The Robert Half Second Quarter 2024 Conference Call begins with the host, Mr. Keith Waddell, reminding listeners that the call is being recorded and that the comments made contain forward-looking statements. He also mentions the risks and uncertainties involved and the company's obligation to update the statements. Non-GAAP financial measures are mentioned and can be found on the company's website. The company's second quarter revenues and net income per share were down compared to the previous year due to caution from clients and candidates. However, Protiviti had strong results in the U.S. with growth in revenues and segment income.

In the second quarter, global revenues for the company were $1.473 billion. Talent Solutions revenues were down 14% compared to the previous year, with U.S. revenues down 15% and non-U.S. revenues down 10%. The company operates Talent Solutions in the U.S. and 17 foreign countries, with a total of 63.5 billing days in the second quarter. Currency exchange rate fluctuations resulted in a decrease of $6 million in reported revenues. The company also distributed a cash dividend and acquired shares during the quarter. Return on invested capital was 18%.

In the second quarter, contract talent solution bill rates increased by 3.1% compared to the same period last year. Global revenues for Protiviti were $487 million, with $399 million from the US and $88 million from outside the US. Adjusted for changes in currency and country mix, global revenues were down 1%. Gross margin for contract talent solutions was 39.3%, with conversion revenues at 3.4% and permanent placement revenues at 13.3%. Overall gross margin for Talent Solutions was 47.4%. For Protiviti, gross margin was 22.5%, but adjusted for deferred compensation, it was 23.2%. Selling, general, and administrative costs will be discussed next.

In the second quarter, Enterprise SG&A costs were 34% of global revenues, while Talent Solutions SG&A costs were 43.1% of Talent Solutions revenues. SG&A costs for Protiviti were 15.6% of revenues. Combined segment income was $92 million with a margin of 6.2%. Talent Solutions had a segment income of $55 million with a margin of 5.5%, while Protiviti had a segment income of $37 million with a margin of 7.7%. The tax rate was 29% and accounts receivable were $893 million with a DSO of 54.6 days. In the second quarter, contract Talent Solutions saw a 13% decrease in revenues, while overall revenues decreased by 14%.

The company's 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%. The company cautions against reading too much into these brief time periods. For the third quarter, they expect revenues to be between $1.39 billion to $1.49 billion, with an income per share of $0.53 to $0.67. This estimate includes a restructuring charge related to Protiviti International. The company expects revenues to be 9% lower than the same period in 2023, with Talent Solutions down 12% to 16% and Protiviti down 1% to 2%. The contract margin percentage is expected to be between 38% to 41%, and SG&A as a percentage of revenues is expected to be between 33% to 35%. The company also expects segment income to be between 4% to 6% for Talent Solutions and 7% to 9% for Protiviti. The tax rate is expected to be between 31% to 33%, and capital expenditures and capitalized cloud computing costs are expected to be between $80 million to $100 million for the full year, with $25 million to $35 million in the third quarter.

The estimates provided on the call are subject to risks mentioned in the press release and SEC filings. Client budgets are constrained and candidates are hesitant to change jobs, leading to subdued demand and longer sales cycles. However, job openings are high and indicative of future demand. As business confidence improves, there will likely be an increase in hiring and consulting demand. The company continues to invest in technology and innovation to combine the skills of their specialized talent solution professionals with AI tools. The candidate discovery experience on their website has been upgraded to display recruiter ratings, demonstrating the benefits of their combined strategy. Protiviti had strong results for the quarter across all solution areas.

The seventh paragraph of the article discusses the strong performance of Protiviti, with its margin and segment income exceeding expectations and expected to improve further in the third quarter. The company's prospects and pipeline remain strong, and it will be transitioning its operations in Mainland China to optimize revenue opportunities. The company is confident about its future and will continue to invest in its people, technology, brand, and business model. The paragraph also mentions the company's recent accolades and invites questions from the audience.

Mark Marcon from Baird asks about the disconnect between high job openings and soft hiring trends. He suggests that some companies may have over-hired during the COVID snapback and great resignation, leading to a surplus of permanent staff. This, combined with difficulty in finding quality hires, may be causing companies to hold onto their current employees and use temporary workers for flexibility. However, Keith Waddell notes that this may have been a factor early on but is not the main issue now, as project deferrals and deferred demand are currently impacting hiring.

The speaker discusses the length of time that the industry has been in a downturn and the impact it has had on their business. They mention sequential declines in the first few quarters of 2023 but are optimistic about improvement in the future due to progress in inflation and potential rate cuts. They also mention that Protiviti U.S. has seen a nice improvement in various solution areas, with a balanced strength in each.

The consulting market is competitive, but Protiviti has managed to maintain sequential and year-on-year growth. Their pipeline is strong and they are focused on market-facing activities to stay close to their clients and promote their capabilities. They work closely with Talent Solutions to go to market aggressively.

Keith Waddell, CEO of Robert Half International, discusses the strong performance of their consulting arm Protiviti in a competitive market. He also mentions their policy of managing headcount through performance management and their commitment to retaining top performers despite a temporary decrease in productivity. They estimate that they could grow revenue without adding to headcount and are prepared for a potential increase in demand.

The company has seen a decrease in demand and projects being deferred, but believes this will lead to future demand. They have experienced this before and expect a turnaround, as they have in previous cycles. The job openings are a positive sign, but at an individual level, projects are being deferred and there is less turnover, which impacts demand for contract labor.

In this paragraph, Keith Waddell discusses the cost management of the company during the ongoing pandemic. He mentions that the largest cost is the staff payroll and they have not changed their policy for underperforming employees. However, they have reduced their SG&A by $32 million compared to the previous year. When asked about staffing for a potential recovery, Waddell states that they feel good about their current staff but may add more if needed for the right reasons.

The speaker asked about contract talent solution margins and if they should expect an increase in the third quarter. The company's gross margins were down year-over-year due to conversions and negative leverage on fixed costs. The company is hoping for better sequential performance in the fourth quarter. The speaker also asked about the decline in revenue in the administrative and customer support segment, wondering if it was a one-time issue.

Keith Waddell discusses the current state of their practice groups and mentions that the year-on-year results are more about comparables from a year ago than current trends. He notes that there has been some firming in enterprise clients, which is encouraging, and that this generally leads to small and medium-sized businesses lagging behind. He also mentions that pricing competition for Protiviti has been the same over the past few quarters and is expected to continue into the third quarter.

The company has seen a 250 basis points improvement in gross margin due to their management of various components such as the leverage pyramid, utilization of full-time employees, and bill rate competition. They have also been successful in retaining their top 250 employees, with their long-term retention rates being the best in the industry. However, like other companies, they have also experienced lower attrition rates due to the current economic situation.

The speaker, Keith Waddell, is discussing the trends in Talent Solutions within the finance sector, specifically in regards to the mix of high-caliber jobs and the breakdown of job types. He mentions that over half of their contract positions are now higher skilled, which is a positive development. He also notes that this plays well with their partnership with Protiviti. When asked to compare and contrast staffing and perm placement, Waddell explains that they are highly correlated and that perm placement tends to be more volatile.

The speaker discusses the staffing recession and how it has affected contract and permanent placements. They note that the decline in permanent placements has been less severe compared to previous downturns, but it is still more impacted than contract placements. The speaker also mentions that there is not much difference in performance between different verticals and practice groups, and that demand in Europe has weakened slightly in recent months.

The speaker discusses the demand environment in various European markets, noting that there has been little change in performance compared to the previous quarter. They also mention that there has been some positive movement in internal audit and IT consulting, particularly with financial institutions. However, this progress may be offset by the completion of some large projects in the previous quarter. Overall, the speaker expects flat top-line growth in the third quarter, but improvements in gross margin and segment margin.

During a conference call, Jack Wilson from Truist Securities asks a question about the dynamics of NFIB small business optimism in June. Keith Waddell, the operator, responds by saying that while the confidence index has improved for three consecutive months, it is still below the normal average. He also mentions that 60% of businesses are still trying to hire, but there are few qualified applicants. Inflation remains the top business problem, but there has been some progress. When asked if there could be a change in customer sentiment following the election inauguration, Waddell says he doesn't know and that there haven't been significant swings in past elections. The next question comes from David Silver with CL King, who asks about the performance of blended solutions in the quarter. Waddell explains that while intersegment eliminations grew, contract Talent Solutions was weaker, leading to a larger share of contract talent placements in blended solutions.

The speaker is discussing the growth of blended solutions with Protiviti and the potential economic impacts for Robert Half. They mention that the gross margins for placing candidates through Protiviti are not significantly different from placing them directly with third-party clients. They also mention the importance of incorporating AI into their business strategy and how it will likely have a broad impact on their results. Clients are interested in both AI and the expertise of recruiters.

The company offers both digital and recruiter-based services to clients, and clients can choose when to use each option. The company's internal systems effectively connect AI and recruiters. The company's perm revenues have been rising while their temp and project-based staffing has been declining, which is a normal seasonal trend.

The speaker attributes the differential in the second quarter to typical seasonality and mentions that other than that, the quarters are similar. The next question is answered and the teleconference is concluded. The call will be archived on the company's website and a conference call replay is available.

This summary was generated with AI and may contain some inaccuracies.