Q4 2024 Robert Half Inc Earnings Call
Please stand by.
Speaker Change: Hello and welcome to the Robert Half Fourth Quarter 2024 conference call. Today's conference call is being recorded.
Speaker Change: If you'd like to ask a question during the Q&A portion of the call, please press star and the number one on your telephone keypad.
Keith Waddell: Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Haass and Mr. Michael Buckley, Chief Financial Officer, Mr. Waddell, you may begin.
Hello, everyone. We appreciate your time today.
Keith Waddell: Before we get started, I'd like to remind you that the comments made on today's call contain forward-looking statements, including predictions and estimates about our future performance.
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. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release.
Keith Waddell: Well, the fourth quarter of 2024, global enterprise revenues were 1.382 billion, down 6% from last year's fourth quarter on an as-reported basis, and down 7% on an as-adjusted basis.
Keith Waddell: That income per share in the fourth quarter was 53 cents compared to 83 cents in the fourth quarter one year ago.
Keith Waddell: Revenues and earnings for the fourth quarter were largely in line with our expectations led by Pertivity, which reported year-on-year revenue growth for the second straight quarter. Contract revenues remained stable throughout the quarter, sustaining early third quarter levels for 23 consecutive weeks prior to the holidays.
Keith Waddell: As we move into the new year, we're very encouraged by the significant rise in U.S. business confidence that followed the recent elections.
Keith Waddell: We're very well positioned to capitalize on emerging opportunities and support our clients' talent and consulting needs through the strength of our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services.
Keith Waddell: Cash flow from operations during the quarter was $155 million. In December, we distributed a 53 cent per share cash dividend to our shareholders of record for a total cash outlay of $54 million.
Keith Waddell: Our per share dividend has grown 11.2% annually since its inception in 2004. The December 2024 dividend was 10.4% higher than the prior year. We also acquired approximately 1 million Robert Half shares during the quarter for 77 million.
Speaker Change: We have 7.3 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 15% in the fourth quarter. Now I'll turn the call over to our CFO, Mike Buckley.
Mike Buckley: Thank you, Keith. Hello, everyone. As Keith noted, global revenues were $1.382 billion in the fourth quarter.
Mike Buckley: conduct talent solutions operations through offices in the United States in 17 other countries.
Mike Buckley: In the fourth quarter, there were 61.6 billing days compared to 61.1 billing days in the same quarter one year ago. The first quarter of 2025 had 61.9 billing days compared to 62.8 billing days during the first quarter of 2024.
Mike Buckley: Billing days for the remaining three quarters of 2025 will be 63.2, 64.2, and 61.4 for a total of 250.7 billing days for the year.
Mike Buckley: And that's $4 million for talent solutions and a negligible amount for productivity.
Mike Buckley: Contract Talent Solutions bill rates for the fourth quarter increased 3.4% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency and country.
Now let's take a closer look at results for productivity.
Global revenues in the fourth quarter were $488 million.
Mike Buckley: 396 million of that is from the United States and 92 million is from outside of the United States.
Mike Buckley: On an as-adjusted basis, global fourth-quarter proactivity revenues were up 5% versus the year-ago period.
Mike Buckley: Turning now to gross margin. In contract talent solutions, fourth quarter gross margin was 39.1% of applicable revenues versus 39.7% in the fourth quarter one year ago.
Mike Buckley: Conversion revenues or contract to hire were 3.2 percent of revenues in the quarter compared to 3.4 percent of revenues in the quarter one year ago.
Mike Buckley: Our permanent placement revenues were 12.1% of consolidated talent solutions revenues in both the current quarter and the fourth quarter of 2023.
Mike Buckley: When combined with contract talent solutions gross margins, overall gross margin for talent solutions was 46.4% compared to 46.9% of applicable revenues in the fourth quarter one year ago.
Mike Buckley: For proactivity, gross margin was 24.9% of proactivity revenues compared to 23.9% of proactivity revenues one year ago.
Mike Buckley: Adjusted for the amount of deferred compensation that is completely offset by investment income related to employee deferred compensation trusts.
for the Deferred Compensation Investment Income Offset.
Mike Buckley: Gross margin for productivity was 25.1% for the quarter just ended compared to 25.9% last year.
Mike Buckley: Ended 2024 with 11,000 full-time productivity employees and contractors, up 4.8% from the prior year.
Moving on to SG&A.
Mike Buckley: Enterprise SG&A costs were 34.1% of global revenues in the fourth quarter compared to 35.1% in the same quarter one year ago.
Adjusted for the Deferred Compensation Investment Income Offset.
Mike Buckley: Talent Solutions SG&A costs were 44.4% of Talent Solutions revenues in the fourth quarter versus 44.6% in the fourth quarter of 2023. Adjusted for the Deferred Compensation Investment Income Offset, Talent Solutions SG&A costs were 43.9% for the quarter just ended.
compared to 40.8% last year.
Mike Buckley: Ended 2024 with 7600 full-time internal employees in our talent solutions divisions.
down 5.2% from the prior year.
Mike Buckley: fourth quarter SG&A cost for productivity or 15.2% of productivity revenues
Mike Buckley: compared to 14.5% of revenues for the same quarter one year ago.
Mike Buckley: Operating income for the quarter was $65 million. Adjusted for the deferred compensation investment income offset, combined segment income was $71 million in the fourth quarter. Combined segment margin was 5.1 percent.
Mike Buckley: Segment income for productivity in the fourth quarter was $48 million with a segment margin of 9.9%.
Mike Buckley: 75 to 95 million with $20 million to $25 million in the first quarter.
Speaker Change: Protiviti is first quarter segment income guidance include includes the seasonal impact of annual staff promotions and compensation increase all of which become fully effective on January one.
Speaker Change: This produces a sequential decline in midpoint estimated segment margin of four four percentage points, which is consistent with the four to seven point decline experienced in most of the last 10 years.
Speaker Change: On a year over year basis at the midpoint for activities first quarter revenues and earnings are expected to grow by 9% and 20% respectively.
Speaker Change: I'll ask all estimates we provide on this call are subject to the risks mentioned in today's press press release and in our SEC filings.
Keith Waddell: Now I'll turn the call back over to Keith.
Keith Waddell: Thank you Mike.
Keith Waddell: Global Labor markets remained resilient with U S job openings significantly above historical averages a clear indicator of substantial pent up demand for talent.
Keith Waddell: While we've seen a slight easing in the tightness of the labor supply the overall unemployment rate in United States stands at only four 1% with even lower rates for college graduates and those with in demand accounting finance and it skills.
Keith Waddell: The NFIB small business optimism index recently posted the largest two month increase in its 39 year history, reaching.
Keith Waddell: Reaching levels not seen in more than six years.
Keith Waddell: The percent of owners expecting the economy to improve also rose to 52%.
Keith Waddell: The highest since 1983.
Keith Waddell: Rising business confidence is conducive to better hiring urgency accelerated project demand and re prioritization of deferred growth initiatives. This in turn creates pressure on client resources and generate significant hiring and consulting demand.
<unk> that has historically set the stage for robust gains in the early stages of growth cycles.
Keith Waddell: We're encouraged by the current combination of elevated job openings low unemployment and strong business confidence.
Keith Waddell: Each of which is even more favorable than similar metrics from the early recovery periods. Following the dotcom and great financial crisis downturns.
Protiviti once again reported very strong results for the quarter achieving year over year revenue growth for the second quarter in a row.
Keith Waddell: This strength is broad based and includes each of its major solution areas with a regulatory risk and compliance solution again, a standout performer.
Keith Waddell: A significant contributor to Protiviti success has been the expanded use of contract professionals sourced through talent solutions, a key component of our enterprise wide competitive advantage for <unk>.
Keith Waddell: <unk> prospects in pipeline remained very strong and we expect continued year on year revenue growth in the first quarter.
Keith Waddell: Protiviti was recently recognized on glass doors Best places to work list for a second consecutive year and honored by Sarah amount as a top company for executive women.
Keith Waddell: 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 structural tail winds that are expected to.
Keith Waddell: Tell us forward in the years to come.
Keith Waddell: We began 20 twenty-five energized by our time tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to confidently compete and grow.
Keith Waddell: Finally, we'd like to extend our gratitude to our global workforce for making possible a number of new accolades just today Robert half was honored by fortunate.
Keith Waddell: That's one of the world's most admired companies for the 28th consecutive year.
Keith Waddell: We're proud of our unique position as the only company in our industry to be awarded this distinction for nearly three decades.
Keith Waddell: We were also recently named one of Fortune's best workplaces for parents and chosen by Newsweek as one of America's most responsible companies.
Mike Buckley: Now, Mike and I'd be happy to answer your questions. Please ask just one question and a single follow up as needed if Theres times will come back to you for additional questions.
Mike Buckley: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone if you're joining us today is a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Mike Buckley: If you would like to withdraw your question. Please press star two.
Mike Buckley: Can you touch tone telephone again that is star one if you would like to ask questions.
Speaker Change: And our first question today comes from Mark Mark Hahn with Baird.
Mark Hahn: Hey, good afternoon keep in Mike.
Mark Hahn: Wanted to ask about Protiviti to start you know we did have a slight deceleration with regards to the revenue growth in the fourth quarter clearly affects.
Mark Hahn: And the timing of the holidays, probably ended up having some some impact and probably ended up impacting the margins a little bit.
Mark Hahn: For the for the first quarter, you're basically guiding to a midpoint around 9%, which is a significant pick up.
Speaker Change: I'm just wondering what are you seeing how how visible is that.
Mark Hahn: Because that's a that's a nice reacceleration.
Mark Hahn: So on the fourth quarter. It is true that the holidays had an impact they had pay a larger than expected impact from client soft closes.
Mark Hahn: Their staff took more holiday than they had expected.
Mark Hahn: And further the holidays and the logistics of the holidays impacted their ability to get contracts signed for revenue recognition before the end of the quarter.
Mark Hahn: That said their solution growth was strong it was broad.
Mark Hahn: And that momentum is expected to continue into the first quarter, whereas on a sequential basis. They always have there.
Mark Hahn: First quarter crowd out of internal audit with clients focus on external audit and the cost pressures of their annual compensation increases and promotions. So very strong pipeline very good momentum.
Mark Hahn: Led by risk and consulting.
Mark Hahn: Big piece of that anti money laundering, as we've talked before activity feels very good about where they are.
Mark Hahn: Feels good about that guidance and the first fourth quarter, there was noise from the holidays, which clearly doesn't impact our first quarter like it did the fourth.
Mark Hahn: That's great and then.
Mark Hahn: We've both been through many cycles before.
Mark Hahn: Historically, the N F I'd be picking up as much as it has you know has a great precursor.
Mark Hahn: Two small business hiring picking up I'm wondering you know what do you think could potentially be a little bit different you know, obviously AI gets a lot of.
Mark Hahn: A lot of attention in terms of news and people talk about you know potential displacement I'm not sure that's going to happen with small businesses, but.
Mark Hahn: The noise is still out there just wondering is there anything that you think would be different this time around relative to that big pick up in terms of N F I b a confidence and.
Mark Hahn: How is that influencing what you're doing in terms of internal staff and how much you're willing to retain the internal staff.
Mark Hahn: And driving margins, a little bit lower in the short term, but making up for it longer term.
Mark Hahn: Well and so what's different.
Mark Hahn: As we referenced first if you look across job openings that are currently at $8 million. If you look at early recovery Dotcom and great financial crisis, They were two and a half and $4 million so openings more than double what they were at.
Mark Hahn: As those recoveries began.
Mark Hahn: Employment rate currently at four one if you look at dotcom five seven if you look a great financial crisis, nine and a half so labor much tighter, making it much harder for our clients to find talent and own their own than they did in prior cycles. So we're in.
Speaker Change: Courage by that and then as you mentioned that shouldn't be optimism NFIB. Currently 105 following great financial crisis. It was 88 following dot com. It was 99 and so on all three measures were in a better place than we were.
Mark Hahn: We're coming out of those two downturns.
Mark Hahn: As to impact of AI, we've talked before we're not seeing any meaningful impact as we speak on our business.
Mark Hahn: With smbs or otherwise and as to impact on internal staff, we've essentially held the line, but for performance management for several quarters now and we would plan to continue that our margins are very consistent.
Mark Hahn: With trough margins of dotcom and great financial crisis and those.
Mark Hahn: Margins recovered significantly thereafter, which we would expect to happen again.
Speaker Change: Terrific. Thank you.
And the next question will come from Andrew Steinman with J P. Morgan.
Speaker Change: Hi, Keith two question. So yeah, obviously I'm intrigued by the NFIB fingers picking up but I just wanted to be clear, especially as you talked about kind of Django right contract revenues being down or have new orders for Robert half contract business picked up yet.
Speaker Change: Or do you expect there to be some delay from the NFIB business confidence and let me just ask my second question too when looking at contract revenues that Robert half Tech business was down a lot less than half a day or or other.
Speaker Change: Do you think that the trajectory of revenue recovery within I T contract will be a different growth trajectory again win gives us confidence picks up.
Speaker Change: And then you know FAA or your overall contract revenues for Robert half.
Speaker Change: And so.
Speaker Change: Early January.
Speaker Change: The first two weeks were very noisy with holiday impacts as well as the Jimmy Carter holiday. The third week in January pick back up to what we would have expected which is good.
Speaker Change: And while the tone of client conversations are definitely better clear.
Speaker Change: Clients are taking more of our calls more of a request for meetings.
Speaker Change: There in addition to talking about their must have requirements. They're also talking about their backlog projects and talking about their liked to have needs.
Speaker Change: Sentiment is clearly better.
Speaker Change: But it's it's still too early for and uptick in actual starts and placements.
Speaker Change: Our guidance for the first quarter.
Speaker Change: <unk> that we stay at that flat level that we did during the fourth quarter hopefully we're being conservative there, but there is no question that the tone is better consistent with the rise in the confidence that we just took.
Speaker Change: About.
Speaker Change: And I'll also say this Andrew about our first quarter guidance.
Speaker Change: There's about a $40 million revenue impact from the fewer number of days and FX or currency impacts relative to the prior year and so when you look at our guidance up but four had we had the same number of days and had currency not changed.
Speaker Change: Our revenue guidance would have been $4 $40 million higher.
Speaker Change: On the tech side.
Speaker Change: It is true.
Speaker Change: That tech has performed better lately principally in the data area be it analytics be it governance be it hygiene and then an ERP platform modernization b at S. P. Oracle workday, Microsoft all of those have been pause.
Speaker Change: It is both on the talent solutions side and on the Protiviti side, and sometimes are working together and so.
Speaker Change: It wouldn't surprise me if tech outperforms F N day a bit.
Speaker Change: Over the next cycle that said, we're very optimistic about F N a as well.
Speaker Change: Okay. Thanks, Keith I appreciate it.
Speaker Change: Okay.
Speaker Change: And our next question will come from Trevor Romeo with William Blair.
Trevor Romeo: Hi, good afternoon. Thanks, so much for taking the questions.
Trevor Romeo: First one I had was you know.
Trevor Romeo: Just on the I guess, the international business, I think again kind of softer across the board compared with the U S business.
Trevor Romeo: You know a lot of political uncertainty in Europe could you kind of just talk about the demand environment for your international business for both talent solutions and Protiviti and kind of what you would expect in the next few quarters there.
Trevor Romeo: Yeah.
Trevor Romeo: I'd say, it's it's largely softer not dramatically softer.
Trevor Romeo: Both in talent solutions and in particular <unk>.
Trevor Romeo: It wouldn't surprise us did that continue for a few quarters, but again nothing dramatic.
Trevor Romeo: Many of the changes that you see on these growth rates are just as much impacted by comps as they are actual current economic performance, but we certainly don't see a dramatic dramatic or drastic.
Trevor Romeo: Fall off at our international results.
Trevor Romeo: Notwithstanding everything you hear and read.
Trevor Romeo: Okay. Thanks, that's helpful and then follow up on <unk>.
Trevor Romeo: Kennedy.
Speaker Change: Specifically on the operating margins for productivity I know in Q1, you do have that seasonal impact with the salary increases I think you typically recapture some of that throughout the year.
Speaker Change: So kind of thinking about full year 2025 with the demand.
Speaker Change: Pipeline seemingly pretty strong there could you kind of talk about how you're thinking about margins for protiviti beyond the next quarter is it possible, we could get back to you.
Speaker Change: The double digit range on a full year basis here.
Speaker Change: The expectation is that protiviti as full year operating margins.
Speaker Change: Good increase versus the prior year, not just stay flat.
Speaker Change: And their goal their stated goal would be to have a double double where they they increased their revenue growth by double digits and they have a double digit operating margin.
Speaker Change: And we like double doubles.
Speaker Change: Okay.
Speaker Change: Alright, Thank you Piet that's helpful.
Speaker Change: And the next question will come from Manav Patnaik with Barclays.
Manav Patnaik: Thank you firstly just on Protiviti, you know just given the improved growth outlook, there I guess.
Speaker Change: I think they are the largest user of pure staffing.
Speaker Change: Attempts stuffing at least can you just remind us of kind of the usage there and you know how you see that is that a leading indicator of how should we think about that kind of correlation.
Speaker Change: Whether it's a leading indicator I can't speak to I would say.
Speaker Change: The collaboration go to market Protiviti is use of contractors from talent solutions.
Speaker Change: For the fourth quarter, just ended Protiviti as overall revenues grow call. It four 5% there are revenues from generated by contractors sourced through talent solutions were up 18%.
Speaker Change: That clearly indicates that their usage is rising not following it still well above 40% of the hours worked.
Speaker Change: On Protiviti, so the collaboration with Protiviti and talent solutions has never been better and is growing and clearly and enterprise competitive advantage, particularly relative to the big four firm, which protiviti continues to take share.
Speaker Change: Got it and you know I I think I understand you know the business confidence optimism index being you know kind of generally positive for you guys, but you know in the past you talked about how a lot of the reason why our clients didn't.
Speaker Change: Really engage as much is because of high inflation and high interest rates.
Speaker Change: You know those kinds of dynamics it sounds like those will be sticking around for longer. So I was just wondering if there is a still a tug of war and that discussion or has that been factored into these optimism index.
Speaker Change: So I think the the expectation of pro go pro growth.
Speaker Change: Policy initiatives.
Speaker Change: Includes the umbrella of.
Speaker Change: Tax rates regulation.
Speaker Change: Tariffs.
Speaker Change: Immigration I think it's one big package and net net inclusive of everything I. Just mentioned is that confidence has surged in a way you know not seen in decades.
Speaker Change: So clearly all of those factors are on the table, but when you net them all out.
Speaker Change:
Speaker Change: You get what you get which is very positive and I said are.
Speaker Change: Our people on the ground talking to their clients every day.
Speaker Change: Things have change there's more activity.
Speaker Change: Clients are more willing to talk to it.
Speaker Change: It just hasn't yet converted to starts and placements.
Speaker Change: We expect that it will.
Speaker Change: Our guidance conservatively is that we stay flat.
Speaker Change: Per day for.
Speaker Change: For the first quarter.
Speaker Change: Hopefully that's conservative.
Speaker Change: But things clearly are different tone is clearly better.
Keith Waddell: Got it thanks Keith.
Speaker Change: [noise] and we'll take a question from Stephanie Moore with Jefferies.
Speaker Change: Hello. This is harold onto on for this stuff anymore. So just I just wanted to make sure.
Stephanie Moore: On the side because I know you said you held the line on hiring right now, but you also said it's too early to receive new orders. So I guess as you expect to see those incremental orders from.
Stephanie Moore: From a as you know from the optimism starts to come in.
Stephanie Moore: Would you would you then anticipate I guess incrementally.
Stephanie Moore: Incrementally hiring recruiters or I guess just.
Stephanie Moore:
Stephanie Moore: As you start to ramp up.
Speaker Change: Are you starting to see orders ramp up I guess would you then be hiring recruiters.
Speaker Change: But on paper as we've said in prior quarters, our productivity today per person is 20% to 30% lower than it has been falling.
Speaker Change: On paper, we could therefore grow by that amount without adding heads.
Speaker Change: That said the more confident we get about.
Speaker Change: Increasing starts and placements.
Speaker Change: We would likely get ahead of that rather than wait for the whole thing to catch up and so.
Speaker Change: While we might not immediately begin to add to heads as it picked up steam and we got more confident we would but we know.
Speaker Change: Based on how much we've done per person in the past.
Speaker Change: We could do more with the same workforce.
Speaker Change: Thank you I guess, you know I know.
Speaker Change: You've spoken with clients, what I guess on the candidate side.
Speaker Change: When when your crews or speaking with clients.
Speaker Change: Our clients.
Speaker Change: Do they have the same high degree of willingness to change jobs.
Speaker Change: Requests and a hybrid of remote work.
Speaker Change: And I guess you know harvest.
Speaker Change: Pricing as you as you would expect for water she started coming in.
Speaker Change: Any commentary there would be helpful.
Speaker Change: Yeah, we would observe that are typically Canada caution.
Speaker Change:
Speaker Change: It reduces as macro improves.
Speaker Change:
Speaker Change: There is no question there is pent up turnover from candidates that are somewhat frustrated in their current positions.
Speaker Change: Particularly as it relates to hybrid slash remote.
Speaker Change: Which some employers are eliminated.
Speaker Change: Eliminating in favor of five days in the office and so traditionally.
Speaker Change: Part of.
Speaker Change: Up cycle also means candidates more constant and in changing positions because they're not as fearful there'll be the last one in first one out.
Speaker Change: But.
Speaker Change: There seems to be unusually.
Speaker Change: Unusually high frustration.
Speaker Change: And therefore, potentially pent up turnover from a Canada point of view given.
Speaker Change: The special circumstances over the last couple of three years, particularly as it relates to remote work.
Speaker Change: Got it and then I guess just on the pricing point then.
Speaker Change: Bill growth Bill rate growth I mean, I guess, how should we be thinking about that.
Speaker Change: So it's been in the low threes now for a few quarters.
Speaker Change: That pretty much mirrors pay rate increases and so we don't see any big change.
Speaker Change: In the near future. So you know.
Speaker Change: Low to mid threes.
Speaker Change: Feels reasonable, which is where we've been for a few quarters now.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And the next question will come from George Tong with Goldman Sachs.
George Tong: Hi, Thanks, good afternoon based.
George Tong: Based on your exit rate in the quarter. It appears that Perm placement revenues are narrowing in the rate of decline, but temp staffing revenues are widening in the rate of decline can you discuss what could be causing this separation in performance what whats specifically weighing on temp staff.
George Tong: Being more so than Perm placement.
George Tong: Well I think technically the December exit rate for for Perm and contract.
George Tong: Or are both less than the fourth quarter, it's the post quarter, where the differential widened more significantly.
George Tong: A perm.
George Tong:
George Tong: Is more volatile than contract day to day week to week, we're talking about a very short period of time.
George Tong: I'd say to Perm was last holiday impacted.
George Tong: As contract has been we talked earlier about some of the first two weeks in contract there was a lot of holiday noise.
George Tong: <unk>.
George Tong: By the third week that holiday noise had gone our way and it was back to where we would have expected and so had we show third week only resource she would get a very different picture than seeing all three of those weeks.
George Tong: But we feel good about contract where it is.
George Tong: Our conversations with clients and the contract versus Perm.
George Tong: Numbers you saw.
George Tong: One month versus a quarter three weeks versus a month.
George Tong: Those differences seem to be tend to be amplified because it's such a short period of time and I think if you do an analysis over a long period of time, you would see that.
George Tong: Post quarter Perm is even less predictive of the coming full quarter, and then post quarter contract, but when post quarter periods include multiple holidays, they're even less predictive.
Speaker Change: Got it that's helpful. And then bigger question, we've seen pretty solid economic growth. The labor market is is doing quite well.
George Tong: It sounds like contract revenues are flat.
George Tong: Over the past 23 consecutive weeks. So can you talk about what could be causing or keeping contract revenues flat rather than growing.
George Tong: When the broader economy is growing and when the labor markets are relatively healthy.
George Tong: Well that same statement could be said about the last 10 quarters.
George Tong: So the past two three weeks are no different than the past 10 quarters.
George Tong: And.
George Tong: There's been plenty of discussion around.
George Tong: A lot of the labor market growth has been concentrated in three industries.
George Tong: Government.
George Tong: Health care leisure hospitality that our big sectors, Robert half that arent big sectors for the staffing industry generally so you take that away from the overall labor market should get a very different picture.
George Tong: Further the churn has the labor churn has reduced significantly over that period of time.
George Tong: The middle of which had COVID-19.
George Tong:
George Tong: So.
George Tong: What we saw in the last two three weeks was an improvement.
George Tong: And what we had been seeing over the last 10 quarters, where we had been slowly drifting down.
George Tong: So I would argue the last 23 that last 23 weeks are better than we had been seeing.
George Tong: And.
George Tong: Certainly the tone.
George Tong: Has it improved yet again sits in <unk>.
George Tong: Because of the election.
George Tong: And.
George Tong: Small business expectations because of that.
George Tong: Got it thank you.
George Tong: Okay.
George Tong: And moving on to Kevin Mcveigh with UBS.
George Tong: Great. Thanks, so much.
Speaker Change: It sounds like Theres, a lot of optimism, but I guess in and things have been asked a couple of weeks, but.
Speaker Change: What do you think it is the client hesitancy because it seems like the indicators are at all time highs and it seems like they're still not <unk>.
Speaker Change: Engaging.
Speaker Change: Just any thoughts around that just at a higher level and what's the trigger that is going to get them.
Speaker Change: To kind of pull the trigger.
Speaker Change: Well the hesitancy.
Speaker Change: Is.
Speaker Change: Everybody is a little bit in a show me state.
Speaker Change: Clearly the environment everybody is more optimistic.
Speaker Change: We're having more discussions with our clients, presumably they're having more discussions with their clients.
Speaker Change: But everybody wants to see it.
Speaker Change: Rather than just talk about it and that's not unusual for particularly small businesses to have a show me.
Speaker Change: Attitude toward their own staffing decisions.
Speaker Change: And so.
As we've said.
Speaker Change: Okay.
Speaker Change: Looking back into the past.
Speaker Change: These elevated levels of activity of interactions with our clients typically lead to more starts and placements.
Speaker Change: It doesn't happen overnight.
Speaker Change: Has it happened yet as to starts at placements, but clearly the tone is better.
Speaker Change: Helpful and then just it looks like.
Speaker Change: The tax rate's, a little bit higher in the Q1 guidance just yet.
Speaker Change: In terms of you know relative to Q4 any anything that's driving that.
Speaker Change: Yes, so the.
Speaker Change: Our restricted stock incentive shares vest annually.
Speaker Change: And because of our lower share price the tax deduction will get for that vesting will book will be below our book expense and therefore, a higher tax rate.
Speaker Change: That tax rate results in about a two penny charge on an EPS basis relative to the tax rate a year ago.
Speaker Change: Thank you.
Speaker Change: And the next question will come from Jeff Silber with BMO capital markets.
Speaker Change: Thank you so much.
Speaker Change: I know theres been a lot of concern in the investment community regarding some of Trump's policies, specifically on Doge. The department of government efficiency can you remind us do you have any exposure either directly or indirectly to federal government drive driven revenues.
Speaker Change: Well our exposure to federal government is very low in.
Speaker Change: In our public sector work to the extent, we do government work at all.
Speaker Change: <unk> substantially.
Speaker Change: Local state and local not federal.
Speaker Change: And so while we don't have zero exposure, it's a very small number.
Speaker Change: And would that state and local work for instance include like you know Medicare work, where the money's come from the federal government, but at state and local driven.
Speaker Change: No we don't have a large amount of Medicare work.
Speaker Change:
Speaker Change: No maybe during the fourth quarter as part of open enrollment.
Speaker Change: There are Medicare and Medicaid.
Speaker Change: Inter dependencies with open enrollment, but other than that no.
Speaker Change: Okay I appreciate that and just a quick question on the tax rate should be the <unk> tax rate something we'd be using for the rest of the year or would it come down to where it was last year.
Speaker Change: No it would definitely come down our our investing is pretty much a first quarter event.
Speaker Change: Okay got it thank you.
Speaker Change: You got pieces of the last four years grants.
Speaker Change: That are valued.
Speaker Change: According to those grant dates that all vest.
Speaker Change: Again, a first quarter event it should come back down.
Speaker Change: Got it alright, great. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: And our next question will come from Kartik Mehta with Northcoast research.
Speaker Change: Good afternoon.
Speaker Change: On the Protiviti capacity.
Speaker Change: You want to be prepared for as business confidence grows as the business grows but as you stand today, how would you measure of capacity.
Speaker Change: In terms of the people that are on staff.
Speaker Change: Well I think there's clearly.
Speaker Change: Utilization capacity for their full time staff.
Speaker Change: But one of their competitive advantages it how quickly they can scale by using contractors are sourcing talent solutions that can be scaled very quickly and.
Speaker Change: So the combination of the two I'm very optimistic about and that's one of the beauties of having this just in time capacity to take it a whistle onto the field via talent solutions.
Mike Buckley: And then Mike just to understand obviously.
Mike Buckley: Fewer days and FX is playing a part in the first quarter does that get outside of FX does that get made up in the second quarter and if so what's the impact outside of FX.
Mike Buckley: So it does not get made up.
Mike Buckley:
Mike Buckley: And the impact of days. So one day billings is 'twenty, two and a half million dollars.
Mike Buckley: And depending on what type of margin assumption you when youre going to have because youre talking the incremental margins in that average margins I mean it. It works out you know up to several pennies a share.
Speaker Change: Okay. Thanks, that's helpful. That's a pretty big impact.
Mike Buckley: Yeah.
Mike Buckley: Yeah for the industry generally.
Mike Buckley: It's essentially a full day.
Mike Buckley: Thank you very much that's helpful.
Speaker Change: And the next question come from Tobey Sommer with Truth Securities.
Mike Buckley: Thank you.
Speaker Change: Of the expected changes contributing to improved.
Speaker Change: Small business optimism what do you think is the most important for the.
Speaker Change: The new administration to deliver on to catalyze that optimism into how your reaction improved kpis at Robert half.
Yeah.
Speaker Change: It would be some combination of less regulation.
Speaker Change:
Speaker Change: More.
Speaker Change: M&A friendliness.
Speaker Change: As part of that and then at least to a continuation of current tax rates, if not lower ones.
Speaker Change: I think those would you.
Speaker Change: Would you rank them in that order.
Speaker Change: Uh huh.
Speaker Change: Yeah.
Speaker Change: Hard to say I think they're both significant drivers of what is perceived to be a pro business administration.
Speaker Change: Okay. It makes sense and then.
Speaker Change: I'm, just kind of double clicking into one of those topics with respect to capital markets and M&A.
Speaker Change: What are you seeing.
Speaker Change: In Protiviti.
Speaker Change: And maybe even in the staffing segments.
Speaker Change: They have any exposure.
Speaker Change: And maybe a comment about the financial services vertical.
Speaker Change: For Protiviti awesome. Thanks.
Speaker Change: Yeah.
Speaker Change: Well I'd say.
Protiviti has most directly impacted by M&A slash IPO and they've seen a little bit of an uptick not a lot.
Speaker Change: But clearly if M&A were to.
Speaker Change: Improve like.
Speaker Change: Some believe they will protiviti will be a big beneficiary of that.
Speaker Change: You know private equity exits via an IPO or.
Speaker Change: M&A create a lot of work has to internal controls as to integration.
Speaker Change: That's where protiviti has enjoyed it.
Speaker Change: In times past that they've had very little over the last two or three years. So it would be a very positive development.
Speaker Change: In fact, M&A picks up and private equity exits IPO or M&A pick up.
Speaker Change: After the financial services vertical.
Speaker Change: Doing very well our.
Speaker Change: Across Protiviti solutions, so it's not only anti money laundering, but it's also as well.
Speaker Change: Internal audit at <unk>.
Speaker Change: Financial institutions were frankly, they don't have enough internal staff to do the work they have to do and even internal audit.
Speaker Change: To some degree is regulated by the regulators because they demand that they actually.
Speaker Change: Get completed which is not necessarily the case in the commercial space, where many times. If you didnt complete part of your internal audit in a given year you just roll them over to the next year.
Speaker Change: So I would say the financial services market generally is very strong protiviti, it's 40% of their revenues by leaps and bounds as their largest industry focus and things look good.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Speaker Change: Okay. So that was our last question and thank you for joining us today.
Speaker Change: So long.
Speaker Change: Thank you.
Speaker Change: And this concludes today's teleconference. If you missed any part of the call. It will be archived in audio format in the Investor Center of Robert Half's website at Robert half Dot Com you can also logged into the conference call replay details are contained in the company's press release issued earlier today.
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Yeah.
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Speaker Change: Yeah.