Q2 2024 Robert Half Inc Earnings Call

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Operator: Hello, and welcome to the Robert Half Second Quarter 2024 conference call. Today's 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 1 on your telephone keypad. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half, and Mr. Michael Buckley, Chief Financial Officer. Mr. Waddell, you may

Operator: And welcome to the Robert Half second quarter 2024 conference call. Today's conference call is being recorded. If you'd like to ask a question during the Q&A portion of the call, please press star in the number one on your telephone keypad.

Hello and welcome to the Robert Half Second Quarter 2024 conference call.

Today's conference call is being recorded. If you'd like to ask a question during the Q&A portion of the call, please do so now.

Speaker Change: Please press star and the number 1 on your telephone keypad. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half, and Mr. Michael Buckley, Chief Financial Officer. Mr. Waddell, you may begin.

Operator: 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.

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

Keith Waddell: Hi 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 those in forward-looking statements. These risks and uncertainties are described in today's press release and our most recent 10-K and 10-Q filed with the SEC. We assume no obligation to update the statements made on today's call.

Speaker Change: Hi 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 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're subject to the risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are described in today's press release, in our most recent 10-K and 10-Q filed with the SEC.

Keith Waddell: During this presentation, we may mention some non-GAAP financial measures and reference these figures as adjusted. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. For the second quarter of 2024, company-wide revenues were $1.473 billion, down 10% from last year's second quarter on both a reported and as-adjusted basis.

Speaker Change: 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.

Speaker Change: These statements represent our current judgment of what the future holds, however, they are subject to the risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.

Speaker Change: 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.

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

Keith Waddell: During this presentation, we may mention some non-GAAP financial measures and reference these figures as adjusted. Reconciliation and further explanations of these measures are included in a supplemental schedule to our earnings press release.

Speaker Change: During this presentation, we may mention some non-GAAP financial measures and reference these figures as adjusted.

Speaker Change: Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com

Keith Waddell: For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. The second quarter of 2024, company-wide revenues were 1.473 billion, down 10% from last year's second quarter on both a reported and as adjusted basis. That income per share in the second quarter was 66 cents compared to a dollar in the second quarter a year ago. Client and candidate caution continues to impact hiring activity and new project starts as macroeconomic and interest rate uncertainty persists. Second quarter revenues and earnings were within our guidance range; activity posted strong results led by US growth in revenues and segment income both on a sequential and year-on-year basis.

Speaker Change: For the second quarter of 2024, company-wide revenues were $1.473 billion, down 10% from last year's second quarter on both a reported and as-adjusted basis.

Keith Waddell: That income per share in the second quarter was 66 cents compared to a dollar in the second quarter a year ago. Client and candidate caution continues to impact hiring activity and new project starts as macroeconomic and interest rate uncertainty persists.

Speaker Change: That income per share in the second quarter was 66 cents compared to a dollar in the second quarter a year ago.

Speaker Change: Client and candidate caution continues to impact hiring activity and new project starts as macroeconomic and interest rate uncertainty persists.

Keith Waddell: Second quarter revenues and earnings were within our guidance range. Activity posted strong results led by U.S. growth in revenues and segment income both on a sequential and year-on-year basis. We remain confident in our ability to navigate the current climate and optimistic about our growth prospects, built on our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services. Cash flow from operations during the quarter was $142 million.

Speaker Change: Second quarter revenues and earnings were within our guidance range. Activity posted strong results led by U.S. growth in revenues and segment income both on a sequential and year-on-year basis.

Keith Waddell: We remain confident in our ability to navigate the current climate and optimistic about our growth prospects. Built on our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services. Cash flow from operations during the quarter was 142 million in June. We distributed a 53 cent per share cash dividend to our shareholders of record for a total cash outlet of 55 million. Our first share dividend has grown 11.5% annually since inception in 2004. The June 24 dividend was 10.4% higher than the prior year. We also acquired 900,000 Robert Half shares during the quarter for 60 million.

Speaker Change: We remain confident in our ability to navigate the current climate and optimistic about our growth prospects.

Speaker Change: built on our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services.

Speaker Change: Cash flow from operations during the quarter was 142 million. In June , we distributed a 53 cent per share cash dividend to our shareholders of record for a total cash outlay of 55 million.

Keith Waddell: In June, we distributed a $0.53 per share cash dividend to our shareholders of record for a total cash outlay of $55 million. Our per share dividend has grown 11.5% annually since inception in 2004. The June 24 dividend was 10.4% higher than the prior year. We also acquired 900,000 Robert Half shares during the quarter for $60 million.

Speaker Change: Our per share dividend has grown 11.5% annually since inception in 2004. The June 24 dividend was 10.4% higher than the prior year.

Speaker Change: We also acquired 900,000 Robert Half shares during the quarter for $60 million.

Keith Waddell: We have 9.1 million shares available for repurchase under our board-approved stock repurchase plan. Return of the invested capital for the company was 18% in the second quarter.

Michael C. Buckley: We have 9.1 million shares available for repurchase under our board-approved stock repurchase plan. Our return on invested capital for the company was 18% in the second quarter. Thanks, Keith, and hello everyone.

Speaker Change: We have 9.1 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 18% in the second quarter. Now I'll turn the call over to our CFO , Mike Buckley.

Michael Buckley: Now I'll turn it all over to our CFO, my phone. Thanks, Keith, and hello everyone. As Keith noted, global revenues were 1.473 billion in the second quarter. On an as-adjusted basis, second quarter talent solutions revenues were down 14% year-over-year. U.S. Talent solutions revenues were 701 million, down 15% of the prior year's second quarter. Non-U.S. Talent solutions revenues were 235 million, down 10% year-over-year. We conduct talent solutions operations through offices in the United States and 17 foreign countries. In the second quarter, there were 63.5 billion days compared to 63.3 billion days in the same quarter one year ago.

Michael C. Buckley: As Keith noted, global revenues were $1.473 billion in the second quarter. On an as-adjusted basis, second quarter talent solutions revenues were down 14% year-over-year. U.S. talent solutions revenues were $701 million, down 15% from the prior year's second quarter. Non-U.S. count solutions revenues were $235 million, down 10% year-over-year. We conduct panel solutions operations through offices in the United States and 17

Michael C. Buckley: Thanks, Keith, and hello, everyone.

Michael C. Buckley: As Keith noted, global revenues were $1.473 billion in the second quarter.

Michael C. Buckley: On an as-adjusted basis, second quarter talent solutions revenues were down 14% year-over-year. U.S. talent solutions revenues were $701 million, down 15% from prior years to second quarter.

Michael C. Buckley: Non-U.S. count solutions revenues were $235 million, down 10% year-over-year.

Michael C. Buckley: We conduct panel solutions operations through offices in the United States and 17 foreign countries.

Michael C. Buckley: In the second quarter, there were 63.5 billing days compared to 63.3 billing days in the same quarter one year ago. The third quarter of 2024 had 64.1 billing days compared to 63.1 billing days during the third quarter of 2023. Currency exchange rate fluctuations during the second quarter had the effect of decreasing reported year-over-year total revenues by 6 million.

Michael C. Buckley: In the second quarter, there were 63.5 billing days compared to 63.3 billing days in the same quarter one year ago.

Michael Buckley: The third quarter of 2024 has 64.1 billion days compared to 63.1 billion days during the third quarter of 2023. Currently, exchange rate fluctuations during the second quarter had the effect of decreasing reported year-over-year total revenues by 6 million, 5 million for talent solutions, and 1 million for particularities. Contract talent solutions bill rates for the second quarter increased to 3.1% compared to one year ago. Adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the first quarter was also 3.1%.

Michael C. Buckley: The third quarter of 2024 has 64.1 billing days compared to 63.1 billing days during the third quarter of 2023.

Michael C. Buckley: Currency exchange rate fluctuations during the second quarter had the effect of decreasing reported year-over-year total revenues by $6 million, $5 million for talent solutions and $1 million for proactivities.

Michael C. Buckley: $5 million for talent solutions and $1 million for productivity. Contract Cal Solution bill rates for the second quarter increased 3.1% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the first quarter was also 3.1 percent. Now, let's take a closer look at the results for productivity. Global revenues in the second quarter were $487 million; 399 million of that was from the United States, and 88 million were from outside the United States.

Michael C. Buckley: Contract Talent Solution bill rates for the second quarter increased 3.1 percent compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the first quarter was also 3.1 percent.

Michael Buckley: Now let's take a closer look at results for fertility. Global revenues in the second quarter were 487 million; 399 million of that is from the United States, and 88 million is from outside the United States. On an as-adjusted basis, global second quarter fertility revenues were down 1% versus 1 year, 1 year ago period.

Michael C. Buckley: On an as-adjusted basis, global second-quarter productivity revenues were down 1 percent versus the one-year-ago period. U.S. productivity revenues were up 3%, while non-U.S. productivity revenues were down 16%, and its independently owned member firms serve clients through locations in the United States and around the world and 29 foreign countries. Turning out a gross margin. Contract Talent Solutions' second quarter gross margin was 39.3% of applicable revenues versus 39.9% in the second quarter one year ago.

Michael C. Buckley: Now let's take a closer look at results for productivity. Global revenues in the second quarter were $487 million, $399 million of that is from the United States, and $88 million is from outside the United States.

Michael C. Buckley: Conversion revenues, or contract to hire, were 3.4% of revenues in the quarter compared to 3.7% of revenues in the quarter one year ago. Our permanent placement revenues in the second quarter were 13.3% of consolidated account solutions revenues versus 13% in the same quarter one year ago. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 47.4% compared to 47.7% of applicable revenues in the second quarter of last year.

Michael C. Buckley: On an as-adjusted basis, global second-quarter proactivity revenues were down 1% versus the one-year-ago period.

Michael Buckley: U.S. fertility revenues were up 3%, while non-U.S. Fertility revenues were down 16%. Fertility and its independently owned member funds serve clients through locations in the United States and 29 foreign countries.

Michael C. Buckley: U.S. proactivity revenues were up 3%, while non-U.S. proactivity revenues were down 16%. Proactivity and its independently owned member firms served clients through locations in the United States and 29 foreign countries.

Michael Buckley: Turning out a gross margin. In contract talent solutions, second quarter gross margin was 39.3% of applicable revenues versus 39.9% in the second quarter, 1 year ago. Inversion revenues were contract to higher or 3.4% of revenues in the quarter compared to 3.7% of revenues in the quarter 1 year ago. Our permanent placement revenues in the second quarter were 13.3% of consolidated talent solutions revenues versus 13% in the same quarter 1 year ago. When combined with the contract talent solutions gross margin, overall gross margin for talent solutions was 47.4% compared to 47.7% of applicable revenues in the second quarter last year.

Speaker Change: Turning out a gross margin.

Speaker Change: In contract talent solutions, second quarter gross margin was 39.3% of applicable revenues versus 39.9% in the second quarter one year ago.

Speaker Change: Inversion revenues, or contract to hire, were 3.4% of revenues in the quarter compared to 3.7% of revenues in the quarter one year ago.

Speaker Change: Our permanent placement revenues in the second quarter were 13.3% of consolidated talent solutions revenues versus 13% in the same quarter one year ago.

Speaker Change: When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 47.4% compared to 47.7% of applicable revenues in the second quarter of last year.

Michael Buckley: For fertility, gross margin was 22.5% of fertility revenues compared to 22.9% of fertility revenues 1 year ago.

Michael C. Buckley: For Fertility, Gross Margin was 22.5% of Fertility revenues compared to 22.9% of Fertility revenues one year ago, adjusted for the amount of deferred compensation that is completely offset by investment income related to employee deferred compensation trusts, or the Deferred Compensation Investment Income Offset. Gross margin for productivity was 23.2% for the quarter just ended, compared to 24% last year. Moving on to Selling General and Administrative Costs. Enterprise SG&A costs were 34% of global revenues in the second quarter compared to 33.1% in the same quarter one year ago.

Speaker Change: For Fertivity, Gross Margin was 22.5% of Fertivity Revenues compared to 22.9% of Fertivity Revenues one year ago.

Michael Buckley: adjusted for the amount of the third compensation that is completely offset by investment income related to employee deferred compensation trust, or the deferred compensation investment income offset. Gross margin for productivity was 23.2% for the quarter just ended compared to 24% last year.

Speaker Change: adjusted for the amount of deferred compensation that is completely offset by investment income related to employee deferred compensation trusts or the deferred compensation investment income offset.

Speaker Change: Gross margin for productivity was 23.2% for the quarter just ended, compared to 24% last year.

Michael Buckley: Moving on to Selling, General and Administrative costs. Enterprise SGNA costs were 34% of global revenues in the second quarter, compared to 33.1% in the same quarter one year ago. Adjusted for the deferred compensation investment income offset, Enterprise SGNA costs were 33.2% for the quarter just ended compared to 31.6% last year.

Speaker Change: Moving on to Selling General and Administrative Costs.

Speaker Change: Enterprise SG&A calls for 34% of global revenues in the second quarter compared to 33.1% in the same quarter one year ago.

Michael C. Buckley: Adjusted for the Deferred Compensation Investment Income Offset, Enterprise SG&A costs were 33.2% for the quarter just ended compared to 31.6% last year. Talent Solutions' SG&A costs were 43.1% of Talent Solutions revenues in the second quarter versus 40.7% in the second quarter of 2023, adjusted for the Deferred Compensation Investment Income Offset. Balance Solutions' SG&A costs were 41.9% for the quarter just ended, compared to 38.7% last year.

Speaker Change: Adjusted for the Deferred Compensation Investment Income Offset, Enterprise SG&A costs were 33.2% for the quarter just ended compared to 31.6% last year.

Michael Buckley: Talent solutions SGNA costs were 43.1% of talent solutions revenues in the second quarter versus 40.7% in the second quarter of 2023. Adjusted for the deferred compensation investment income offset, Talent Solutions SGNA costs were 41.9% for the quarter just ended compared to 38.7% last year.

Speaker Change: Talent Solutions SG&A costs were 43.1% of Talent Solutions revenues in the second quarter versus 40.7% in the second quarter of 2023.

Speaker Change: Adjusted for the Deferred Compensation Investment Income Offset, Allen Solutions SG&A costs were 41.9% for the quarter just ended, compared to 38.7% last year.

Michael Buckley: Second quarter SGNA costs for productivity were 15.6% of productivity revenues compared to 15.1% of revenues for the same quarter last year. Operating income for the quarter of 76 million, adjusted for the deferred compensation investment income offset, combined segment income was 92 million in the second quarter. Combined segment margin was 6.2%. Second quarter segment income from our talent solutions divisions was 55 million with a segment margin of 5.5%. Second income for productivity in the second quarter was 37 million, with a segment margin of 7.7%.

Michael C. Buckley: Second quarter SG&A costs for productivity were 15.6% of productivity revenues compared to 15.1% of revenues for the same quarter last year. Operating income for the quarter was $76 million, adjusted for the deferred compensation investment income offset. Combined segment income was $92 million in the second quarter.

Speaker Change: Second quarter SG&A costs for productivity were 15.6% of productivity revenues compared to 15.1% of revenues for the same quarter last year.

Speaker Change: Operating income for the quarter was $76 million. Adjusted for the deferred compensation investment income offset, combined segment income was $92 million in the second quarter.

Michael C. Buckley: Combined segment margin was 6.2%. Second quarter segment income from our talent solutions divisions was $55 million, with a segment margin of 5.5%. Segment income for productivity in the second quarter was $37 million, with a segment margin of 7.7%. Our second quarter 2024 income statement includes $16 million as income from investments held in Employee Deferred Compensation Trusts. This is completely offset by an equal amount of additional equity deferred compensation costs, which are reflected in SG&A expenses and direct costs. As such, it has no effect on reported missing.

Speaker Change: Combined segment margin was 6.2%. Second quarter segment income from our talent solutions divisions was $55 million with a segment margin of 5.5%.

Speaker Change: Segment income for productivity in the second quarter was $37 million with a segment margin of 7.7%.

Michael Buckley: Our second quarter 2024 income statement includes 16 million as income from investments held in employee deferred compensation trust. This is completely offset by an equal amount of additional employee deferred compensation costs, which are reflected in SGNA expenses and direct costs, as such has no effect on reporting an income. Our second quarter tax rate was 29% compared to 30% one year ago.

Speaker Change: Our second quarter 2024 income statement includes $16 million as income from investments held in Employee Deferred Compensation Trusts.

Speaker Change: This is completely offset by an equal amount of additional equity deferred compensation costs, which are reflected in SG&A expenses and direct costs.

Speaker Change: As such, it has no effect on reporting an impact.

Michael C. Buckley: Our second quarter tax rate was 29% compared to 30% one year ago. At the end of the second quarter, accounts receivable were $893 million, and implied day sales outstanding, or DSO, was 54.6 days. Before we move to third quarter guidance, let's review some of the monthly revenue trends we saw in the second quarter and so far in July, all adjusted for currency and billing date. Contract Talent Solutions exited the second quarter with June revenues down 13% versus the prior year, compared to a 14% decrease for the full quarter.

Speaker Change: Our second quarter tax rate was 29% compared to 30% one year ago.

Michael Buckley: At the end of the second quarter, accounts receivable were 893 million, and implied day sales outstanding or DSO was 54.6 days.

Speaker Change: At the end of the second quarter, accounts receivable were $893 million, and implied day sales outstanding, or DSO, was 54.6 days.

Michael Buckley: Before we move to third quarter guidance, let's review some of the monthly revenue trends we saw in the second quarter and so far in July, all adjusted for currency and billing days. Contract talent solutions exited the second quarter; June revenues down 13% versus the prior year, compared to a 14% decrease for the full quarter. Revenues for the first two weeks of July were down 14% compared to the same period last year. Farman and placement revenues in June were down 3% versus June of 2023. This compares to a 12% decrease for the full quarter. For the first three weeks of July, Farman and Placement revenues were down 17% compared to the same period in 2023.

Speaker Change: Before we move to third quarter guidance, let's review some of the monthly revenue trends we saw in the second quarter and so far in July , all adjusted for currency and billing days.

Michael C. Buckley: Revenues for the first two weeks of July were down 14% compared to the same period last year, and permanent placement revenues in June were down 3% versus June of 2023. This compares to a 12% decrease for the full quarter. For the first three weeks of July, permanent placement revenues were down 17% compared to the same period in 2023. We provide this information so 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 time periods.

Speaker Change: Contract Talent Solutions exited the second quarter with June revenues down 13% versus the prior year, compared to a 14% decrease for the full quarter.

Speaker Change: Revenues for the first two weeks of July were down 14% compared to the same period last year.

Speaker Change: Permanent placement revenues in June were down 3% versus June 2023. This compares to a 12% decrease for the full quarter.

Speaker Change: For the first three weeks of July , permanent placement revenues were down 17% compared to the same period in 2023.

Speaker Change: We provide this information so 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 time periods. We caution against reading too much into them.

Michael Buckley: In the very brief time periods, we caution against reading too much into them.

Michael Buckley: With that in mind, we offer the following third quarter guidance. revenues 1.39 billion to 1.49 billion. Income per share: 33 to 67 cents.

Michael C. Buckley: We caution against reading too much into them. With that in mind, we offer the following third-quarter guidance. Revenues: $1.39 billion to $1.49 billion. Income per share: $.53 to $.67. Our Q3 EPS estimate includes a restructuring charge of $0.08 per share related to Productivity International. This includes $5.7 million charged to SG&A and income tax charges of $2.5 million.

Speaker Change: With that in mind, we offer the following third quarter guidance, revenues $1.39 billion to $1.49 billion.

Speaker Change: Income per share, 53 to 67 cents.

Michael Buckley: Part two, three EPS estimates include the restructuring charge of 8 cents per share related to Productivity International. This includes 5.7 million charge to SGA and income tax charges of 2.5 million.

Speaker Change: Our Q3 EPS estimate includes a restructuring charge of $0.08 per share related to Productivity International.

Speaker Change: This includes $5.7 million charged to SG&A and income tax charges of $2.5 million.

Michael Buckley: EPS will provide additional information on this in a moment.

Michael C. Buckley: We will provide additional information on this in a moment. Midpoint revenues of $1.44 billion are 9% lower than the same period in 2023 on an as-adjusted basis. The major financial assumptions underlying the midpoint of these estimates are as follows.

Speaker Change: These will provide additional information on this in a moment.

Michael Buckley: Midpoint revenues of 1.44 billion are 9% lower than the same period in 2023 on an as adjusted basis. The major financial assumptions underlying in midpoint, these estimates are as follows. Revenue growth year-over-year has adjusted for talent solutions down 12% to 16%. Pivoting down 1% to up 2%. Overall, down 7% to 11%. Contract margin percentage for contract talent 38 to 41%. Creativity as adjusted for the deferred compensation investment income offset 24 to 26%. Overall, 39 to 41%. SGA as a percentage of revenues adjusted for deferred compensation investment income offset for talent solutions 41 to 43%. Creativity 16 to 18% overall 33 to 35%.

Speaker Change: Midpoint revenues of $1.44 billion are 9% lower than the same period in 2023 on an as-adjusted basis.

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

Michael C. Buckley: Ratbeard Grove, year-over-year, has adjusted for talent solutions down 12% to 16%, activity down 1% to up 2%. Overall, down 7% to 11%. Contract Margin Percentage for Contract Talent, 38 to 41%. Creativity, as adjusted for the Deferred Compensation Investment Income Offset, 24 to 26 percent. Overall, 39 to 41 percent.

Speaker Change: Revenue growth year-over-year has adjusted for talent solutions down 12% to 16%.

Speaker Change: activity down 1% to up 2%.

Speaker Change: Overall down 7% to 11%.

Speaker Change: Contract Margin Percentage for Contract Talent, 38-41%.

Speaker Change: Creativity, as adjusted for the Deferred Compensation Investment Income Offset, 24 to 26 percent.

Speaker Change: Overall, 39 to 41 percent.

Michael C. Buckley: SG&A has a percentage of revenues adjusted for deferred compensation investment income offset for talent solutions, 41 to 43 percent. Creativity, 16 to 18% Overall, 33 to 35 percent. Segment income, talent solutions, four to six. Proactivity, 7 to 9 percent. Overall, 5 to 7 percent. Tax rate, 31 to 33 percent.

Speaker Change: SG&A as a percentage of revenues adjusted for deferred compensation investment income offset.

Speaker Change: for Talent Solutions, 41 to 43 percent.

Speaker Change: Creativity, 16 to 18 percent. Overall, 33 to 35 percent.

Michael Buckley: Segment income and talent solutions 4 to 6% productivity 7 to 9%. Overall, 5 to 7%.

Speaker Change: Segment Income, Talent Solutions, 4 to 6.

Speaker Change: Productivity 7 to 9 percent, overall 5 to 7 percent.

Michael Buckley: Act rate 31 to 33% shares 102 to 103 million.

Speaker Change: Tax rate 31 to 33 percent, shares 102 to 103 million.

Michael C. Buckley: Shares $102 to $103 million. 2024 Capital Expenditures and Capitalized Cloud Computing Costs. $80 million to $100 million, with $25 to $35 million in the third quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filing. Now, I'll turn the call back over to, So we're told the sound is a little scratchy. We're going to switch lines, so give us just one second. Okay, we're on the backup line. You are. You are.

Michael Buckley: 2024 capital expenditures and capitalized cloud computing costs 80 million to 100 million, with 25 to 35 million in third quarter.

Speaker Change: 2024 Capital Expenditures and Capitalized Cloud Computing Costs $80 million to $100 million, with $25 to $35 million in the third quarter.

Michael Buckley: All estimates we provide on this call are subject to the risk mentioned in today's press release and in our SEC filings.

Speaker Change: All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings.

Michael Buckley: Now, I'll turn the call back over to you.

Speaker Change: Now I'll turn the call back over to Keith.

Keith Waddell: So we're going to hold the sound of the most gratitude. We're going to switch lines, so give us just one second. Okay, we're on the backup line. Justin, you are you are go ahead, please. Okay, thank you, Mike. Client budget to remain constrained and candidates are elective James Jobs. This of do short term demand and elongate cell cycles, however, job openings are well above historical highs and indicative of picked up future demand. As business confidence improves, hiring urgency returns, project demand accelerates, deferred backlogs and growth initiatives are reprioritized, and labor churn normalizes. This puts pressure on client resources that are often already stretched and creates hiring and consulting demand that traditionally leads to very strong gains for us.

Keith: So, we're told the sound is a little scratchy. We're going to switch lines, so give us just one second.

Keith: Okay, we're on the backup line.

Keith: Justin?

Justin: You are. You are. Go ahead, please.

Keith Waddell: Go ahead, please. Okay. Thank you, Mike. However, client budgets remain constrained, and candidates are elected to change jobs. This subdues short-term demand and elongates sales cycles. However, job openings are well above historical highs and indicative of pent-up future demand. As business confidence improves, hiring urgency returns, project demand accelerates, deferred backlogs and growth initiatives are reprioritized, and labor churn normalizes. This puts pressure on client resources that are often already stretched and creates hiring and consulting demand that traditionally leads to very strong gains for us in the early part of the growth cycle.

Keith: Okay, thank you, Mike.

Speaker Change: Client budgets remain constrained and candidates are elected to change jobs.

Speaker Change: This subdues short-term demand and elongates sales cycles. However, job openings are well above historical highs and indicative of pent-up future demand.

Speaker Change: As business confidence improves, hiring urgency returns, project demand accelerates, deferred backlogs and growth initiatives are reprioritized, and labor churn normalizes.

Speaker Change: This puts pressure on client resources that are often already stretched and creates hiring and consulting demand that traditionally leads to very strong gains for us in the early part of growth cycles.

Keith Waddell: The early part of growth cycles while progress on inflation and economic momentum stalled during the first quarter of this year. Positive trends reemerged in the second quarter, which should be more conducive for higher business confidence levels and overall sentiment going forward. We continue to invest in technology and innovation to fuel our core business, which combines the skills, judgment, and expertise of our specialized talent solution professionals with world-class AI tools that leverage our proprietary data assets. We recently upgraded the candidate discovery experience on our website to transparently display the ratings of our recruiters for all AI-matched candidates we previously placed or interacted with.

Keith Waddell: While progress on inflation and economic momentum stalled during the first quarter of this year, positive trends reemerged in the second quarter, which should be more conducive to higher business confidence levels and overall sentiment going forward. We continue to invest in technology and innovation to fuel our core business, which combines the skills, judgment, and expertise of our specialized talent solution professionals with world-class AI tools that leverage our proprietary data assets. We recently upgraded the candidate discovery experience on our website to transparently display the rating of our recruiters for all AI-matched candidates we've previously placed or interacted with.

Speaker Change: While progress on inflation and economic momentum stalled during the first quarter of this year, positive trends reemerged in the second quarter.

Speaker Change: which should be more conducive for higher business confidence levels and overall sentiment going forward.

Speaker Change: We continue to invest in technology and innovation to fuel our core business, which combines the skills, judgment, and expertise of our specialized talent solution professionals.

Speaker Change: with world-class AI tools that leverage our proprietary data assets.

Speaker Change: We recently upgraded the candidate discovery experience on our website to transparently display the ratings of our recruiters for all AI-matched candidates we've previously placed or interacted with.

Keith Waddell: This is an industry first that tangibly demonstrates the benefits of our combined recruiters plus AI strategy, which our clients highly value. We're very pleased with Portivities results for the quarter based on broad strength in each of its solution areas. Gross margin and segment income both exceeded expectations, growing more than 250 basis points sequentially. Additional improvement is expected in the third quarter. The result of continued revenue strength combined with close control over resource cost and staff utilization rates. Vertilities' prospects and pipeline remain very strong, a testament to its ability to increasingly gain share in a competitive consulting market.

Keith Waddell: This is an industry first that tangibly demonstrates the benefits of our combined recruiters plus AI strategy, which our clients highly value. We're very pleased with Pertivity's results for the quarter, based on broad strength in each of its solution areas. Gross Margin and Segment Income both exceeded expectations, growing more than 250 basis points sequentially. Additional improvement is expected in the third quarter, the result of continued revenue strength combined with close control over resource costs and staff utilization rates.

Speaker Change: This is an industry first that tangibly demonstrates the benefits of our combined recruiters plus AI strategy which our clients highly value.

Speaker Change: We're very pleased with Pertivity's results for the quarter, based on broad strength in each of its solution areas.

Speaker Change: Gross Margin and Segment Income both exceeded expectations.

Speaker Change: growing more than 250 basis points sequentially. Additional improvement is expected in the third quarter, the result of continued revenue strength combined with close control over resource costs and staff utilization rates.

Keith Waddell: Our activities, prospects, and pipeline remain very strong, a testament to its ability to increasingly gain share in a competitive consulting market. As noted previously, during the third quarter, Pertivity will transition its mainland China operations to an independently owned member firm to optimize local revenue opportunities, including state-owned enterprises. This will result in a restructuring charge of $0.08 per share.

Speaker Change: Fertivity's prospects and pipeline remain very strong, a testament to its ability to increasingly gain share in a competitive consulting market.

Keith Waddell: As noted previously during the third quarter, Fertility will transition its mainland China operations to an independently owned member firm. to optimize local revenue opportunities, including state-owned enterprises. This will result in a restructuring charge of 8 cents per share. We've weathered many economic cycles in the past, each time emerging to achieve higher peaks. Aging workforce demographics and clients' desire for flexible resources and variable costs are expected to benefit us for years to come. With our current business portfolio of talent solutions and consulting, we're even more confident about our future as macro-confidence returns. We'll continue to invest in our people, our technology, our brand, and our business model; strengthen our ability to connect candidates in meaningful work and provide clients with the talent and subject matter expertise they need to confidently compete and grow.

Speaker Change: As noted previously, during the third quarter, Pertivity will transition its mainland China operations to an independently owned member firm to optimize local revenue opportunities including state-owned enterprises.

Speaker Change: This will result in a restructuring charge of $0.08 per share.

Keith Waddell: We've weathered many economic cycles in the past, each time emerging to achieve higher peace. Aging workforce demographics and clients' desire for flexible resources and variable costs are expected to benefit us for years to come. With our current business portfolio of talent solutions and consulting, we're even more confident about our future as macro-confidence returns. We will continue to invest in our people, our technology, our brand, and our business model to strengthen our ability to connect candidates 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 employees across the globe, whose commitment to success made possible a number of new accolades. Robert Half, again, ranked number one on Forbes' list of America's best professional recruiting firms.

Speaker Change: We've weathered many economic cycles in the past, each time emerging to achieve higher peaks.

Speaker Change: Aging workforce demographics and clients' desire for flexible resources and variable costs are expected to benefit us for years to come. With our current business portfolio of talent solutions and consulting, we're even more confident about our future as macro-confidence returns.

Speaker Change: We will continue to invest in our people, our technology, our brand, and our business model to strengthen our ability to connect candidates to meaningful work.

Speaker Change: and provide clients with the talent and subject matter expertise they need to confidently compete and grow.

Keith Waddell: Finally, we'd like to thank our employees across the globe, whose commitments to success made possible a number of new accolades. Robert Half again ranked number one on Forbes' list of America's best professional recruiting firms, and our people-first culture was reflected in our selection as one of Fortune's best workplaces for millennials, Forbes' best employers for diversity, and just yesterday Forbes' best employers for women.

Speaker Change: Finally, we'd like to thank our employees across the globe.

Speaker Change: whose commitment to success made possible a number of new accolades.

Speaker Change: Robert Half, again, ranked number one on Forbes' list of America's best professional recruiting firms.

Operator: And our people-first culture was reflected in our selection as one of Fortune's best workplaces for millennials. Forbes, Best Employers for Diversity, and just yesterday, Forbes, Best Employers for Women. Now, Mike and I would be happy to answer your questions. Please ask just one question and follow-up with one question. If there's time, we'll come back to you with additional questions. Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone.

Speaker Change: And our people-first culture was reflected in our selection as one of Fortune's best workplaces for millennials.

Speaker Change: Forbes, Best Employers for Diversity, and just yesterday, Forbes, Best Employers for Women.

Operator: Now, might I be happy to answer your questions? Please ask us one question and a single follow-up. If there's time, we'll come back to you for additional questions.

Speaker Change: Now, Mike and I would be happy to answer your questions. Please ask just one question and a single follow-up. If there's time, we'll come back to you for additional questions.

Operator: Thank you. If you would like to signal with questions, please press star one on your touch-tone telephone. If you would like to withdraw your question, please press star two on your touch-tone telephone. 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. Again, that is star one. If you would like to signal with questions, star one.

Operator: If you would like to withdraw your question, please press star 2 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to signal with questions.

Speaker Change: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone.

Speaker Change: If you would like to withdraw your question, please press star 2 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to signal with questions.

Mark Marcon: And your first question comes to a line of Mark Marcon with Baird. Good afternoon, Keith and Mike. We know that job openings continue to be elevated, but obviously the trends, when we take a look at temp or term, continue to be relatively soft. And so one thing that a lot of investors are asking about is, you know, to what extent do we think, you know, it's not just macro concerns, but potentially, you know, that some companies ended up over hiring, you know, during the snapback from COVID, and in the midst of the Great Resignation, and once everything froze, they basically ended up with, you know, too high of a permanent staffing level, but we're concerned about, like, it's so difficult to hire quality people that they're just holding on to them.

Speaker Change: Star 1

Mark Steven Marcon: And your first question comes to a line of Mark Marcon with Baird.

Keith Waddell: Good afternoon, Keith and Mike. We know that, you know, job openings continue to be elevated, but obviously the trends when we take a look at, Dr. Jeffrey Silber, Manav Patnaik, Tobey Sommer, Joshua Chan, David Silver, Mark Marcon, Kevin McVeigh, Heather Balsky, Stephanie Moore, Keen Tong, Kartik Mehta, Princy Thomas, John Romeo, Robert Half International Inc., Kevin McVeigh, Heather Balsky, Stephanie Moore, Kevin McVeigh, Heather Balsky, Stephanie Moore, Robert Half International Inc., Kevin McVeigh, and that it's-and that they're, in certain cases, just overstaffed and therefore hesitant to basically using temps as-as their-their pathway to flexibility.

Mark Steven Marcon: Good afternoon, Keith and Mike.

Speaker Change: We know that, you know, job openings continue to be elevated, but obviously the trends when we take a look at, you know...

Speaker Change: you know, TEMP or PERM continue to be relatively soft. And so.

Speaker Change: One thing that a lot of investors are asking about is, you know, to what extent do we think, you know, it's not just macro concerns, but potentially, you know, that some companies ended up overhiring, you know, during the snapback from COVID.

Speaker Change: and in the midst of the Great Resignation. And once everything froze, they basically ended up with, you know, too high of a permanent staffing level. But we're concerned about, like, it's so difficult to hire quality people that they're just holding onto them.

Mark Marcon: And that it's, and that they're, in certain cases, just overstaffed, and therefore, has it into basically using temp as their pathway to flexibility.

Speaker Change: and that they're, in certain cases, just overstaffed, and therefore...

Speaker Change: I'm wondering, you know, this is a subjective question, but how much do you think that's the dynamic that's at play relative to...

Keith Waddell: I'm wondering, you know, this is a subjective question, but how much do you think that's the dynamic that's at play relative to macro concerns? And if that is a big part of it, how long do you think it might take us to kind of go through that before we start seeing a bit of a pickup? Well, Mark, I would say, you know, early post-COVID, those were certainly factors, but we're now eight quarters into down sequential quarters, such that to a large extent, that's played out. We're clearly seeing signs of project deferrals. There's no question that clients are using the lever of variable cost, which they get by using contractors, but again, we're eight quarters into that.

Keith Waddell: I'm wondering, you know, this is a subjective question, but how much do you think that's the dynamic that's at play relative to macro concerns? And if that is a big part of it, how long do you think it might take us to kind of go through that before we start seeing a bit of a pickup? Well, Mark, I would say, you know, early post-COVID.

Speaker Change: to macro concerns, and if that is a big part of it, how long do you think it might take us to kind of go through that before we start seeing a bit of a pickup?

Speaker Change: Well, Mark, I would say, you know, early post-COVID.

Keith Waddell: Those were certainly factors. But we're now eight quarters into down sequential chord, such that, to a large extent, that's played out. We're clearly seeing signs of project deferrals. There's no question that clients are using the lever of variable cost, which they get by using contracts. But again, we're eight quarters into that.

Mark Steven Marcon: Those were certainly factors.

Mark Steven Marcon: But we're now eight quarters into...

Speaker Change: down sequential quarters.

Speaker Change: such that, to a large extent, that's played out.

Speaker Change: There's no question that clients are using the lever of variable cost, which they get by using contractors, but again, we're eight quarters into that.

Keith Waddell: One of our people on our pre-earnings call made an interesting comment; they said, "It feels like, using a retail analogy, our clients have done due diligence, they've put something in their shopping cart, but they just won't hit the submit button." Indicative of, there's deferred demand as we speak. And so there's no question that accelerated hiring that did early post-COVID had an impact, but as I said, we're eight quarters into this. In fact, the longest period of sequential down quarters we've had was 10, and that relates all the way back to the .com period. So we've been at this a while.

Keith Waddell: One of our people on our pre-earnings call made an interesting comment. They said, using a retail analogy, our clients have done due diligence, they've put something in their shopping cart, but they just won't hit the submit button. Indicative that there's deferred demand as we speak. And so. There's no question that, uh..., accelerated hiring that did the early postcode had an impact, but as I've said, we're eight quarters into it.

Speaker Change: One of our people on our pre-earnings call made an interesting comment. They said, it feels like, using a retail analogy, our clients have done due diligence, they've put something in their shopping cart, but they just won't hit the submit button.

Speaker Change: Indicative of there's deferred demand as we speak.

Speaker Change: And so there's no question that the...

Speaker Change: accelerated hiring that did early post-COVID.

Speaker Change: had an impact, but as I've said...

Keith Waddell: In fact, the longest period of sequential down quarters we've had was 10, and that relates all the way back to the dot com period. We've been at this for a while. Contractors industry-wide temps, if you will, are down and have been down, bills to us like, particularly given, if you looked at the second half of 2023, inflation was coming down, a lot of talk of interest rate cuts. If you looked at our sequential performance, the first couple, three quarters of 2020.

Speaker Change: I mean, we're eight quarters into this. In fact, the longest.

Speaker Change: period of sequential down quarters we've had was 10 and that relates all the way back to the dot-com period.

Speaker Change: So...

Keith Waddell: Contractors industry-wide temps, if you will, are down and have been down. Fills to us like, particularly given if you looked at second half of 2023, inflation was coming down, a lot of talk of interest rate cuts. If you looked at our sequential performance, the first couple three quarters of 2023, we were down mid single digits. On the prospect of rate cuts, less inflation, the fourth quarter, the first quarter, those sequential declines improved to down low single digits. This quarter, given the stalling of the progress on inflation on the fewer interest rate cuts, we moved back to mid single digits.

Speaker Change: We've been at this a while.

Speaker Change: Contractors industry-wide temps, if you will, are down and have been down.

Speaker Change: to us like particularly given if you looked at second half of 2023 inflation was coming down a lot of talk of interest rate cuts if you looked at our sequential performance

Speaker Change: The first couple, three quarters of 2023, we were down mid-single digits.

Keith Waddell: We were down mid-single digits on the prospect of rate cuts and less inflation in the fourth quarter and the first quarter. Those sequential declines improved to down low single digits. And this quarter, given the stalling of the progress on inflation and the fewer interest rate cuts, we've moved back to mid-single digits. Again, this, down sequentially.

Speaker Change: On the prospect of rate cuts, less inflation, the fourth quarter, the first quarter, those sequential declines improved to down low single digits.

Speaker Change: This quarter, given the stalling of the progress on inflation, on the fewer interest rate cuts,

Mark Marcon: Again, this is down sequentially. Our guidance for Q3 is that we stay in that down mid single digits sequentially, but we're optimistic given how our business reacted to what happened second half of last year, and as we see progress in inflation, as we speak, and more talk of rate cuts. We're cautiously optimistic that with a bit of a lag, we will see improvement in numbers, but the overhang of overhiring. To the extent it existed, it existed early in the last eight quarters, and it's pretty much plagued its way out as we speak. That's great color key, thanks, and I agree with you.

Speaker Change: We've moved back to mid-single digits. Again, this is...

Keith Waddell: Our guidance for Q3 is that we stay in that down mid-single, mid-single digits sequentially. But we're optimistic, given how our business reacted to what happened in the second half of last year, and as we see progress in inflation as we speak and more talk of rate cuts, we're cautiously optimistic that with a bit of a lag, we will see improvement in our numbers. But the overhang of over hiring, to the extent it existed, existed early in the last eight quarters, and it's pretty much played its way out. That's a great color, Keith.

Speaker Change: down sequentially. Our guidance for Q3 is that we stay in that down mid-single.

Speaker Change: mid-single digits sequentially, but we're optimistic, given how our business reacted

Speaker Change: to what happened second half of last year, and as we see progress in inflation as we speak, and more talk of rate cuts, we're cautiously optimistic that with a bit of a lag, we will see improvement in our numbers.

Speaker Change: But the overhang of overhiring...

Speaker Change: To the extent it existed, it existed early in the last eight quarters and has pretty much played its way out as we speak.

Keith Waddell: Thanks. And I agree with you. The other question is just on proactivity within the U.S. You know, really nice improvements. And what I'm wondering is, you know, can you talk a little bit about the areas where you saw additional strength there? And when we – you gave us the guidance for proactivity in terms of the quarter, but how much of that is China? What's the amount that we're stripping out?

Speaker Change: That's that's great color key. Thanks, and I agree with you The the other question is just on productivity within the u.s. You know really nice improvements

Mark Marcon: The other question is just on pro-tivity within the US, you know, really nice improvement, and what I'm wondering is, you know, can you talk a little bit about the areas that you saw additional strength there, and when we, when we gave us the guidance for, for pro-tivity in terms of the quarter, but how much of that is China? What's the, what's the amount that we're stripping out? So the good news is, all-pertivity US, the solution string was very balanced across its four major solution areas: technology consulting, journal audit, business process improvement, and regulatory risk and compliance. Very broad-based, every one of them grew sequentially, which we're very pleased by.

Speaker Change: And what I'm wondering is, you know, can you talk a little bit about the areas that you saw additional strength there? And when we...

Speaker Change: You gave us the guidance for proactivity in terms of the quarter, but how much of that is China, what's the amount that we're stripping out?

Keith Waddell: So the good news is that for Pertivity US, the solution strength was very balanced across its four major solution areas, technology consulting, internal audit, business process improvement, and regulatory risk and compliance. Very broad based. Every one of them grew sequentially, which we're very pleased by. As to the impact of China, it was small.

Speaker Change: So the good news is operativity U.S.

Speaker Change: The solution strength was very balanced across its four major solution areas, technology consulting, internal audit.

Speaker Change: Business Process Improvement, and Regulatory Risk and Compliance. Very broad-based. Every one of them grew sequentially, which we're very pleased by.

Keith Waddell: Annual revenues, less than $10 million. And so while there's an EPS impact of the conversion from owned to member firm, the revenue impact is quite small. And I'd say this as well, for what's left that we have in China, which is principally Hong Kong, it's just under 1% of revenue. Great, thank you.

Keith Waddell: As to the impact of China, it was small; annual revenues less than ten million, and so while there's an EPS impact of the conversion from owned to member firm, the revenue impact is quite small. And I'd say this as well: for what's left that we have in China, which is principally Hong Kong, it's just under one percent of revenues. Great, thank you.

Speaker Change: As to the impact of China, it was small, annual revenues less than $10 million, and so while there's an EPS impact of the conversion.

Speaker Change: from owned to member firm, the revenue impact is quite small. And I'd say this as well, for what's left that we have in China, which is principally Hong Kong, it's just under 1% of revenues.

Speaker Change: Great, thank you.

Andrew Steinerman: And the next question will come from Andrew Steinerman with J.D. Morgan. Hey, Keith, could you give a little more color on the consulting market?

Operator: And the next question will come from Andrew Steinerman with J.P. Morgan. Hey, Keith, could you give a little more color on the consulting market? I mean, the kind of peer market that Protiviti plays in.

Speaker Change: And the next question will come from Andrew Steinerman with J.P. Morgan.

Andrew Charles Steinerman: Hey Keith, could you give a little more color on the consulting market, I mean kind of the peer market that Proactivity plays in, I know you used the word.

Keith Waddell: I mean, kind of the peer market, the pro-tivity plays, and I know you use the word competitive, and I know you use the word gaining share for pro-tivity, but do you feel like the consulting market might be bottom out here? Like, what do you feel like bench utilization is at firms like a centrum big four, and how does a pro-tivity utilization of its full-time staff look right now? Well, I'd say the consulting market does remain competitive, particularly on a market-by-market basis. Some firms have excess capacity; they get particularly aggressive with pricing. That's not new; that impacted this quarter. But pro-tivities manage through that quite well, in large part by how they manage their own utilization, including the judicious use of contractors through talent solutions.

Andrew Charles Steinerman: competitive, and I know you use the word a lot. I feel like the consulting market might be bottomed out here. What do you feel like bench utilization is at firms like Accenture and Big Four, and how does Proactivity's utilization of its full-time staff look right now?

Keith Waddell: I know you use the word competitive, and I know you use the word gaining share for Protiviti, but do you feel like the consulting market might be, you know, bottoming out here? Like, what do you feel like bench utilization is at firms like Accenture and the Big Four? And, you know, how does Protiviti's utilization of its full-time staff look? Well, I'd say the consulting market does remain competitive. Particularly on a market-by-market basis, some firms have excess capacity, and they are particularly aggressive with pricing. That's not new.

Speaker Change: Well, I'd say the consulting market does remain competitive.

Speaker Change: Particularly on a market-by-market basis, some firms have excess capacity.

Speaker Change: They get particularly aggressive with pricing.

Keith Waddell: That impacted this quarter, but Pertivity's managed through that quite well, in large part by how they've managed their own utilization, including the judicious use of contractors through Talent Solutions. So productivity has, you know, it was close to year-on-year growth in Q2. With a little luck, globally, it will have year-on-year growth in Q3. We feel great about Operativity.

Speaker Change: That's not new, that impacted this quarter, but Pertivity's managed through that quite well. In large part, by how they've managed their own utilization, including the judicious use of contractors through Talent Solutions.

Keith Waddell: So, pro-tivity has, you know, it was close to year-on-year growth in Q2; with a little luck, globally it will have year-on-year growth in Q3. We feel great about pro-tivity; their pipeline is strong, and that's balanced across solution strength. They're very focused on market-facing activities, starting by staying close to their current clients, understanding their business problems, and making sure our capabilities are top of mind. They've kept their comfort sponsorships high; they do webinars, local events, and they go to market aggressively, jointly with talent solutions. So we're very pleased with how activities performing, particularly in this very competitive consulting marketplace, and I don't think anybody would argue that they're gaining share.

Speaker Change: So, productivity has, you know, it was close to year-on-year growth in Q2. With a little luck, globally, it will have year-on-year growth.

Speaker Change: In Q3, we feel great about productivity, their pipeline is strong, and that's a balanced across solution strength.

Keith Waddell: The pipeline is strong, and that's a balanced across all areas. They're very focused on market facing activities, starting by staying close to their current clients, understanding their business problems, making sure our capabilities are top of mind. They keep their conference sponsorships high, they do webinars, and local events, and they go to market aggressively jointly with Talent Solutions. So we're very pleased with how Pertivity is performing, particularly in this very competitive consulting marketplace. And I don't think anybody would argue that they're gaining share. Thanks so much, Keith.

Speaker Change: They're very focused on market-facing activities, starting by staying close to their current clients.

Speaker Change: understanding their business problems, making sure our capabilities are top of mind. They've kept their conference sponsorships high. They do webinars, local events. They go to market aggressively, jointly with Talent Solutions.

Speaker Change: So, we're very pleased with how Pertivity is performing, particularly in this very competitive consulting marketplace, and I don't think anybody would argue that they're gaining share.

Andrew Steinerman: Sure thing. Thanks so much, Keith.

Speaker Change: Sure thing. Thanks so much, Keith.

Manav Patnaik: And the next question will come from Manav Patnaik with Barclays. Hi, Keith. This is Nancy Thomas from Manav. Thanks for taking my call. A quick question about demand expectations that you mentioned. Can you talk about how you've been managing your recruiter levels, and then also separately on your recent conversations with clients? Have you noticed any changes that they're hiring the remainder of the year, seeing the same levels of flavor hurting? I had a little trouble hearing you, but based on what I think I heard, you ask about our own internal recruiter levels, as well as conversation with clients about their levels of resource needs.

Keith Waddell: And the next question will come from Manav Patnaik with Barclays. I had a little trouble hearing you, but based on what I think I heard, you asked about our own internal recruiter levels, as well as our conversations with clients about their levels of resource needs. As to our own internal recruiters, our policy hasn't changed. On the one hand, we have a performance management approach by person as to how we manage headcount and those that underperform. We counsel them that they'd be better off with their career somewhere else, just like we always have.

Speaker Change: And the next question will come from Manav Patnaik with Barclays.

Speaker Change: Hi, Kate, this is Quincy Thomas on for Manav. Thanks for taking my call. A quick question about...

Quincy Thomas: expectations that you mentioned, can you talk about how you manage in your recruiter level, and then also separately

Speaker Change: on your recent conversations with clients. Have you noticed any changes with their hiring behavior?

Speaker Change: remainder of the year.

Speaker Change: being the same levels of labor hoarding?

Kate: Well, I had a little trouble hearing you, but based on what I think I heard, you ask about our own internal recruiter levels, as well as conversation with clients about their levels of resource needs.

Keith Waddell: As to our own internal recruiters, our policy hasn't changed. On the one hand, we have a performance management approach by person as to how we manage headcount and those that underperform. We counsel that they'd be better with their career somewhere else, just like we always have. By the same token, proven performers, while their productivity might be down somewhat given market conditions, we're committed to keeping them to having that capacity or drive powder at things get better. We've certainly estimated internally that we could grow revenues somewhere 20 to 30 plus percent without adding to heads, but that's all subject to how V-shaped a recovery we see and how much additional capacity we feel like we need at the time.

Speaker Change: As to our own internal recruiters, our policy hasn't changed. On the one hand, we have a performance management approach by person as to how we manage headcount and those that underperform.

Kate: We counsel that they'd be better with their career somewhere else just like we always have.

Keith Waddell: By the same token, proven performers, while their productivity might be down somewhat given market conditions, we're committed to keeping them, to having that capacity or dry powder as things get better. We've certainly estimated internally that we could grow revenue somewhere 20 to 30 plus percent without adding heads, but that's all subject to how V-shaped a recovery we see and how much additional capacity we feel like we need at the time. But that's a high-class problem to have. As to conversations with clients about their needs. As I talked about before, we definitely see deferred project demand. And the point we were trying to make in the prepared remarks was:

Kate: By the same token, proven performers, while their productivity might be down somewhat given market conditions, we're committed to keeping them, to having that capacity or dry powder as things get better.

Kate: We've certainly estimated internally that we could grow revenue somewhere 20 to 30 plus percent without adding to heads, but that's all subject to

Kate: how V-shaped a recovery we see and how much additional capacity we feel like we need at the time, but that's a high-class problem to have.

Keith Waddell: But that's a high-class problem to have as to conversations with clients about their needs. As I talked before, we definitely see deferred project demand. The point we were trying to make in the prepared remarks was today's subdued demand is tomorrow's source of demand, and that as projects are deferred, everybody talks about that, and most companies today focus only on those projects with a short-term ROI. There are many other projects, growth related, including that are getting deferred. That's future demand. Churn is subdued as we speak. That impacts backfill demand. Again, so as candidates' confidence improves, there will be more churn.

Speaker Change: Conversations with clients about their needs. As I talked before, we definitely see deferred project demand. And the point we were trying to make in the prepared remarks was...

Keith Waddell: Today's Subdued Demand is tomorrow's source of demand, and that as projects are deferred. Everybody talks about how most companies today focus only on those projects with a short-term ROI. And there are many other projects, growth-related including, that are getting deferred. That's future demand. Churn is subdued as we speak, and that impacts backfill demand. Again, as candidate confidence improves, there will be more churn; you get backfill demand from that, plus that impacts client capacity to deal with. Improvements for Stacy and their business.

Speaker Change: Today's

Speaker Change: Subdue Demand

Speaker Change: is tomorrow's source of demand and that as projects are deferred, everybody talks about that most companies today focus only on those projects with a short-term ROI.

Speaker Change: There are many other projects, growth-related including, that are getting deferred. That's future demand. Churn is subdued as we speak.

Speaker Change: That impacts backfill demand. Again, so as candidates' confidence improves, there will be more churn. You get backfill demand from that. Plus, that impacts client capacity to deal with.

Keith Waddell: You get backfill demand from that. Plus that impacts client capacity to deal with improvements they see in their business. There's a deferred impact. There's a pushed forward demand impact of current constraint conditions that we've seen many times through many cycles. We're one of the few management teams in the industry that's been through several of these cycles. Much of the softness in demand that we see and the impacts on churn that we see are not unusual. They turn around, which is why we, and frankly, the entire industry, typically does very well in the early part of growth cycles.

Stacy: Improvement Stacey and their business so

Keith Waddell: So, there's a deferred impact; there's a pushed forward demand impact of current constrained conditions that we've seen many times through many cycles. We're one of the few management teams in the industry that's been through several of these cycles. And much of the softness in demand that we see, and the impacts on churn that we are not unusual, and they turn around, which is why we, and frankly, the entire industry, typically do very well in the early part of the growth cycle.

Stacy: There's a deferred impact, there's a pushed forward demand impact.

Stacy: of Current Constrained Conditions that we've seen many times through many cycles. We're one of the few management teams in the industry that's been through several of these cycles.

Stacy: much of the softness in demand that we see and the impacts on churn that we see

Stacy: are not unusual, and they turn around, which is why we, and frankly the entire industry, typically does very well in the early part of growth cycles.

Keith Waddell: So we believe there's deferred demand; the job openings are a good backdrop to all of that. But down at the individual client level, individual conversation level, there's no question that projects are being deferred and that there's less turnover, less attrition, and less churn that also impacts demand for our contract labor resources as well as everybody else's in the industry. Thank you, and our next question will come from Heather Balsky with Bank of America. Hi, thank you for taking my question.

Keith Waddell: We believe there's a deferred demand. The job openings is a good backdrop to all of that. But down at the individual client level, individual conversation level, there's no question that projects are being deferred and that there's less turnover, less attrition, less churn. That also impacts demand for our contract labor resources as well as everybody else's in the industry.

Stacy: So we believe...

Stacy: There's deferred demand, the job openings is a good backdrop to all of that, but down at the individual client level, individual conversation level, there's no question that projects are being deferred.

Stacy: and that there's less turnover, less attrition, less churn that also impacts demand for our contract labor resources as well as everybody else's in the industry.

Keith Waddell: Thank you.

Heather Balsky: And our next question will come from Heather Balsky with Bank of America. Hi. Thank you for taking my question. Keith, just admit the backdrop that you're talking about. How are you thinking about the cost out of your business? You've given this update every quarter, but just given the ongoing malaise, are you thinking about making any changes, and how are you keeping in mind from existing yourself for when there is recovery? Well, you broke up on the last part, but the first part was how do we see the cost out of our business? Our largest cost is our head down, our staff payroll cost.

Bellar: Thanks, appreciate it, Fowler.

Speaker Change: Thank you. And our next question will come from Heather Balsky with Bank of America.

Keith Waddell: Keith, just amid the backdrop that you're talking about, how are you thinking about the cost of your business? You know, you've given this update every quarter, but just, you know, given the ongoing malaise, are you thinking about making any changes? And how are you keeping in mind sort of positioning yourself for when there is a recovery? Thanks.

Heather Nicole Balsky: Hi, thank you for taking my question. Keith, just amid the backdrop that you're talking about, how are you thinking about the cost out of your business?

Speaker Change: Thank you for joining us.

Keith Waddell: Well, you broke up on the last part, but the first part was, how do we see the cost side of our business? Our largest cost is our headcount, our staff, and payroll costs. And as I said, we haven't changed our policy.

Speaker Change: Well, you broke up on the last part, but the first part was, how do we see the cost side of our business? Our largest cost is our headcount, our staff, payroll costs.

Keith Waddell: And as I said, we haven't changed our policy. For those underperforming, we performance manage, as we always had. For those that have a medium to long term track record of success, we're committed to them even though their productivity levels aren't what they are in normal periods during a cycle. So, cost side management, not that different. Having said that, for the quarter just ended, our S.G.N.A. was down $32 million versus a year ago. That's a 7% reduction, although there is a negative leverage, particularly for our fixed cost, our corporate services, headquarters, and the administrative compensation of our branches.

Keith Waddell: For those underperforming, we performance manage, as we always have. For those that have a medium to long-term track record of success, we're committed to them even though their productivity levels aren't what they are during normal periods during a cycle. So cost-side management is not that different. Having said that, for the quarter just ended, our SG&A was down $32 million versus a year ago. That's a 7% reduction.

Speaker Change: And, as I said, we haven't changed our policy.

Speaker Change: For those underperforming, we performance manage as we always have. For those that have a medium to long-term track record,

Speaker Change: of success, we're committed to them even though their productivity levels aren't what they are in normal periods during a cycle.

Speaker Change: So, cost side management.

Speaker Change: Not that different.

Speaker Change: You know, having said that, for the quarter just ended, our SG&A was down $32 million versus a year ago.

Keith Waddell: Although there is negative leverage, particularly for our fixed costs, our corporate services, headquarters, and the administrative compensation of our branches, we have some negative leverage, but we have reduced our SG&A year on year for the quarter by $32 million. Thanks.

Speaker Change: That's a 7% reduction.

Speaker Change: Although there is a negative leverage, particularly for our fixed costs, our corporate services, headquarters, the administrative compensation of our branches.

Keith Waddell: So, we have some negative leverage, but we have reduced our S.G.N.A. year on year for the quarter $32 million.

Speaker Change: So, we have some negative leverage, but we have reduced our SG&A year-on-year for the quarter of $32 million.

Keith Waddell: Thanks, and Keith, where I got caught off, I guess I was asking about thinking about the recovery and where you are from a staffing perspective. If we see an inflection in the near term, are you where you would like to be from a staffing perspective? We feel good about where we are with our veteran productive staff. We just talked about; we think we could grow 20-30% plus without adding to heads, but that would be subject to an evaluation of just how robust the recovery was being. And we may want to add some sooner, but if we did, it would be for all the right reasons.

Keith Waddell: And, Keith, where I got caught off guard, I guess I was asking you about thinking about the recovery and where you are from a staffing perspective. If we see an inflection in the nearer term, are you where you would like to be from a staffing perspective? We feel good about where we are with our veteran, productive staff. We just talked about how we could grow 20 to 30 percent plus without adding to the headcount, but that would be subject to an evaluation of just how robust the recovery is being, and we may want to add some sooner, but if we did, it would be for all the right reasons. Thank you very much. And moving on, to Jeff Silber with BMO Capital Markets. Thanks so much.

Speaker Change: Thanks. And Keith, where I got caught off, I guess I was asking about thinking about the recovery and where you are from a staffing perspective. If we see an inflection in the nearer term, are you where you would like to be from a staffing perspective?

Keith: We feel good about where we are with our veteran productive staff. We just talked about we think we could grow 20 to 30 percent plus.

Speaker Change: without adding to heads.

Speaker Change: But that would be subject to an evaluation of just how robust the recovery was being and we may want to add some sooner. But if we did, it would be for all the right reasons.

Keith Waddell: Got it. Thank you very much.

Speaker Change: Got it. Thank you very much.

Jeff Silber: And moving on to Jeff Silber with BMO Capital Markets. Thanks so much. For my first question, I'd like to focus on margins, specifically contract talent solution margins. I know you don't guide to that specific number, but at least, compared to our estimates, it was a bit lower than we thought. Was there anything specifically going on there at this quarter, timing issues, et cetera? Should we expect that number to at least increase sequentially going into the third quarter? Thanks. You know, Jeff, I would say two components. On the one hand, if we're talking year on year, our gross margins were down about 60 basis points, a little over half of that due to conversions, which is a derivative of full time hiring or permanent placement, not a surprise.

Speaker Change: And moving on to Jeff Silber with BMO Capital Markets.

Keith Waddell: For my first question, I'd like to focus on margins, specifically contract talent solution margins. I know you don't guide to that specific number, but at least, compared to our estimates, it was a bit lower than we thought. Was there anything specifically going on there this quarter, timing issues, etc.? Should we expect that number to at least increase sequentially going into the third quarter? Thanks. You know, Jeff, I would say there are two components.

Jeffrey Marc Silber: Thanks so much. For my first question, I'd like to focus on margins, specifically contract talent solution margins. I know you don't guide to that specific number, but at least, you know, compared to our estimates, it was a bit lower than we thought. Was there anything specifically going on there this quarter, timing issues, etc.? Should we expect that number to at least increase sequentially going into the third quarter? Thanks.

Jeffrey Marc Silber: You know, Jeff, I would say two components. On the one hand, if we're talking year-on-year, our gross margins were down about 60 basis points.

Keith Waddell: On the one hand, if we're talking year-on-year, our gross margins were down about 60 basis points. A little over half of that's due to conversions, which is a derivative of full-time hiring or permanent placement. Not a surprise. And the other piece of that was essentially payroll fringes, payroll taxes, insurance, etc. A bunch of little pieces there, none of which individually was that large.

Speaker Change: A little over half of that's due to conversions, which is a derivative of full-time hiring or permanent placement. Not a surprise.

Keith Waddell: And the other piece of that was essentially payroll fringes, payroll taxes, insurance, et cetera. A bunch of little pieces there, none of which individually was that large. And the other piece of the margin contraction is the negative leverage on fixed SG&A cost, which I just addressed by saying we're committed to holding the line on our medium to long term proven internal recruiters. Plus, you've got your fixed cost that you have negative leverage on as the revenues fall a bit sequentially. As I said, for guidance purposes on the contract talent side, we're assuming mid single digit down sequentially, which is kind of what we were seeing, you know, first half of 2023.

Speaker Change: And the other piece of that was essentially payroll fringes, payroll taxes, insurance, etc. A bunch of little pieces there, none of which individually was that large.

Keith Waddell: And the other piece of the margin contraction is the negative leverage on fixed SG&A costs, which I just addressed by saying we're committed to holding the line on our medium-to-long-term proven internal recruiters, plus you've got your fixed costs that you have negative leverage on as revenues fall a bit sequentially. As I said, for guidance purposes on the contract talent side, we're assuming mid-single-digit decline sequentially, which is kind of what we were seeing in the first half of 2023.

Speaker Change: And the other piece of the margin contraction is the negative leverage on fixed SG&A costs, which I just addressed by saying we're committed to holding the line on our medium-to-long-term proven internal recruiters.

Speaker Change: Plus, you've got your fixed costs that you have negative leverage on as the revenues

Speaker Change: fall a bit sequentially. As I said, for guidance purposes on the contract talent side, we're assuming mid-single digit, down sequentially.

Speaker Change: which is kind of what we were seeing, you know, first half of 2023. And our hope is that given...

Keith Waddell: And our hope is that, given recent progress and inflation, hope for interest rate cuts that come fourth quarter and beyond, we'll see better sequential performance than that.

Keith Waddell: And our hope is that, given, uh... recent progress in inflation and hope for interest rate cuts that come fourth quarter and beyond... we'll see better sequential performance. Okay, that's helpful. If I could switch back up to the revenue line. On the administrative and customer support segment, I know you don't talk about this much, and it was relatively small, but sometimes, historically, the trends there have been leading indicators, and we took a slight step back in the second quarter; the year-over-year decline got slightly worse. Was there anything specifically going on there? Again, is this a one-time issue?

Speaker Change: Recent progress in inflation, hope for interest rate cuts that come fourth quarter and beyond, we'll see better sequential performance than that.

Jeff Silber: Okay, that's helpful.

Michael Buckley: If I could switch back up to the revenue line, I'm the administrative and customer support segment. I know you don't talk about this much. I know it's relatively small. But sometimes, historically, that trends there have been leading indicators, and we took a slight step back in the second quarter. The year of year decline got slightly worse. Was there anything specifically going on there again at a one-time issue, what should we expect going forward? Thanks. I'd say most of our practice groups, as we refer to them internally, the near-term results were pretty similar, and the year-on-year results that you mentioned are more about the comparable a year ago than they are what's happening right now.

Speaker Change: Okay, that's helpful. If I could switch back up to the revenue line.

Speaker Change: On the administrative and customer support segment, I know you don't talk about this much and it was relatively small, but sometimes historically the trends there have been leading indicators and we took a slight step back in the second quarter, the year-over-year decline got slightly worse. Was there anything specifically going on there? Again, is it a one-time issue? What should we expect going forward?

Keith Waddell: What should we expect going forward? Well, I'd say... Most of our practice groups, as we refer to them internally, the near-term results were pretty similar, and the year-on-year results that you mentioned are more about the comparables a year ago than they are about what's happening right now. And on this, kind of, what leads...

Speaker Change: I'd say most of our practice groups, as we refer to them internally,

Speaker Change: The near-term results were pretty similar and the year-on-year results that

Speaker Change: mentioned are more about...

Speaker Change: the comparables a year ago.

Michael Buckley: And on this kind of what leads potentially, one thing we look at is enterprise versus small business, excuse me, and we would observe that for the last two or three quarters, we see some firming in enterprise clients, we call them strategic accounts. Vertivity also focuses on enterprise-sized accounts, and so internally we're somewhat encouraged by what we're seeing more strength at the enterprise level; that generally, not always, but generally leads SMB to a bit. And so if we're looking for kind of small green shoots of optimism, we would point to enterprises doing better than SMB, both in talent solutions and clearly in vertivity, and in the past, that generally leads SMB by a little.

Speaker Change: Then they are what's happening right now and on this kind of what leads

Keith Waddell: Potentially, one thing we look at is enterprise versus small business, and we would observe that for the last two or three quarters, we have seen some firming in enterprise clients. We call them strategic accounts. And so internally, we're somewhat encouraged by the fact that we're seeing more strength at the enterprise level, which generally, not always, but generally leads SMB to, And so we're looking for kind of small green shoots of optimism. We would point out that enterprises are doing better than SMBs, both in talent solutions and clearly in productivity. And in the past, that generally leads SMBs by a little. Okay, that's really helpful. Thanks so much.

Speaker Change: potentially, one thing we look at is enterprise versus small business, excuse me, and we would observe

Speaker Change: that for the last two or three quarters, we see some firming in enterprise clients. We call them strategic accounts.

Speaker Change: Creativity also focuses on enterprise-sized accounts.

Speaker Change: And so, internally, we're somewhat encouraged by we're seeing more strength at the enterprise level that generally, not always, but generally, leads SMB to a bid.

Speaker Change: And so if we're looking for...

Speaker Change: kind of small green shoots of optimism.

Speaker Change: We would point to enterprises doing better than SMB, both in talent solutions and clearly in productivity. And in the past, that generally leads SMB by a little.

Michael Buckley: Okay, that's really helpful.

Michael Buckley: Thanks so much, Kate.

Keith Waddell: And the next question will come from Kartik Mehta with North Coast Research. All right, good afternoon. I wanted to go back a little bit to what you were saying about price incompetition and productivity. And I'm wondering, I know this is very short term, but has that gotten worse since the last quarter? Or are you seeing about the same level of price competition you saw at the beginning of the year? It's the same-ish, you know; it's not a national thing, it's a local thing, and depends on a local office's resource level and utilization levels. I'll give it, you know, Big Four, because of its low utilization levels in that location, but it's not a nationwide thing.

Speaker Change: Okay, that's really helpful. Thanks so much, Kate.

Kartik Mehta: And the next question will come from Cartique Mata with North Coast Research. Good afternoon. I wanted to go back a little bit to what you were saying about pricing competition and fertility, and I'm wondering, I know this is very short term, but has that gotten worse since the last quarter, or are you seeing about the same level of price competition you saw at the beginning of the year? It's same-ish. You know, it's not a national thing; it's a local thing, and depending on a local office's resource levels and utilization levels, I given, you know, a big-for accounting firm might get super-aggressive because of its low utilization levels in that location, but it's not a nationwide thing.

Speaker Change: And the next question will come from Kartik Mehta with North Coast Research.

Kartik Mehta: Good afternoon. I wanted to go back a little bit to what you were saying about price and competition and productivity and I'm wondering, I know this is very short-term, but has that gotten worse since the last quarter or are you seeing about the same level price competition you saw at the beginning of the year?

Speaker Change: It's same-ish, you know, it's not a national thing, it's a local thing, and depending on a local office's resource levels.

Speaker Change: and Utilization Levels, a given, you know, big four,

Speaker Change: Accounting firm might get super aggressive because of its low utilization levels in that location but it's not a nationwide thing. And so

Keith Waddell: And so, Fertivity's been seeing that type of pricing competition for several quarters now, and it continued into the second.

Kartik Mehta: And so, particular being seeing that type of pricing competition for several quarters now, it continued into the second; it's expected to continue into a third, but it's something that they're managing through, and they're managing through. It's a component of gross margin for which they improve 250 basis points in the quarter. It's a component, but the other components are kind of the shape of the leverage pyramid, managing directors at the top end, variable cost contractors at the bottom, so they've been aggressively managing that mix. They've been aggressively managing the utilization of their full-time employees, and so, when you put that piece together, it's particularly impressive, I think, that they're making the sequential progress that they're making, notwithstanding the revenue, the bill rate competition that they're seeing for the reasons you mentioned.

Speaker Change: Perttivity's been seeing that type of pricing competition for several quarters now. It continued into the second. It's expected to continue into a third. But it's something that they're managing through, and they're managing through. It's a component of gross margin for which they improve 250 basis points in the quarter.

Keith Waddell: It's expected to continue into the third quarter, but it's something that they're managing through. And they are managing through it. It's a component of gross margin, for which they improved 250 basis points in the quarter.

Keith Waddell: But the other components are kind of the shape of the leverage pyramid, managing directors at the top end, and variable cost contractors at the bottom. So they've been aggressively managing that mix. And they've been aggressively managing the utilization of their full-time employees.

Speaker Change: It's a component, but the other components are kind of the shape of the leveraged pyramid, managing directors at the top end, variable cost contractors at the bottom, so they've been aggressively managing that mix.

Speaker Change: They've been aggressively managing the utilization of their full-time employees.

Keith Waddell: And so when you put that piece together, it's particularly impressive, I think, that they're making the sequential progress that they're making, notwithstanding the revenue, the bill rate competition that they're seeing for the reasons you mentioned. And then just, you know, you've talked about kind of keeping your good employees, and I'm wondering what the retention rate has been, and whether you've been successful, if you have been successful. I imagine you're going through the same stuff that every other company is going through, where people are less likely to leave.

Speaker Change: And so when you put that piece together, it's particularly impressive, I think, that they're making the sequential progress that they're making, notwithstanding the revenue, the bill rate competition that they're seeing for the reasons you mentioned.

Keith Waddell: And then just, you know, you've talked about kind of keeping your good employees, and I'm wondering what the retention rate has been, and it's been successful, or if you've been successful. I imagine you're going through the same stuff that every other company is, where people are less likely to leave, but I'm just wondering if you retain the right employees that you want or if there's been any kind of movement because of what's happening in the industry. I'd say, generally speaking, virtually every company, certainly in the United States, is seeing lower attrition rates because the raise the higher compensation opportunity to switch isn't what it was.

Keith Waddell: But I'm just wondering if you retain the right employees that you want, or if there's been any kind of movement because of what's happening in the industry. I'd say, generally speaking, virtually every company, certainly in the United States, is seeing lower attrition rates, so the higher compensation opportunity to switch isn't what it was. I'd also say that... I don't think anybody would dispute that Robert Half has more tenure among its top 250. Not just five, of anybody in the industry, our retention rates have always been the strongest in that regard, and they continue to this day. But for economic reasons...

Speaker Change: And then just, you know, you've talked about kind of keeping your good employees, and I'm wondering what the retention rate has been, and if you've been successful. I imagine, you know, you're going through the same stuff that every other company is, where people are less likely to leave.

Speaker Change: But I'm just wondering if you've retained the right employees that you want or if there's been any kind of movement because of what's happening in the industry.

Speaker Change: I'd say, generally speaking, virtually every company, certainly in the United States, is seeing lower attrition rates because the

Speaker Change: The higher compensation opportunity to switch isn't what it was.

Kartik Mehta: I'd also say that I don't think anybody would dispute that Robert Half has more tenure amongst its top 250 people, not just five of anybody in the industry. But for our retention rates have always been the strongest in that regard, and they continue; but for economic reasons, virtually everybody's retention rate is better now than it typically is, ours included. But my point is our long-term retention rates are the best in the industry, and that continues, and it's a big part of our success. Thank you very much. I appreciate it.

Speaker Change: I'd also say that...

Robert Half: I don't think anybody would dispute that Robert Half has more tenure amongst its top 250 people, not just five.

Robert Half: of anybody in the industry, our retention rates have always been the strongest in that regard, and they continue. But for economic reasons, virtually everybody's retention rate is better now than it typically is, ours included. But my point is,

Keith Waddell: Virtually everybody's retention rate is better now than it typically is, ours included, but my point is, our long-term retention rates are the best in the industry, and that continues, and it's a big part of our success. Thank you very much. I appreciate it. And the next question will come from Stephanie Moore with Jeffreys. Hello, this is Harold Lanta on behalf of Stephanie Moore.

Robert Half: Our long-term retention rates are the best in the industry and that continues and it's a big part of our success.

Speaker Change: Thank you very much. I appreciate it.

Harold Lanzar: And the next question will come from Stephanie Moore with Jefferies. Hello, this is Harold Lanzar on for Stephanie Moore. Just one of the touch on comments on solutions with my finance and the comment. So I know at one point in time you said, you know, you guys just need a higher mix of, you know, higher caliber jobs. So I just want to get a sense, you know, in the finance and the comment, how the job breakdown is looking there. Well, we've said on prior calls that we've now gotten to where over half of our contract positions are higher skilled.

Speaker Change: And the next question will come from Stephanie Moore with Jeffreys.

Speaker Change: Hello, this is Harold Hunter on for Stephanie Moore. I just wanted to touch on...

Keith Waddell: Just wanted to touch on Tom's solutions for my finance and accounting. So I know at one point in time, you said that you guys were seeing a higher mix of, you know, high-caliber jobs. So I just want to get a sense, you know, in finance and accounting, how the job breakdown is. Well, we've said on prior calls that we've now gotten to where over half of our contract positions are higher skilled, they have higher margins, they're not as economically sensitive. And so we're pleased with that migration up the skill curve. We've been on that journey for a long time.

Speaker Change: Bye.

Speaker Change: Tom Solutions with my finance on the comment, so I know at one point in time you said, you know, you guys are seeing

Speaker Change: higher, a higher mix of, you know, a high-caliber job. So I just want to get a sense, you know, in the finance and econ how the job breakdown is looking there.

Speaker Change: Well, we've said on prior calls that we've now gotten to where over half of

Keith Waddell: They have higher margins. They're not as economically sensitive. And so we're pleased with that migration up to Skill Curve. We've been on that journey for a long time. We continue on that journey. It also plays in well with talent solutions and creativity going to market together because it's those higher skills that often fit best in the joint projects we have with creativity. So strategically, we love this, this higher mix of higher skilled. Not that we're walking away in any shape or form from the more operational skills, which are the high volume positions in most accounting departments.

Speaker Change: of our contract positions are higher skilled, they have higher margins, they're not as economically sensitive.

Speaker Change: And so...

Speaker Change: We're pleased with that.

Keith Waddell: We continue on that journey. It also plays in well with talent solutions and productivity going to market together because it's those higher skills that often fit best in the joint projects we have with productivity. So strategically, we love this higher mix of higher-skilled workers, not that we're walking away in any shape or form from the more operational skills, which are the high volume positions in most accounting departments. Thank you for the call.

Speaker Change: We've been on that journey for a long time. We continue on that journey. It also plays in well with talent solutions and productivity going to market together because it's those higher skills that often fit best in the joint projects we have with productivity.

Speaker Change: So, strategically, we love this higher mix of higher skill, not that we're walking away in any shape or form from the more operational skills, which are the high volume positions in most accounting departments.

Harold Lanzar: Thank you for the call.

George Tong: And the next question will come from George Tongue with Goldman Sachs. Hi, thanks, good afternoon. Can you compare and contrast trends that you're seeing with temp staffing in per placement and put that in the context with the broader macro environment? Well, it's interesting, George. So, if you go to our website where we've got our investor slides, we've got a couple that show for 20, 25 years of relative performance between contractor temp and per placement. And what you'll see is that they're highly correlated; the beginnings, the troughs, the peaks happen largely at the same time, per placement, always more volatile, lower lows, higher highs from a growth rate standpoint.

Speaker Change: Thank you for the call.

Operator: And the next question will come from George Tong with Goldman Sachs. Hi, thanks. Good afternoon.

Speaker Change: And the next question will come from George Tong with Goldman Sachs.

Keith Waddell: Can you compare and contrast trends that you're seeing with temporary staffing and permanent placement and put that in the context of the broader macro environment? Well, it's interesting, George. So if you go to our website, where we've got our investor slides, we've got a couple that show 2025 years of relative performance between contractor temp and per place. And what you'll see is that they're highly correlated. The beginnings, the troughs, the peaks happened largely at the same time, perm placement always more volatile, lower lows, higher highs from a growth rate standpoint.

Keen Fai Tong: Hi, thanks. Good afternoon. Can you compare and contrast trends that you're seeing with temp staffing and perm placement and put that in the context with the broader macro environment?

Speaker Change: Well, it's interesting, George, so if you go to our website where we've got our investor slides.

Speaker Change: We've got a couple that show for 20-25 years of relative performance between contractor temp and perm placement.

Speaker Change: And what you'll see is that...

Speaker Change: They're highly correlated, the beginnings, the troughs, the peaks happen largely at the same time, perm placement always more volatile, lower lows, higher highs from a growth rate standpoint.

Keith Waddell: I'd say if you look at the past eight quarters of what I would certainly call a staffing recession, we're down peak to trough in both contract and per placement, less than we have been in other staffing recessions. And the thing that probably is the most in contrast, whereas in prior staffing downturns, a permanent placement declines by over 50%. In so far this time, these past eight quarters, I think peak to trough, we're down in the 30%. So more benign peak to today in per placement, better in contract but not as different as is the case in per placement.

Keith Waddell: I'd say if you look at the past eight quarters of what I would certainly call a staffing recession. We're down peak to trough in both contract and perm positions, less than we have been in other staffing recessions. And the thing that probably is the most contrast, whereas in prior staffing downturns, permanent placement declines by over 50%, And so far this time, these past eight quarters, I think peak to trough, we're down into 30%.

Speaker Change: I'd say if you look at the past eight quarters of what I would certainly call a staffing recession.

Speaker Change: We're down peak to trough in both contract and perm placement, less than we have been in other staffing recessions.

Speaker Change: And the thing that probably is the most in contrast, whereas in prior staffing downturns, permanent placement declines by over 50 percent,

Speaker Change: And so far this time, these past eight quarters, I think peak to trough were down in the 30%. So more benign.

Keith Waddell: So more benign peaked today in permplacement, better in contract, but not as different as is the case in PERM placement. Said differently, PERM's faring better in this staffing downturn than it has in prior staffing downturns, but it's still more impacted than contract because it's fundamentally about full-time jobs. Got it. That's helpful.

Speaker Change: That peaked today in perm placement, better in contract.

Speaker Change: Not as different as is the case in PIRM placement. Said differently, PIRM's fairing better.

Keith Waddell: So differently, perms fairing better in this staffing downturn than it has in prior staffing downturns. But it's still more impacted than contract because it's fundamentally about full-time jobs.

Speaker Change: in this staffing downturn than it has in prior staffing downturns, but it's still more impacted than contract because it's fundamentally about full-time jobs.

George Tong: Got it. That's helpful.

Keith Waddell: Earlier, you provided some comparisons between enterprise and S&B customer behaviors. Can you talk a bit about what you're seeing across different verticals? Which verticals and markets are doing particularly well, and which end markets are faring less well? Well, I would put it on a practice group basis, and where we talk about finance and accounting, administrative customer support, and technology are our big PAC practice groups. Because they're all principally SMB folks. Current sequential performance, one to the other, isn't that different?

Keith Waddell: Earlier, you provided some comparisons between enterprise and SMB customer behaviors. Can you talk a bit about what you're seeing across different verticals, which verticals and markets are doing particularly well, and which markets are faring less well? Well, I would put it on a practice group basis and where we talk about finance and accounting, administrative customer support, technology are our big practice groups. And because they're all principally SMB focused, current sequential performance, one to the other, is it that different? And the year-on-year differences are more about the comps than they are current sequential performance. So I wouldn't call out any practice group more so than another, and that.

Speaker Change: Got it. That's helpful. Earlier you provided some comparisons between enterprise and S&B customer behaviors. Can you talk a bit about what you're seeing across different verticals? Which verticals and markets are doing particularly well and which end markets are faring less well?

Speaker Change: Well, I would put it on a practice group basis, and where we talk about finance and accounting, administrative customer support, technology, are our big practice groups.

Speaker Change: Because they're all principally SMB focused...

Speaker Change #100: Current sequential performance, one to the other, isn't that different?

Speaker Change #100: And the year-on-year differences are more about the comps than they are current sequential performance. So I wouldn't call out...

Keith Waddell: that way.

Speaker Change #100: any practice group more so than another in that way.

Keith Waddell: Got it, thank you.

Trevor Romeo: And the next question will come from Trevor Romeo with William Blair. Thank you, Mike. Thanks for taking the questions.

Speaker Change #101: Got it. Thank you.

Keith Waddell: And the year-on-year differences are more about the comps than they are current sequential performance. So I wouldn't call out any practice group more so than another in that. Got it. Thank you. And the next question will come from Trevor Romeo with William Blair. Hi, Keith and Mike, thanks for taking the questions. Just a couple of quick ones for me. One on Europe, I think we heard from a few of the other kind of talent solutions companies that demand in Europe has weakened a bit in the past few months gradually, particularly on the perm side. Just curious if you saw that as well.

Speaker Change #101: And the next question will come from Trevor Romeo with William Blair.

Keith Waddell: And if you could kind of just talk about the demand environment in, you know, Germany, Belgium, any of the other notable markets in Europe, that'd be great. I would say, not much change. If you look at our supplemental revenue schedules, you'll see the year-on-year performance. Corridor 1 versus Corridor 2, for Non-U.S. Operations, isn't very different.

Trevor Romeo: Just a couple of quick ones for me, one on Europe. I think we heard from a few of the other kind of talent solutions companies that demand in Europe. We can a bit the past few months incrementally, particularly on the perm side. Just curious if you saw that as well.

John Trevor Romeo: Hi Keith and Mike, thanks for taking the questions. Just a couple of quick ones for me. One on Europe , I think we had heard from a few of the other kind of talent solutions companies that demand in Europe weakened a bit the past few months incrementally, particularly on the perm side. Just curious if you saw that as well, and if you could kind of just talk about the demand environment in, you know, Germany, Belgium, any of the other notable markets in Europe , that'd be great.

Keith Waddell: And if you could kind of just talk about the demand environment in Germany, Belgium, any of your other noble markets in Europe, that would be great. I would say not much change if you look at our supplemental revenue schedules. You'll see the year-on-year performance quarter one versus quarter two for non-US operations is a very different. And so I would say more of the same; our forecast for Q3 is similar as well. So no notable change in our collection of international countries led by Germany, Belgium, Brazil, coming on as I talked last quarter, but not much change.

Speaker Change #108: I would say not much change. If you look at our supplemental revenue schedules you'll see the year-on-year performance

Speaker Change #103: Quarter 1 versus Quarter 2 for non-U.S. operations isn't very different.

Keith Waddell: And so I would say more of the same. Our forecast for Q3 is similar as well, so no notable change in... our collection of international, led by Germany, Belgium, and Brazil coming on as I talked last quarter, but not much change.

Keith Waddell: Okay. Thank you. That's helpful.

Speaker Change #104: And so, I would say more of the same. Our forecast for Q3 is similar as well, so no notable change in...

Speaker Change #104: our collection of international countries, led by Germany, Belgium,

John Trevor Romeo: Brazil coming on as I talked last quarter, but not much change.

Keith Waddell: Okay, thank you. That's helpful.

Keith Waddell: And then just a quick follow-up on productivity. You know, I think you called out broad strength across all the solution areas, which was nice to hear, but I think the last, you know, several quarters, you talked about internal audit and tech consulting, seeing some budget pressures. So have you started to see some of that pressure on those two solutions, in particular, ease in the past few months? I would say, particularly in internal audit, we're seeing some life with financial institutions, internal audit, particularly IT, internal audit, and so we would be more positive about internal audit, particularly with large financial institutions.

Keith Waddell: And then just a quick follow-up on productivity. I think you called out broad strength across all the solution areas, which was nice to hear. But I think the last several quarters you talked about, internal audit and tech consulting, seeing some budget pressures. So, have you started to see some of that pressure on those two solutions in particular ease in the past few months? I would say particularly in internal audit, we're seeing some life with financial institutions in internal audit, particularly IT internal audit. And so we would be more positive about internal audit, particularly with large financial institutions. As you know, about 40 percent of activities, revenues are in the financial services industry.

Speaker Change #109: Okay, thank you, that's helpful. And then just a quick follow-up on protivity, you know, I think you called out broad strength across all the solution areas, which was nice to hear, but I think the last, you know, several quarters you talked about

Speaker Change #105: Internal Audit and Tech Consulting seeing some budget pressures. So have you started to see some of that pressure on those two solutions in particular ease in the past few months?

Speaker Change #106: I would say, particularly in internal audit, we're seeing some life with financial institutions, internal audit, particularly IT internal audit.

Speaker Change #107: And so, we would be more positive about internal audit, particularly with large financial institutions. As you know, about 40% of Pertivity's revenues are in the financial services industry, so to see some...

Keith Waddell: As you know, about 40% of Pertivity's revenues are in the financial services industry, so to see some... of optimism there is great. Sequentially, in the third quarter, we typically see a lift from more Sarbanes-Oxley. We're gonna see that lift again, however, it's masked by a couple of large projects that ended this past quarter. And so they're essentially going to offset the sequential progress we would typically see in the third quarter, such that the guidance you're given sequentially is, flat at the top line, more improvement on utilization such that you've got gross margin and segment margin improvement. All right. Thank you, Keith. I appreciate it. And the next question will come from Tobey Sommer with Truist Securities. Hey, good afternoon. This is Jack Wilson on behalf of Tobey.

Keith Waddell: So to see some signs of optimism, there is great. The other thing I'd point out is sequentially in the third quarter, we typically see a lift from more servings actually work. We're going to see that lift again. However, it's masks by a couple of large projects that ended this past quarter. And so they're essentially going to offset the sequential progress we would typically see in the third quarter, such that the guidance you're given sequentially is flat at the top line, more improvement on utilization, such that you've got gross margin and segment margin improvements.

Speaker Change #107: Signs of optimism there is great. The other thing I'd point out is, sequentially in the third quarter, we typically see a lift from more Sarbanes-Oxley work.

Speaker Change #107: We're going to see that lift again, however, it's masked.

Speaker Change #107: by a couple of large projects that ended this past quarter and so they're essentially going to offset the sequential progress we would typically see in the third quarter such that the guidance you're given sequentially is...

Speaker Change #107: flat at the top line, more improvement on utilization such that you've got gross margin and segment margin improvements.

Trevor Romeo: All right, thank you, Keith.

Trevor Romeo: Appreciate it.

Tobey Sommer: And the next question will come from Toby Summer with Truce Securities. Hey, good afternoon.

Speaker Change #107: All right. Thank you, Keith. Appreciate it.

Speaker Change #107: And the next question will come from Tobey Sommer with Truist Securities.

Jack Wilson: This is Jack Wilson on for Toby. Can we maybe dig in a little bit more of the dynamics you saw in June? It looks like NTIB Small Business Optimism trended up sort of March to June. Is that something that you saw? Well, I don't know whether you're talking about our numbers specifically or generally. I would say generally, if you look at NFIB, we're encouraged that their confidence indexed has improved three months in a row. It's still below their normal average, but sequentially, at least for those three months, we are encouraged. Sixty percent are still trying to hire; 85 percent of them, a few or no qualified applicants.

Operator: Can we maybe dig into a little bit more of the dynamics you saw in June? It looks like NPIB small business optimism trended up sort of from March to June. Is that something that you saw?

Jack Wilson: Hey, good afternoon. This is Jack Wilson on for Tobey. Can we maybe dig into a little bit more of the dynamics you saw in June ? It looks like NPIB small business optimism trended up sort of March to June . Is that something that you saw?

Keith Waddell: Well, um... I don't know whether you're talking about our numbers specifically or generally. I would say generally, if you look at NFIB, we're encouraged that their confidence index has improved three months in a row. It's still below its normal average, but sequentially, at least for those three months, we are encouraged. 60% are still trying to hire, 85% of them, and a few are not qualified applicants. Inflation is still the number one business problem for which we seem to see some progress, which was helpful coming out of the second half of last year into the first part of this year.

Speaker Change #111: Well, um...

Speaker Change #112: I don't know whether you're talking about our numbers specifically or generally, I would say...

Speaker Change #113: Generally, if you look at NFIB, we're encouraged that their confidence index has improved three months in a row. It's still below their normal average, but sequentially, at least for those three months, we are encouraged.

Speaker Change #114: 60% are still trying to hire, 85% of them.

Keith Waddell: Flation still the number one business problem for which we seem to see some progress, which was helpful coming out of the second half of last year and to the first part of this year, and NFIB, small business, confidence, hiring, it's a little better, it's a little better.

Speaker Change #114: a few or no qualified applicants, inflation still the number one business problem for which we seem to see some progress, which was helpful coming out of the second half of last year into the first part of this year.

Keith Waddell: NFIB, small business, confidence, hiring, it's a little better, it's a little better. Okay, and then maybe in the follow-up... June included. Go ahead. Um, maybe as a follow-up to that, do you think we could see sort of a step change in customer sentiment following the election or the inauguration? Oh boy. You know, the answer is I don't know. My recollection is...having been here a bit, is that there haven't been any huge swings in elections one way or the other.

Speaker Change #114: NFIB, small business, confidence, hiring, it's a little better, it's a little better.

Keith Waddell: Okay, let me do a follow-up. June included. Go ahead. The members will follow up to that. Do you think we could see sort of a step change in customer sentiment following the election or the inauguration? Oh, boy. You know, the answer is I don't know. My recollection is having been here a bit; is that there haven't been huge swings in elections one way or the other.

Speaker Change #115: Okay, and then maybe as a follow-up... June included.

Speaker Change #116: Do you think we could see sort of a step change in customer sentiment following the election or the inauguration?

Speaker Change #117: Oh boy. You know, the answer is, I don't know. My recollection is, having been here a bit, is that there haven't been...

Speaker Change #117: Huge swing in elections one way or the other.

David Silver: Okay, thank you very much.

David Silver: And the next question will come from David Silver with CL King. Yeah, hi, thank you. I think my first question would be on the blended solutions performance this quarter. So I guess the intersegment eliminations number grew, while contract talent solutions was weaker across the board. And firstly, I was just wondering if you could comment on that trend where I guess blended solutions is accounting for a larger share of your contract talent placements. And then secondly, if you could remind me about the economic effects internally, I guess, for Robert Hath, when let's say a productivity project is theft via the blended solutions route versus let's say, with another candidate, sorry, that candidate would be placed with a non-protivity client.

Speaker Change #118: Okay, thank you very much.

Keith Waddell: Okay, thank you very much. And the next question will come from David Silver with CL King. Yeah, hi, thank you.

Speaker Change #118: And the next question will come from David Silver with CL Kink.

Operator: Um, I think my first question would be on the blended solutions performance this quarter. So I guess the number of intersegment eliminations grew while contract talent solutions were weaker across the board. And, you know, firstly, I was just wondering if you could comment on that trend where, I guess, Splendid Solutions is accounting for a larger share of your contract talent placement. And then secondly, if you could remind me about the economic effect internally, I guess for Robert Half when, let's say, a proactivity project is staffed, you know, via the blended solutions route versus, let's say, you know, with another candidate, or sorry, a non-proactivity candidate, that candidate would be placed with a non-proactivity client.

David Silver: Yeah, hi, thank you.

David Silver: I think my first question would be...

David Silver: on the blended solutions performance this quarter. So, I guess the inter-segment eliminations number grew while contract talent solutions, you know, was weaker across the board.

Speaker Change #120: And, you know, firstly, I was just wondering if you could comment on that trend where I guess Blended Solutions is accounting for a larger share of your contract talent placements.

Speaker Change #121: And then secondly, if you could remind me about the economic effects.

Speaker Change #121: internally I guess for Robert Half when let's say

Speaker Change #121: a proactivity project is staffed, you know, via the blended solutions route versus, let's say, you know, with another, another candidate, or sorry, a non, that candidate would be placed with a non-proactivity client. Thank you.

Keith Waddell: Thank you. Okay, so blended solutions, and you're right, and we're happy that we now have three quarters in a row where blended solutions with productivity have grown sequentially. The two or three prior to that, productivity was aggressively managing its utilization levels for its full-time staff, which was done to some extent at the expense of using contractors. But we now have three quarters in a row where that's grown. We're going to market together better than ever. That's a good thing as to economic impacts from an enterprise point of view whether we place a candidate on a third party client directly from talent solutions or to a third party client via creativity; the gross margins aren't that different.

Operator: Thank you. Okay, so blended solutions, and you're right, and... We're happy that we now have three quarters in a row where blended solutions with protivity have grown sequentially. The two or three prior to that, Pertivity was aggressively managing its utilization levels for its full-time staff, which was done, to some extent, at the expense of using contracts. But we now have three quarters in a row where that's grown. We're going to market together better than ever, that's a good thing. As to economic impact, From an enterprise point of view, whether we place a candidate on a third-party client directly from Talent Solutions or yes, to a third-party client via Protivix.

Speaker Change #122: Okay, so blended solutions, and you're right, and

Speaker Change #123: We're happy that we now have three quarters in a row.

Speaker Change #123: where blended solutions with protivity have grown sequentially.

Speaker Change #123: The two or three prior to that, Pertivity was aggressively managing its utilization levels.

Speaker Change #123: for its full-time staff, which was done, to some extent, at the expense of using contractors. But we now have three quarters in a row where that's grown. We're going to market together better than ever.

Speaker Change #123: That's a good thing. As to...

Speaker Change #123: Whether we place a candidate on a third party client directly from Talent Solutions.

Speaker Change #123: or

Speaker Change #123: to a third-party client via protivity.

Keith Waddell: The gross margins aren't that different. One way to look at it is... Bye. Going through protivity for enterprise accounts, or effectively getting SMB gross margin that we otherwise wouldn't get if we were going directly to those enterprise third-party clients rather than through Protivics, if that's clear. Okay, no, that's great.

Keith Waddell: One way to look at it is by going through creativity for enterprise accounts or effectively getting SMB gross margins that we otherwise wouldn't get if we were going directly to those enterprise third party clients rather than through creativity, if that's clear.

Speaker Change #123: The gross margins aren't that different. One way to look at it is...

Speaker Change #123: Bye.

Speaker Change #123: Going through productivity for enterprise accounts or effectively getting SMB gross margins.

Speaker Change #123: if we were going directly to those enterprise third-party clients rather than through productivity.

Keith Waddell: I will have to review it, but thank you for the walk-through there. And then, you know, I did note your comment about recruiters plus AI, which I'm sure will grow in importance. But if, you know, if we're speaking a year from now, and that element of your overall business strategy is or develops as you suspect, where will that success be, you know, reflected in your results on a broader basis? Or should we look for, you know, greater impact on certain of your staffing lines? I think it would be broad.

Speaker Change #123: if that's clear.

Keith Waddell: Okay, no, that's great. I will have to review it, but thank you for the walk through there. And then I did note your comment about recruiters plus AI approach that I'm sure will grow in importance. But if we're speaking a year from now and that element of your overall business strategy is or develops as you suspect, where will that success be reflected in your results on a broader basis, or should we look for greater impact on certain of your staffing lines? I think it would be broad. Our clients clearly tell us they want both; they want the benefit of world-class AI, they want the benefit of recruiters, they want to choose when they primarily go digitally versus use recruiters. Typically, at the front end, they're more digital and at the back end, they're more recruiter-focused. But every client's different, and the point is we have both capabilities, which is not true for the digital-only competitors, if you will, out there.

Speaker Change #124: Okay, no, that's great. I will have to review it but thank you for the walk through there.

Speaker Change #125: And then, you know, I did note your comment about recruiters plus AI approach that, you know, I'm sure will grow in importance, but...

Speaker Change #126: If, you know, if we're speaking a year from now and that element of your overall business strategy is, or develops as you suspect.

Speaker Change #127: Will that success be reflected in your results on a broader basis, or should we look for greater impact on certain of your staffing lines?

Keith Waddell: Our clients clearly tell us they want both. They want the benefit of world-class AI. They want the benefit of recruiters, but they want to choose when they primarily go digital versus using recruiters. Typically, at the front end, they're more digital, and at the back end, they're more recruiter-focused. But every client's different, and the point is, we have both capabilities, which is not true for the digital-only... competitors, if you will, out there. So they want both.

Speaker Change #128: I think it would be broad. Our clients clearly tell us they want both. They want the benefit of world-class AI. They want the benefit of recruiters.

Speaker Change #128: They want to choose when they...

Speaker Change #129: primarily go digitally versus use recruiters typically at the front end they're more digital and at the back end they're more recruiter focused but every client is different and the point is we have both capabilities

Speaker Change #129: which is not true for the digital-only...

Keith Waddell: So they want both, and they want to choose on their terms and on their timetable when they want to lead with digital AI and when they want to lead with recruiters, and they expect a seamless connection between our AI and our recruiters, which our internal systems do a decent job of today and we'll do a better job as time passes.

Speaker Change #129: competitors if you will out there so they want both and they want to choose on their terms and on their timetable when they want to lead with digital AI and when they want to lead with recruiters and they expect a seamless

Keith Waddell: And they want to choose on their terms and on their timetable when they want to lead with digital AI and when they want to lead with recruiters. And they expect a seamless connection between our AI and our internal systems, which do a decent job today and will do a better job as time passes. We're very happy about this new capability. Go to our website, roberthalf.com. You can, today, anybody, search for candidates. And in so doing, you will see who we have that matches those specifications.

Speaker Change #129: connection between our AI and our recruiters which our internal systems

Speaker Change #129: We'll do a decent job of today and we'll do a better job as time passes.

Keith Waddell: We're very, very happy about this new capability. Go to our website, roberthave.com. You can today, anybody, search for candidates, and in so doing, you will see who we have that matches those specifications, and we will show you in a star system, one to five stars, how our recruiters rate that can.

Speaker Change #129: We're very happy about this new capability. Go to our website, roberthalf.com. You can, today, anybody, search for candidates. And in so doing, you will see who we have.

Speaker Change #129: that matches those specifications, and we will show you in a star system, one to five stars, how our recruiters rate that candidate.

David Silver: Got it, and then maybe just one last brief one, but there's a trend, I guess, over the last couple quarters where sequentially your perm revenues have actually risen while your temp and project-based staffing has continued to sequentially decline. And just, you know, from my models and whatnot, I hadn't really noticed that trend happening too often. And, you know, with that divergence, and in particular with perm, you know, leading temp, is there anything you would call out to maybe, you know, describe or explain the relative strength in perm versus the contract and temp side of your staffing operations? Thanks.

Keith Waddell: And we will show you in a star system, one to five stars, how our recruiters rate that candidate. Got it. And then maybe just one last brief one, but there's a trend, I guess, over the last couple quarters where sequentially your perm revenues have actually risen, while your temp and project-based staffing has continued to sequentially decline. And just, you know, from my models and whatnot, I hadn't really noticed that trend happening too often with that divergence, and in particular with perm, you know, leading temp.

Speaker Change #132: Got it. And then maybe just one last brief one, but, um...

Speaker Change #130: There's a trend, I guess, over the last couple quarters where sequentially your perm revenues have actually risen while the temp and project-based staffing has continued to sequentially decline.

Speaker Change #134: And just, you know, from my models and whatnot, I hadn't really noticed that trend happening too often, you know, with that divergence and in particular with perm, you know, leading temp. Is there anything you would call out to maybe

Keith Waddell: Is there anything you would call out to maybe, you know, describe or explain the relative strength of PERM versus the contract and temporary side of your staffing operations? Thanks. They were pretty similar every quarter, and in 2024, the second quarter was stronger.

Speaker Change #130: you know, describe or explain the relative

Speaker Change #133: strength in PERM versus the contract and temp side of your staffing operations. Thanks. Well and so I'm sitting here looking at the last eight quarters and then during 2023

Keith Waddell: And so I'm sitting here looking at the last eight quarters, and then during 2023, they were pretty similar every quarter. In 2024, the second quarter was stronger; the second quarter is always a seasonally stronger quarter for perm, and I would say even though it was up sequentially, that still wasn't a normal sequential. So I would rise for them for seasonal reasons, and so I would attribute the differential in the second quarter to typical seasonality. Other than that, they're pretty similar. Very good, I appreciate all the colors. Thank you.

Speaker Change #131: They were pretty similar every quarter, and in 2024, the second quarter was stronger. The second quarter is always a seasonally stronger quarter for PERM, and I would say

Keith Waddell: The second quarter is always a seasonally stronger quarter for PERM, and I would say, Even though it was up sequentially, that still wasn't a normal sequential rise for them for seasonal recovery. And so I would, I would attribute the differential in the second quarter to typical seasonality. And other than that, they're pretty similar.

Speaker Change #135: Even though it was up sequentially, that still wasn't a normal sequential rise for them for seasonal reasons.

Speaker Change #137: And so I would, I would attribute the differential.

Speaker Change #137: in the second quarter to typical seasonality.

Speaker Change #135: And other than that, they're pretty similar.

Keith Waddell: Very good. I appreciate all the colors. Thank you. And the next question will come from Mark Marcon with Baird. My follow-up was answered. Thanks. Thank you. Okay, that was our last question. We thank you for joining us today.

Speaker Change #136: Very good. I appreciate all the colors. Thank you.

Mark Marcon: And the next question will come from Mark Marcon with Baird.

Speaker Change #136: And the next question will come from Mark Marcon with Baird.

Mark Marcon: My follow-up was answered, thanks. Thank you.

Mark Steven Marcon: My follow-up was answered. Thanks.

Operator: Okay, that was our last question. We thank you for joining us today. Thank you very much. Thank you.

Speaker Change #138: Thank you.

Speaker Change #139: Okay, that was our last question. We thank you for joining us today. Thank you very much.

Operator: Thank you very much. Thank you. This concludes today's teleconference. If you missed any part of the call, it will be archived in the audio format in the Investor Center of Robert Half's website at roberthalf.com. You can also log in to the conference call replay. Details are contained in the company's press release issued earlier today.

Operator: This concludes today's teleconference. If you missed any part of the call, it will be archived in the audio format in the Investor Center of Robert Hath's website at RobertHath.com. You can also log into the conference call replay; details are contained in the company's press release issued earlier today. Thank you very much.

Speaker Change #140: Thank you. This concludes today's teleconference.

Speaker Change #142: If you missed any part of the call, it will be archived in the audio format in the Investor Center of Robert Half's website at www.roberthalf.com.

Operator: The end. Thank you. Thank you.

Speaker Change #141: No. Maybe. I don't know.

Operator: In the next episode, we'll see you in the next episode.