that bodes well for pricing. As to mix, we've been on this long-term journey across our practice groups to move up the skill curve and there is a meaningful gross margin benefit to the higher level skills versus the more operational level skills.

And what.

What the challenges are there the thing about Ernst and young.

They didn't have a lot of external audit financial services clients, where they're conflicted from providing consulting services. So they weren't gonna be freed up in a major way to provide consulting and protiviti is the largest industry.

Joshua Chan: In accounting, operational level skills will be accounts payable, accounts receivable, payroll, general ledger, et cetera, while the higher level skills would start with senior accounts and move up. And so that migration up the skill curve has been planned and ongoing for several years now. We continue to march in that direction, which includes, by the way, our full-time engagement professionals, which are more prevalent at higher skill levels than at the operational skill levels. We feel great about gross margins both as to what we've done and as to the outlook.

Which is F. S high so it was already not expected to have a huge negative impact for that reason, but the fact that it didn't happen its kind of business as usual.

Nothing's, new but there is a little more activity with some of their partners managing directors that would be interested with Protiviti I'd say the other thing about the big four generally most have a very young early retirement practice I say that because I'm 66.

And that would be passed there their limit, but we're the beneficiary of.

Many of those early retired partners across the big four that have many many projects you have years left in their careers.

Thank you very much I appreciate it.

And our next question will come from Jeff Silber with BMO capital markets.

Keith Waddell: That's good fellow things, Keith. For my follow-up, could I ask about the revenue comparisons? You gave the October, first two weeks of October. I guess given the fact that last year you saw this deceleration in November and December, would you expect that if there's a somewhat stable environment that the revenue declines with lessen as you go through the fourth quarter? Oh, this whole weekly sequential versus quarterly sequential versus year over year has many moving parts and is complicated.

Hey, Thanks, so much this is ryan on for Jeff over the past couple of quarters, there has been a larger delta.

When the U S and international business I was just curious if you can explain where youre seeing the relative strength internationally.

Okay.

Your observation is correct and our international zone generally speaking has outperformed.

For several quarters most of that's been in Europe.

Within Europe.

Germany has been the strongest.

Belgium has always been solid it's been good lately and even the U K, which gets a fair amount of negative press for us the UK has been good.

Keith Waddell: That's why for us to understand how we're performing right now, we believe the best thing to look at is how our weekly revenues are progressing on a sequential basis. So the fact that we've had three quarters of sequential declines by definition, you're going to have negative year on your growth rates because you're starting in the hole, but to the effect that you've flattened out most recently, that's certainly helpful on a year on year basis, but you still have the issue of the past three quarters have been down less than what they were a year ago.

So we continue to have a better quarter year on year and sequentially outside the U S than in the U S.

Which is great.

Got it and then I know you talked about some of the cost actions during the quarter and I'm sure. That's reflected in the SG&A guidance just more broadly can you offer any thoughts on where you are from expense going forward.

But as I said earlier, our overarching goal is not to optimize trough margins, but is instead to right size and have the right kind of capacity when things get better.

Keith Waddell: And so year on year has a lot of moving parts including what happened a year ago, obviously, but how we're doing right now sequentially on a weekly basis is what we think is most indicative of what are market conditions. That's a full color.

And we've gone through a process the last several quarters individually based on productivity and based on capabilities to right size, our staff, we've gone through that process.

Those savings are reflected in our SG&A I think this quarter alone, we saved $42 million per quarter of relative to a year ago and talent solutions. So we'll continue to watch revenues and to the extent we have to make further adjustments.

Keith Waddell: Thank you.

Operator: Thank you both for your time.

Stephanie Moore: And our next question will come from Stephanie Moore with Jeffries. Got it.

Keith Waddell: Thank you so much. Appreciate the question. It may be continuing on the last question. As you think about your fourth quarter and you know maybe the trends you started to see at the end of September, in fact, end of the third quarter or maybe in October, any feedback you've been hearing from your clients or customers, any seasonality to think about, I think we're all just trying to get our heads around where are we in the cycle.

Based on.

What plays out we will be looking at that but again not with a view that there's some magical.

Trough margin, we're not gonna go below but instead, what's the right thing to do relative to having the capability, we want to have as things get better as we've also said in prior calls many of the actions clients tag during a downturn reduced their capacity and.

Keith Waddell: And I think this is a cycle where you had a lot of pockets of weakness, whether it's tech or elsewhere financial petitions over the last year. So maybe any customer color that you can point to, particularly towards the end of the third quarter and you've seen so far going in the fourth quarter would be helpful.

As soon as things get better they need capacity and we're a great source for them to scale their own internal capacity when things get better for which we need our own internal resources.

Keith Waddell: Thanks. Well, I'd say customers are still cautious. That said, it feels like it's beginning to stabilize. The numbers are the numbers as I just described from beginning to end. Our average weekly is only changed by 2%. That's not much. And that's a lot better than it was 90 days ago. And so there are signs of stabilization. Customers still have requirements, still have demands consistent with the fact that job openings in the US are still high.

And our next question will come from Tobey Sommer with trust.

Thank you very much.

I'm wondering what growth could look like.

Keith Waddell: So they still need people. They're just very selective. They're waiting for the perfect person to come along and they feel like they can be patient and they have time to do so. But to us, the good news is when you look week by week for several weeks in a row. It looks much better than it did 90 days ago. Absolutely. No, that's crystal clear. Appreciate it.

This is a mid cycle slowdown on the other side.

Recline as Ben.

As Keith require.

Recession is a down period.

It does.

Up cycle on the other side.

Different inform what we should expect on the other side.

Well the only reason I would say no to that is.

To me the the absolute level of job openings are much much higher than in the past.

So even though its been half is negative on the downside those job openings, what's your future hires for which the velocity does speed up when things get better. They're there. So that gives me confidence that just because it's been half is negative.

Operator: Maybe just pushing gears quickly.

Stephanie Moore: Could you talk a little bit about some of your your tech investments? I think you've spent a lot of this call talking about some of the work you've done to kind of enhance your mix, but in terms of maybe some of the other actions within your control.

Down, it's only going to be half as positive going up look at that huge job openings number which is almost double what it would typically be now coming out of a down cycle.

Keith Waddell: Can you talk a little bit about some of those digital and tech investments and kind of the opportunities in through 2024? Thanks. Well, so I presume you're talking in part about AI and we've been very pleased about what AI has done to our recruiting. Kind of interesting this past quarter, we did a major three year back test of the effectiveness of our AI. We randomly chose over 70,000 candidates over the last three years and we tested how accurate our model was and predicting which candidates we placed and which we did not.

And even with unemployment at.

Thanks.

So job.

Keith Waddell: And the good news is it was highly accurate in making that prediction and the even better news is that clients gave us higher loyalty scores and had higher response rates where we involved our AI model in the selection process than where we did not. And so that just reinforced what we already believed about our AI as we used it in recruiting as we said last quarter or in the process of customizing a large language model which we think will further improve our AI.

Level of Kansas.

Can't be filled in propel a more aggressive and cyclical upturn.

And so I I.

I understand that typically in the early part of an upturn.

A major source of candidates for us are those.

That are between jobs, because they were unemployed during the downturn and clearly there are fewer of them.

But we're not near as concerned about supply just as during the peak of the last two to three years, where labor was really tight you never heard us talking about our growth was constrained because of supply because we have several several levers we've got a candidate.

Database of 30 million people, we've got AI that can pinpoint.

On the short list of the right candidates to fill those positions with remote work, which remains viable, particularly at upper skills that expands the candidate base and maybe more important than everything I've. Just said this full time engaged with professionals that there were recruiting.

From people that already have a full time job and so that's not relying on people that were displaced during a downturn that's half that's having people switch from their current full time job to work for Robert half full time and be deployed as a contractor so I'm very bullish on the Sop.

Keith Waddell: And so we're excited about what it's done for us on the recruiting side. We continue down the path of using AI to help our people in their outreach as to which current customers, which previous customers which prospects are the most likely to give them an order when they call. So that's an effort that's ongoing. There's some positive signs on that horizon, but that's much less developed than we are on the can recruiting side.

Ply side that as things get better even though there won't be the traditional tranche of unemployed people for us to rely on for our supply. We have alternatives that are just as good if not better as we demonstrated in the last couple of years.

Thanks, if I could sneak one and how it is.

Job opportunities how have those trended as a proportion of the jobs that your clients are looking for you to Phil.

Keith Waddell: So we're excited about our AI, our investment. Now we were in the AI well before AI was in the paper every day and it's very practical. It leverages data that only we have, we have candidate performance data across millions of assignments that they work for us. We leverage that information and it's a key portion of our AI as we now know it. I didn't want to say AI, but you did it for me. Appreciate it. Thanks for the color.

Year to date, and how does that compare to <unk>.

'twenty, one 'twenty two when when it might've been sort of out of sight.

And so without giving firm statistics, we would say it's.

It's certainly a different at higher skills and lower skilled were much more prevalent at higher skills.

Next we would say the movement has been more between fully remote and hybrid than it has been to totally onsite and so not a lot of movement between totally on site and the others, but there has been a fair amount of movement between remote to hybrid.

Kartik Mehta: And we'll take a question from the know of potniac with Barclays. Hi, Kate. Thanks for the question. This is Prinsley Thomas on Permanas. Can you talk about any public sector impacts and exposure from the UAW and others? Fair Labor Strike for Robert Half?

<unk>.

But if you add remote and hybrid together another way of saying what I. Just said is that that's fairly stable, particularly at higher skills.

Thank you very much and it's still want the flexibility to not come in every day.

Keith Waddell: Yeah, so there's very, very, very little impact from labor strikes over Robert Half, either UAW or the LA entertainment based, I mean small impacts but certainly not enough to move in the needle.

That hasnt changed at higher skills.

And particularly for project skills clients still very much except remote work even.

Even more so I would argue than they do with their own full time staff.

They have a special project there are.

Kartik Mehta: Matt Chan, switching gears, can you talk about any factors that are influencing your outlook for internal hiring? Well, for internal hiring, we're always looking at the productivity of our existing staff. We've been through a process where, based on individual performance, we've had to reduce staff that were performing to expectation. That said, we're always in the market for highly talented experienced staff and would continue to look so but the point is given the current environment, we're certainly not aggressively adding to internal staff.

Very pinpointed high skills that they need for that project. They remain very willing that that be staffed on a remote basis.

That's where those high skills are.

Thank you.

Yeah.

And our next question will come from George Tong with Goldman Sachs.

Hi, Thanks, Good afternoon, your contract talent solutions revenue exited the third quarter down, 17%, which was relatively comparable to the full quarter down 16 to what extent does your <unk> guide assume stabilization in your various end markets with respect to supply and demand.

Ed.

So our <unk> guide looks at.

Kartik Mehta: We feel good about the dry powder we have and the skill set of the dry powder which is both sales-oriented and recruiting-oriented and those are the people that are performing best in this environment, those are the people that have the best productivity in this environment. We feel like we've got some pretty decent capacity in that way but we're always, we're always on the lookout for great people.

The sequential trends.

For the fourth quarter over many years.

And that trend line, we discount.

Just on the experience of the last few quarters.

Since this most recent quarter.

We.

The trend lines improved.

We've reflected that improvement.

In our Q4 guide that said, we've still significantly discounted.

What that traditional trend line would be for a typical fourth quarter and by the way the fourth quarter given the shorter number of days due to holidays and for Perm placement.

Trevor Romeo: And our next question will come from Trevor Romeo with William Blair. Hi, good afternoon. Thanks for taking the questions.

Keith Waddell: One on the health solutions business, could you talk maybe about demand by client industry vertical? Are there any types of clients that are maybe holding up better than others in this environment or vice versa? Well, on the talent solution side, we're 70% SMB and so we certainly don't have that many large clients. Financial services on the mid cap and larger cap on the market. This is holding in there reasonably well, probably down mid single digits year on year but there's no real industry story per se outside of that. It's pretty broad based both by geography and by industry. Baby California a little more impacted because it's big tech heavy but there are no major stories there.

The month of December is always volatile.

Clients run out of budget clients go on holiday clients decide to defer hiring until next year. So December Perm placement is always.

Keith Waddell: Okay, understood thanks.

Variable into how we perform.

But by and large we've reflected some of the improvement that.

That we saw sequentially in the third quarter.

In our guide for the fourth quarter, but certainly not all of it said differently that weekly sequential stabilization.

Partially reflected in Q4 not totally reflected.

And that's just for conservatism.

Right as for conservatism and it's because it's the fourth quarter and because fourth quarter holiday impacts change fourth quarter Perm hiring demand changes.

Got it that's helpful and then in the quarter you delivered above consensus numbers for revenue and profitability as you think about internal metric what areas of the business surprised you to the upside and what areas would you call out would be surprises to the downside.

Keith Waddell: And then one on productivity, you know, I think you mentioned some budget pressure on the internal audit and the tech consulting practices. Just wondering if you could maybe give some more detail on what those conversations with clients look like on consulting projects in particular since we are kind of approaching the year and budget cycle for a lot of companies. Well, part of what's happened particularly in internal audit with their large FSI clients, we've talked about in the past a lot of what productivity does is co sourcing where they split the responsibilities with clients as to their internal audit work program.

Right that you saw in the quarter.

I'd say the positive so.

Positive surprise was the improvement in the weekly sequential performance.

Which was pretty broad based.

Ross our practice groups.

On the negative side. The good news is that there were no major negatives in that way and so I wouldn't call out anything as being of consequence that was a negative relative to our expectation. The other positive, but I had mentioned there was not a total surprise.

Keith Waddell: And as clients get more budget conscious, they allocate more of that work to their internal staff and less the third parties such as fertility. I think that environment is expected to continue. But as I said earlier, productivity feels like the market place is pretty stable as it relates to their services as we speak and feels pretty good about where they are, including in the budget cycle for the coming year of the first quarter is a big quarter for signing new internal audit contracts. And they're relatively bullish about that. So we feel good.

Third parties.

Keith Waddell: Okay, great. Thank you, Keith.

Made significant improvements in their segment income over the course of the first three quarters.

First quarter in the Sevens.

Third quarter double digit again, and kind of given the dynamics of that campus hires coming less attrition.

Resource management between contractors and full time staff I think they did a hell of a job given the hand, they were dealt with maintaining and improving their their segment margins.

Went up 200 basis points between the second and the third quarter, which I think is fantastic and Thats, a little better than we expected, but I think it's fantastic.

Kartik Mehta: And moving on to Carti Mehta with North Coast research. Good afternoon, Keith. You talked about your ability to maintain pricing. And I'm wondering from a competitive standpoint, you've seen any change. If there's any pricing competition at all, or what your competitors might be doing. Well, on the tunnel solution size, there's always price competition. We've never operate in the absence of price competition. They're local regional firms that always in every part of a cycle try to compete based on price.

Got it thank you.

Yeah.

Okay, everyone that was our last question. Thank you for joining.

Thank you. This concludes today's teleconference. If you missed any part of the call. It will be archived in audio format in the Investor Center of Robert Half's website at Robert half Dot Com.

You could also log into the conference call replay details are contained in the company's press release issued earlier today.

Kartik Mehta: But given how tight the labor market is, frankly, he or she that has the best candidate wins. And given our brand, given our positioning, we typically can compete quite effectively on quality of talent we can provide, which is also aided by the AI I just talked about. So it's more about candidate quality than price, but that's not to say we don't get undercut every day by a local competitor as to price on the fertility side.

Yeah.

[music].

Kartik Mehta: I'd say the big four based on how heavily they hired what their position has been relative to the campus hires that were coming, some of which have been deferred. Some of them have certain locations that have excess capacity. And in those locations, those big four firms will get quite competitive as to price, but that's just part and parcel to the environment.

Keith Waddell: And just on E and Y, Keith, just now that they've decided to go another direction, is that help hurt, or is it neutral, do you think, for Robert Half? I'd say neutral to help a little bit. We were already seeing partners, managing directors that weren't happy with how they thought that was going to shake out. The fact that it didn't happen wasn't a surprise given all the first-hand knowledge the fertility MDs had of when Anderson, Anderson Consulting Split and what the challenges are there.

Keith Waddell: The thing about Austin Young, they didn't have a lot of external audit financial services clients where they're conflicted from providing consulting services, so they weren't going to be freed up in a major way to provide consulting in portivities largest industry group, which is FSI. So it was already not expected to have a huge negative impact for that reason, but the fact that it didn't happen, it's kind of business as usual, nothing's new, but there is a little more activity with some of their partners, managing directors that would be interested with fertility.

Keith Waddell: I said the other thing about the Big Four generally, most have a very young early retirement practice, I say that because I'm 66 and I would be past their limit, but we're the beneficiary of many of those early retired partners across the Big Four that have many, many productive years left in their careers.

Kartik Mehta: Thank you very much, I appreciate it.

Jeffrey Silber: And our next question will come from Jeff Silver with BMO Capital Markets. Hey, thanks so much, this is Ryan on for Jeff. Over the past couple of quarters, there's been a larger delta between the US and international business, which is curious if you can explain where you're seeing the relative strength internationally. Your observation is correct, and the international zone, generally speaking, has outperformed US for several quarters, most of that's been in Europe within Europe.

Jeffrey Silber: Germany has been the strongest, Belgium has always been solid, it's been good lately, and even the UK, which gets a fair amount of negative press for us, the UK's been good. So we continue to have a better quarter year on year and sequentially outside the US than in the US, which is great.

Michael Buckley: Got it. And then I know you talked about some of the cost actions during the quarter, and I'm sure that's reflected in the SG&A guys. Just more broadly, can you offer any thoughts on where you are from expense work going? as I said earlier, our overarching goal is not to optimize trot margins, but is instead to write size and have the right kind of capacity when things get better. And we've gone through a process, the last several quarters, individually based on productivity and based on capabilities to write size our staff.

Michael Buckley: We've gone through that process, those savings are reflected in our S-G-N-A. I think this quarter alone, we say 42 million per quarter, a relative to a year ago, in talent solutions. So we'll continue to watch revenues and to the extent we have to make further adjustments have based on what plays out, we'll be looking at that, but again, not with the view that there's some magical trough margin, we're not going to go below, but instead what's the right thing to do relative to having the capability we want to have as things get better, as we've also said in prior calls, many of the actions clients take during a downturn, reduce their capacity, and as soon as things get better, they need capacity, and we're a great source for them to scale their own internal capacity when things get better for which we need our own internal resources.

Keith Waddell: And our next question will come from Toby Summer with Trist. Thank you very much. I wonder what growth would look like if this is a big type of slowdown on the other side if the decline has been half as deep as higher recession in the down period, does the up cycle on the other side, is that kind of difference in form what we should expect on the other side? Well, the only reason I would say no to that is to me, the absolute level of job openings are much, much higher than in the past.

Keith Waddell: So, even though it's been half as negative on the downside, those job openings which are future hires, for which the velocity does speed up when things get better, they're there. So, that gives me confidence that just because it's been half as negative going down, it's only going to be half as positive going up, look at that huge job openings number, which is almost double what it would typically be coming out of a down cycle.

Keith Waddell: And even with unemployment at these low levels, you think that those jobs, the level of jobs can be filled to propel a more aggressive and typical upturn. And so I understand that typically in the early part of an upturn, a major source of candidates for us are those that are between jobs because they were unemployed during a downturn. And clearly there are fewer of them. But we're not nearest concerned about supply.

Keith Waddell: Just as during the peak of the last two to three years where labor was really tight, you never heard us talking about our growth was constrained because of supply. Because we have several levels, we've got a candidate database of 30 million people, we've got AI that can pinpoint the short list of the right candidates to fill those positions with remote work, which remains viable, particularly at upper skills, that expands the candidate base.

Keith Waddell: And maybe more important than everything I've just said, this full-time engagement professionals there were recruiting from people that already have a full-time job. And so that's not relying on people that were displaced during a downturn. That's having people switch from their current full-time job to work for Robert Hath full-time and be deployed as a contractor.

Keith Waddell: So I'm very bullish on the supply side that as things get better, even though there won't be the traditional tranche of unemployed people for us to rely on for supply, we have alternatives that are just as good if not better as we demonstrated the last couple of years.

Keith Waddell: Thanks, Mike Kristikler, and how has remote job opportunities, how have those trended as a proportion of the jobs that your clients are looking for you to fill, you know, year to date, and how does that compare to the 2021-22 when it might have been sort of at a site? And so without giving firm statistics, we would say it's certainly different at higher skills and lower skills, we're much more prevalent at higher skills.

Keith Waddell: Next we would say the movement has been more between fully remote and hybrid than it has been to totally on site. And so not a lot of movement between totally on site and the others, but there has been a fair amount of movement between remote to hybrid. But if you add remote and hybrid together, another way of saying what I just said is that that's fairly stable, particularly at higher skills. Thank you very much.

Keith Waddell: And it still want the flexibility to not come in every day. That hasn't changed, at higher skills, and particularly for project skills, clients still very much accept remote work. Even more so, I would argue, than they do with their own full time staff. They have a special project. There are very pinpointed high skills that they need for that project. They remain very willing that that be staff on a remote basis. That's where those high skills are. Thank you.

George Tong: And our next question will come from George Tongue with Goldman Sachs. Hi, thanks. Good afternoon. Your contract talent solutions revenue exited the third quarter down 17%, which was relatively comparable to the full quarter down 16. What extent does your 4Q guide assume stabilization in your various end markets with respect to supply and demand? Our 4Q guide looks at the sequential trends for the fourth quarter over many years. And that trend line we discount based on the experience of the last few quarters.

George Tong: Since this most recent quarter, we, the trend line improved. We've reflected that improvement in our Q4 guide. That said, we've still significantly discounted what that traditional trend line would be for a typical fourth quarter. And by the way, the fourth quarter, given the shorter number of days due to holidays, and for per replacement, the month of December is always volatile. Clients run out of budget, clients go on holiday, clients decide to defer hiring until next year, so December per emplacement is always variable in how we perform, but by and large we've reflected some of the improvement that we saw sequentially in the third quarter in our guide for the fourth quarter, but certainly not all of it said differently that weekly sequential stabilization we partially reflected in Q4, not totally reflected. And that's just for conservatism, right, it's for conservatism and it's because it's the fourth quarter and because fourth quarter holiday impacts change, fourth quarter per hiring demand changes.

Keith Waddell: And then in the quarter you delivered above consensus numbers for revenue and profitability, as you think about internal metrics, what areas of the business surprised you to the upside and what areas would you call out, would be surprises to the downside that you saw in the quarter. I say the positive surprise was the improvement in the weekly sequential performance, which was pretty broad based across our practice groups. You know, on the negative side, the good news is that there were no major negatives in that way, and so I wouldn't call out anything as being of consequence that was a negative relative to our expectation.

Keith Waddell: The other positive that I've mentioned that was not total surprise, their fertility made significant improvements and their segment income over the course of the first three quarters, first quarter in the seventh, third quarter, double digit again, and kind of given the dynamics of the campus. The higher is coming, the less attrition, the resource management between contractors and full-time staff, I think they did a hell of a job given the hand they were dealt with maintaining and improving their their segment margins went up 200 basis points between the second and the third quarter, which I think is fantastic. And that's a little better than we expected, but I think it's fantastic. Got it. Thank you. Okay, everyone.

Operator: That was our last question. Thank you for joining. Thank you.

Operator: This concludes today's teleconference. If you missed any part of the call, it will be archived in audio format in the investor center of Robert Hath's website at robberthalf.com. You can also log in to the conference call replay. Details are.., was contained in the company's press release issued earlier today.