Earnings call transcript: Robert Half Q4 2024 misses forecasts, stock dips

Robert Half International Inc. (NYSE:RHI) reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $0.53, slightly below analysts' expectations of $0.55. The company also reported revenues of $1.382 billion, falling short of the forecasted $1.41 billion. Following the announcement, Robert Half's stock dropped 6.1% in aftermarket trading, reflecting investor concerns over the missed estimates and declining productivity.

Key Takeaways

• Robert Half's Q4 2024 EPS and revenue fell short of expectations.
• The stock declined by 6.1% in aftermarket trading.
• Protiviti, a division of Robert Half, showed strong growth potential.
• Productivity per employee was notably lower than historical levels.
• The company increased its dividend by 10.4%.

Company Performance

Robert Half's performance in Q4 2024 was marked by a 6% year-over-year decline in global enterprise revenues. The company's net income per share decreased to $0.53 from $0.83 in the same quarter last year. Despite these challenges, the Protiviti division showed robust growth, contributing positively to the company's overall performance.

Financial Highlights

• Revenue: $1.382 billion, down 6% year-over-year
• Earnings per share: $0.53, down from $0.83 in Q4 2023
• Cash flow from operations: $155 million
• Dividend: $0.53 per share, up 10.4% from the previous year

Earnings vs. Forecast

Robert Half reported an EPS of $0.53, missing the forecast of $0.55 by $0.02. Revenue was also below expectations, coming in at $1.382 billion compared to the anticipated $1.41 billion. This marks a notable deviation from the company's historical performance, where it has often met or exceeded forecasts.

Market Reaction

Following the earnings release, Robert Half's stock price fell by 6.1% in aftermarket trading, closing at $64.93. This decline reflects investor disappointment with the company's missed earnings and revenue targets, as well as concerns over declining productivity levels.

Outlook & Guidance

Looking ahead, Robert Half provided revenue guidance for Q1 2025 in the range of $1.35 to $1.45 billion, with an EPS guidance of $0.31 to $0.41. The company remains cautiously optimistic about business confidence translating into increased hiring, particularly within the Protiviti division.

Executive Commentary

CEO Keith expressed confidence in Protiviti's growth, stating, "Protiviti feels very good about where they are, feels good about that guidance." He also highlighted the company's resilience, saying, "We've weathered many economic cycles in the past, each time emerging to achieve higher peaks."

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Q&A

During the earnings call, analysts inquired about the potential impacts of AI on staffing, Protiviti's growth prospects, and the modest performance of international operations. Executives addressed these concerns, emphasizing the strong pipeline and growth potential of Protiviti.

Risks and Challenges

• Continued decline in productivity per employee could impact future profitability.
• Potential economic downturns may affect client hiring and project demand.
• Increased competition in the tech and consulting sectors.
• Dependence on Protiviti's performance to offset other areas of weakness.
• Macroeconomic factors such as unemployment rates and business confidence levels.

Full transcript - Robert Half International Inc (RHI) Q4 2024:

Keith, CEO/Executive, Robert Half: 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 and in our most recent 10 ks and 10 Q filed with the SEC. We assume no obligation to update the statements made on today's call.

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 the 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 Q4 of 2024, global enterprise revenues were $1,382,000,000 down 6% from last year's Q4 on an as reported basis and down 7% on an as adjusted basis. Net income per share in the 4th quarter was $0.53 compared to $0.83 in the 4th quarter 1 year ago.

Revenues and earnings for the 4th quarter were largely in line with our expectations led by Protiviti, which reported year on year revenue growth for the 2nd straight quarter. Contract revenues remained stable throughout the quarter, sustaining early third quarter levels for 23 consecutive weeks prior to the holidays. 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.

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. Cash flow from operations during the quarter was 155,000,000 dollars In December, we distributed a $0.53 per share cash dividend to our shareholders of record for a total cash outlay of 54,000,000 dollars Our per share dividend has grown 11.2 percent annually since its inception in 2004. The December 2024 dividend was 10.4% higher than the prior year. We also acquired approximately 1,000,000 Robert Half shares during the quarter for $77,000,000 We have 7,300,000 shares available for repurchase under our Board approved stock repurchase plan. Return on invested capital for the company was 15% in the 4th quarter.

Now I'll turn the call over to our CFO, Mike Buckley.

Mike Buckley, CFO, Robert Half: Thank you, Keith. Hello, everyone. As Keith noted, global revenues were $1,382,000,000 in the 4th quarter. On an as adjusted basis, 4th quarter Talent Solutions revenues were down 12% year over year. U.

S. Talent Solutions revenues were $686,000,000 down 11% from the prior year's 4th quarter. Non U. S. Talent Solutions revenues were $208,000,000 down 14% year over year.

Conduct Talent Solutions operations through offices in the United States and 17 other countries. In the 4th quarter, there were 61.6 billing days compared to 61.1 billing days in the same quarter 1 year ago. The Q1 of 2025 had 61.9 billing days compared to 62.8 billing days during the Q1 of 2024. Billing days for the remaining 3 quarters of 2025 will be 63.2, 64.2, 61.4 for a total of 250.7 billing days for the year. Currency exchange rate movements during the 4th quarter had the effect of decreasing reported year over year total revenues by 4,000,000 dollars and that's $4,000,000 for Talent Solutions and a negligible amount for Protiviti.

Sequential quarter currency fluctuations reduced revenues by $7,000,000 $5,000,000 for Talent Solutions and $2,000,000 for Protiviti. Contract Talent Solutions bill rates for the Q4 increased 3.4% compared to 1 year ago, adjusted for changes in the mix of revenues by functional specialization, currency and country. This rate for the Q3 was 3.2%. Now let's take a closer look at results for Protiviti. Global revenues in the 4th quarter were 488,000,000 dollars 396,000,000 of that is from the United States and $92,000,000 is from outside of the United States.

On an as adjusted basis, global 4th quarter Protiviti revenues were up 5% versus the year ago period. U. S. Protiviti revenues were up 6%, while non U. S.

Protiviti revenues were flat compared to 1 year ago. Protiviti and its independently owned member firms serve clients through locations in the United States and 29 other countries. Turning now to gross margin. In Contract Talent Solutions, 4th quarter gross margin was 39.1 percent of applicable revenues versus 39.7% in the Q4 1 year ago. Conversion revenues or contract to hire were 3.2% of revenues in the quarter compared to 3.4% of revenues in the quarter 1 year ago.

Our permanent placement revenues were 12.1 percent of consolidated talent solutions revenues in both the current quarter and the Q4 of 2023. 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 4th quarter 1 year ago. For Protiviti, gross margin was 24.9 percent of Protiviti revenues compared to 23.9 percent of Protiviti revenues 1 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 Protiviti was 25.1 percent for the quarter just ended compared to 25.9% last year. Ended 2024 with 11,000 full time Protiviti employees and contractors, up 4.8% from the prior year.

Moving on to SG and A. Enterprise SG and A costs were 34.1% of global revenues in the 4th quarter compared to 35.1% in the same quarter 1 year ago. Adjusted for the deferred compensation investment income offset, Enterprise SG and A costs were 33.8% for the quarter just ended compared to 32.5% 1 year ago. Talent Solutions SG and A costs were 44.4% of Talent Solutions revenues in the 4th quarter versus 44.6% in the Q4 of 2023. Adjusted for the deferred compensation investment income offset, Talent Solutions SG and A costs were 43.9% for the quarter just ended compared to 40.8% last year.

Ended 2024 with 7,600 full time internal employees in our Talent Solutions divisions, down 5.2% from the prior year. 4th quarter SG and A costs for Protiviti were 15.2% of Protiviti revenues compared to 14.5% of revenues for the same quarter 1 year ago. Operating income for the quarter was $65,000,000 Adjusted for the deferred compensation investment income offset, combined segment income was $71,000,000 in the 4th quarter. Combined segment margin was 5.1%. 4th quarter segment income from our Talent Solutions divisions was $23,000,000 with a segment margin of 2.5%.

Segment income for Protiviti in the 4th quarter was $48,000,000 with a segment margin of 9.9%. Our Q4 2024 income statement includes $6,000,000 dollars as income from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of additional employee deferred compensation costs, which are reflected in SG and A expenses and direct costs. As such, it has no effect on our reported net income. Our 4th quarter tax rate was 28% and this compares to 27% 1 year ago.

At the end of the Q4, accounts receivable were $772,000,000 and implied days sales outstanding or DSO was 50.5 days. Before we move to Q1 guidance, let's review some of the monthly revenue trends we saw in the Q4 and so far in January, all adjusted for currency and billing days. Contract Talent Solutions exited the 4th quarter with December revenues down 11% versus the prior year compared to a 12% decrease for the full quarter. Revenues for the 1st 3 weeks of January were down 14% compared to the same period last year. Permanent placement revenues in December were down 6% versus December 2023.

This compares to an 11% decrease for the full quarter. For the 1st 4 weeks in January, permanent placement revenues were down 3% compared to the same period in 2024. We provide this information so that you have insight into some of the trends we saw during the Q4 and into January. But as you know, these are very brief time periods and we caution reading too much into them. With that in mind, we offer the following Q1 guidance.

Revenues, dollars 1,350,000,000 to $1,450,000,000 income per share, $0.31 to $0.41 Midpoint revenues of $1,400,000,000 are 3% lower than the same period in 2024 on an as adjusted basis. The major financial assumptions underlying the midpoint of these estimates are as follows: revenue growth year over year on an as adjusted basis Talent Solutions down 7% to 10%, Protiviti up

: 8% to

Mike Buckley, CFO, Robert Half: 10%, overall down 1% to down 4%. Contract margin percentages per contract talent 38% to 40%. Protiviti as adjusted for the deferred compensation investment income offset 20% to 22%, overall 36% to 39%. SG and A as a percentage of revenues adjusted for the deferred compensation investment income offsets, Talent Solutions 43% to 45%, productivity 15% to 16%, overall 33% to 35%. Segment income for Talent Solutions 1% to 4%, Protiviti 4% to 7%, overall 2% to 5%.

Our tax rate, a range of 31% to 35%, shares 101,000,000 to 102,000,000 2025 capital expenditures and capitalized cloud computing costs, $75,000,000 to $95,000,000 with $20,000,000 to $25,000,000 in the Q1. Protiviti's 1st quarter segment income guidance includes the seasonal impact of annual staff promotions and compensation increase, all of which become fully effective on January 1. This produces a sequential decline in midpoint estimated segment margin of 4.4 percentage points, which is consistent with the 4 to 7 point decline experienced in most of the last 10 years. On a year over year basis, at the midpoint, Protiviti's 1st quarter revenues and earnings are expected to grow by 9% and 20%, respectively. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings.

Now, I'll turn the call back over to Keith.

Keith, CEO/Executive, Robert Half: Thank you, Mike. Global labor markets remain resilient with U. S. Job openings significantly above historical averages, a clear indicator of substantial pent up demand for talent. While we've seen a slight easing in the tightness of the labor supply, the overall unemployment rate in United States stands at only 4.1% with even lower rates for college graduates and those with in demand accounting, finance and IT skills.

The NFIB's Small Business Optimism Index recently posted the largest 2 month increase in its 39 year history, reaching levels not seen in more than 6 years. The percent of owners expecting the economy to improve also rose to 52%, the highest since 1983. Rising business confidence is conducive to better hiring urgency, accelerated project demand and reprioritization of deferred growth initiatives. This in turn creates pressure on client resources and generates significant hiring and consulting demand, conditions that have historically set the stage for robust gains in the early stages of growth cycles. We are encouraged by the current combination of elevated job openings, low unemployment and strong business confidence, 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 2nd quarter in a row. This strength is broad based and includes each of its major solution areas with the regulatory risk and compliance solution again a standout performer. A significant contributor to Protiviti's success has been the expanded use of contract professionals sourced through talent solutions, a key component of our enterprise wide competitive advantage. Protiviti's prospects and pipeline remain very strong and we expect continued year on year revenue growth in the Q1. Protiviti was recently recognized on Glassdoor's Best Places to Work list for a 2nd consecutive year and honored by Ceramount as a top company for executive women.

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 tailwinds that are expected to propel us forward in the years to come. We began 2025 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. 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 Fortune as one of the world's most admired companies for the 28th consecutive year.

We're proud of our unique position as the only company in our industry to be awarded this distinction for nearly 3 decades. We were also recently named 1 of Fortune's best workplaces for parents and chosen by Newsweek as one of America's most responsible companies. Now Mike and I'd be happy to answer your questions. Please ask just one question and a single follow-up as needed. If there's time, we'll come back to you for additional questions.

Call Moderator: Thank And our first question today comes from Mark Marcon with Baird.

Mark Marcon, Analyst, Baird: Hey, good afternoon, Keith and Mike. I wanted to ask about Protiviti to start. We did have a slight deceleration with regards to the revenue growth in the Q4. Clearly, FX and the timing of the holidays probably ended up having some impact and that probably ended up impacting the margins a little bit. But for the Q1, you're basically guiding toward a midpoint around 9%, which is a significant pickup.

And I'm just wondering what are you seeing? How visible is that? Because that's a nice reacceleration.

Keith, CEO/Executive, Robert Half: So on the Q4, it is true that the holidays had an impact. They had a larger than expected impact from client soft closes. Their staff took more holiday than they had expected. And further the holidays, the logistics of the holidays impacted their ability to get contracts signed for revenue recognition before the end of the quarter. That said, their solution growth was strong.

It was broad and that momentum is expected to continue into the Q1, whereas on a sequential basis, they always have their Q1 crowd out of internal audit with clients focused on external audit and the cost pressures of their annual compensation increases and promotions. So very strong pipeline, very good momentum led by risk and consulting, big piece of that anti money laundering as we've talked before. Protiviti feels very good about where they are, feels good about that guidance. And the 4th quarter, there was noise from the holidays, which clearly doesn't impact the Q1 like it did the 4th.

Mark Marcon, Analyst, Baird: That's great. And then Keith, we've both been through many cycles before. Historically, the NFIB picking up as much as it has is a great precursor to small business hiring picking up. I'm wondering what do you think could potentially be a little bit different? Obviously AI gets a lot of attention in terms of news and people talk about potential displacements.

Not sure that's going to happen with small businesses, but the noise is still out there. Just wondering, is there anything that you think would be different this time around relative to that big pickup in terms of NFIB confidence? And how is that influencing what you're doing in terms of internal staff and how much you're willing to retain the internal staff and driving margins a little bit lower in the short term, but making up for it longer term?

Keith, CEO/Executive, Robert Half: Well, and so what's different, as we referenced, first, if you look across job openings that are currently at $8,000,000 if you look at earlyrecovery.com and great financial crisis, they were $2,500,000 $4,000,000 So openings more than double what they were as those recoveries began. Unemployment rate currently at 4.1. If you look at dotcom5.7. If you look at Great Financial Crisis 9.5. So labor much tighter making it much harder for clients to find talent on their own than they did in prior cycles.

So we're encouraged by that. And then as you mentioned, SMB Optimism, NFIB currently 105, following great financial crisis, it was 88, following dotcom, it was 99. And so on all three measures, we're in a better place than we were coming out of those two downturns. As to impact of AI, we've talked before, we're not seeing any meaningful impact as we speak on our business 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 with trough margins of dotcom and Great Financial Crisis and those margins recovered significantly thereafter, which we would expect to happen again.

: Terrific. Thank you.

Call Moderator: And the next question will come from Andrew Steinerman with JPMorgan.

Andrew Steinerman, Analyst, JPMorgan: Hi, Keith. Two questions. So, yes, obviously, intrigued by the FIB figures picking up. But I just wanted to be clear, especially as you talked about kind of January contract revenues being down, have new orders for Robert Half contract business picked up yet? Or do you expect there to be some delay from the NFIB business confidence?

Let me just ask my second question too. When looking at contract revenues, Robert Half's tech business was down a lot less than F and A or other. Do you think that the trajectory of revenue recovery within IT contract will be a different growth trajectory, again, when business confidence picks up than F and A or overall contract revenues for Robert Half.

Keith, CEO/Executive, Robert Half: And so early January, the first two weeks were very noisy with holiday impacts as well as the Jimmy Carter holiday. The 3rd week in January pick back up to what we would have expected, which is good. And while the tone of client conversations are definitely better, Clients are taking more of our calls, more of our requests for meetings. They're in addition to talking about their must have requirements, they're also talking about their backlog projects and talking about their like to have needs. Cinnamon is clearly better, but it's still too early for an uptick in actual starts and placements.

Our guidance for the Q1 assumes that we stay at that flat level that we did during the Q4. 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 talked about. And I'll also say this, Andrew, about our Q1 guidance. There's about a $40,000,000 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, but for had we had the same number of days and had currency not changed, our revenue guidance would have been $40,000,000 higher. On the tech side, it is true that tech has performed better lately, principally in the data area, be it analytics, be it governance, be it hygiene and then in ERP platform modernization, be it SAP, Oracle (NYSE:ORCL), Workday (NASDAQ:WDAY), Microsoft (NASDAQ:MSFT), all of those have been positive both on the talent solution side and on the Protiviti side and sometimes working together. And so it wouldn't surprise me if tech outperforms F and A a bit over the next cycle. That said, we're very optimistic about F and A as well.

: Okay. Thanks, Keith. I appreciate it.

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

: Hi, good afternoon. Thanks so much for taking the questions. First one I had was just on the, I guess, the international business, I think again kind of softer across the board compared with the U. S. Business.

I think 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'd expect in the next few quarters there?

Keith, CEO/Executive, Robert Half: I'd say it's modestly softer, not dramatically softer, both in Talent Solutions and in Protiviti. It wouldn't surprise us that that continued for a few quarters, but again nothing dramatic. 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 or drastic fall off in our international results, notwithstanding everything you hear and read.

: Okay. Thanks. That's helpful. And then follow-up on Protiviti, specifically on the operating margins for Protiviti. 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. So kind of thinking about full year 2025 with the demand 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 that double digit range on kind of a full year basis here?

Keith, CEO/Executive, Robert Half: The expectation is that Protiviti's full year operating margins would increase versus the prior year, not just stay flat. And their goal their stated goal would be to have a double double where they increased their revenue growth by double digits and they have a double digit operating margin and we like double doubles.

: All right. Thank you, Keith. That was helpful.

Call Moderator: And the next question will come from Manav Patnaik with Barclays (LON:BARC).

: Thank you. First, Keith, just on Protiviti, just given the improved growth outlook there, I guess, I think they are the largest user of your staffing, your temp staffing at least. Can you just remind us of kind of the usage there and how you see that? Is that a leading indicator? How should we think about that kind of correlation?

Keith, CEO/Executive, Robert Half: Whether it's a leading indicator, I can't speak to. I would say the collaboration go to market, Protiviti's use of contractors from Talent Solutions for the Q4 just ended Protiviti's overall revenues grew call it 4.5%. Their revenues from generated by contractors sourced through talent solutions were up 18%. So that clearly indicates that their usage is rising not falling. It's still well above 40% of the hours worked on Protiviti.

So the collaboration with Protiviti and Talent Solutions has never been better and is growing and clearly an enterprise competitive advantage, particularly relative to the big four from which Protiviti continues to take share.

: Got it. And I think I understand the business confidence optimism index being kind of generally positive for you guys. But in the past, you talked about how a lot of the reason why your clients didn't really engage as much is because of high inflation, high interest rates, those kinds of dynamics. It sounds like those will be sticking around for longer. So I was just wondering if there is still a tug of war in that discussion or has that been factored into these optimism index?

Keith, CEO/Executive, Robert Half: Well, I think the expectation of pro growth policy initiatives includes the umbrella of tax rates, regulation, tariffs, immigration. I think it's one big package and net net inclusive of everything I just mentioned, the confidence has surged in a way not seen in decades. And so clearly all of those factors are on the table, but when you net them all out, you get what you get, which is very positive. And I said, our people on the ground talking to their clients every day, things have changed. There is more activity.

Clients are more willing to talk to them. It just hasn't yet converted to starts and placements. We expect that it will. Our guidance conservatively is that we stay flat per day for the Q1. Hopefully, that's conservative.

But things clearly are different. Tone is clearly better.

: Got it. Thanks, Keith.

Call Moderator: And we'll take a question from Stephanie Moore with Jefferies.

Harold Onto, Analyst, Jefferies: Hello. This is Harold Onto on for Stephanie Moore. So I just want to make sure I understand because I know you said you held the line on hiring right now, but you also said it's a bit too early to receive new orders. So I guess as you expect to receive those incremental orders from as you know from the optimism starts to come in. Would you then anticipate, I guess, incrementally hiring recruiters or I guess just as you start to ramp up as you start to see orders ramp up, I guess would you then be hiring recruiters?

Keith, CEO/Executive, Robert Half: On paper, as we've said in prior quarters, our productivity today per person is 20% to 30% lower than it has been. On paper, we could therefore grow by that amount without adding heads. That said, the more confidence we get about increasing starts and placements, we would likely get ahead of that rather than wait for the whole thing to catch up. And so 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 based on how much we've done per person in the past, we could do more with the same workforce.

Harold Onto, Analyst, Jefferies: Thank you. And I guess, I know you've spoken to clients, but I guess on the candidate side, when your crews are speaking with clients, are clients, do they have the same high degree of willingness to change jobs? Are they requesting hybrid or remote work? And I guess, how does that impact pricing as you expect for orders to start coming in? Any comments around that would be helpful.

Keith, CEO/Executive, Robert Half: We would observe that typically candidate caution reduces as macro improves. There is no question there is pin up turnover from candidates that are somewhat frustrated in their current positions, particularly as it relates to hybridremote which some employers are eliminating in favor of 5 days in the office. And so traditionally part of upcycle also means candidates more confident in changing positions because they're not as fearful. They'll be the last one in, first one out. But there seems to be unusually high frustration and therefore potentially pin up turnover from a candidate point of view given the special circumstances of the last couple of 3 years particularly as it relates to remote work.

Harold Onto, Analyst, Jefferies: Got it. And then I guess just on the pricing point and bill rate growth, any, I guess how should we be thinking about that?

Keith, CEO/Executive, Robert Half: It's been in the low 3s now for a few quarters. That pretty much mirrors pay rate increases. And so we don't see any big change in the near future. So low to mid-3s feels reasonable, which is where we've been for a few quarters now.

: Thank you.

Call Moderator: And the next question will come from George Tong with Goldman Sachs.

George Tong, Analyst, Goldman Sachs: Hi, thanks. Good afternoon. Based on your exit rates 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's specifically weighing on temp staffing more so than perm placement?

Keith, CEO/Executive, Robert Half: Well, I think technically the December exit rate for perm and contract were both less than the full quarter. It's the post quarter where the differential widened more significantly. And a perm is more volatile than contract day to day, week to week. We're talking about a very short period of time. I'd say 2 perm was less holiday impacted as contract has been.

We talked earlier about for the 1st 2 weeks in contract, there was a lot of holiday noise. By the 3rd week, that holiday noise had gone our way and was back to where we would have expected. And so had we shown 3rd week only results, we should get a very different picture than seeing all three of those weeks. But we feel good about contract where it is, our conversations with clients and the contract versus perm numbers you saw 1 month versus a quarter, 3 weeks versus a month, 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 post quarter perm is even less predictive of the coming full quarter than post quarter contract.

But when post quarter periods include multiple holidays, they're even less predictive.

George Tong, Analyst, Goldman Sachs: Got it. That's helpful. And then bigger question, we've seen pretty solid economic growth. The labor market is doing quite well. And yet it sounds like contract revenues are flat over the past 23 consecutive weeks.

So can you talk about what could be causing or keeping contract revenues flat rather than growing when the broader economy is growing and when the labor markets are relatively healthy?

Keith, CEO/Executive, Robert Half: Well, that same statement could be said about the last 10 quarters. And so the past 23 weeks are no different than the past 10 quarters and there has been plenty of discussion around a lot of the labor market growth has been concentrated in 3 industries government, healthcare, leisure, hospitality that aren't big sectors for Robert Half, that aren't big sectors for the staffing industry generally. So you take that away from the overall labor markets, you get a very different picture. Further, the churn has the labor churn has reduced significantly over that period of time, the middle of which had COVID. So what we saw in the last 23 weeks was an improvement in what we had been seeing over the last 10 quarters where we had been slowly drifting down.

And so I would argue the last 23 weeks are better than we had been seeing. And certainly the tone has improved yet again since then because of the election and small business expectations because of that.

George Tong, Analyst, Goldman Sachs: Got it. Thank you.

Call Moderator: And moving on to Kevin McVeigh with UBS.

Kevin McVeigh, Analyst, UBS: Great. Thanks so much. It sounds like there's a lot of optimism, but I guess, and I think it's been asked a couple of ways, but what do you think is the client hesitancy? Because it seems like the indicators are at all time highs and it seems like they're still not engaging. So just any thoughts around that just at a higher level and what's the trigger that's going to get them to kind of pull the trigger?

Keith, CEO/Executive, Robert Half: Well, the hesitancy is everybody is a little bit in a show me state. Clearly the environment, everybody is more optimistic. We're having more discussions with our clients. Presumably, they're having more discussions with their clients. But everybody wants to see it rather than just talk about it.

And that's not unusual for particularly small businesses to have a show me attitude toward their own staffing decisions. And so as we've said, looking back into the past, these elevated levels of activity of interactions with our clients typically lead to more starts and placements. It doesn't happen overnight, hasn't happened yet as to starts and placements, but clearly the tone is better.

Kevin McVeigh, Analyst, UBS: Helpful. And then just it looks like the tax rate is a little bit higher in the Q1 guidance just in terms of relative to Q4. Anything that's driving that?

Keith, CEO/Executive, Robert Half: Yes. So the our restricted stock incentive shares vest annually and because of our lower share price, the tax deduction will get for that vesting will be below our book expense and therefore a higher tax rate. That tax rate results in about a $0.02 charge on an EPS basis relative to the tax rate a year ago.

: Thank you.

Call Moderator: And the next question will come from Jeff Silber with BMO Capital Markets.

Mike Buckley, CFO, Robert Half0: Thank you so much. I know there's 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 driven revenues?

Keith, CEO/Executive, Robert Half: Our exposure to federal government is very low. In our public sector work to the extent we do government work at all, it's substantially local state and local, not federal. And so while we don't have 0 exposure, it's a very small number.

Mike Buckley, CFO, Robert Half0: And would that state and local work, for instance, include like Medicare work where the money has come from the federal government,

: but it's

Keith, CEO/Executive, Robert Half: state and local driven? We don't have a large amount of Medicare work. Maybe during the Q4 as part of open enrollment, There are Medicare, Medicaid interdependencies with open enrollment, but other than that, no.

Mike Buckley, CFO, Robert Half0: Okay. Appreciate that. And just a quick question on the tax rate. Should the 1Q tax rate something we'd be using for the rest of the year or would it come down to where it was last year?

Keith, CEO/Executive, Robert Half: No, no, no. It would definitely come down. Our vesting is pretty much a Q1 event. Okay. And you've got pieces of the last 4 years grants that are valued according to those grant dates that all vest.

Again a Q1 event, it should come back down.

: Got it.

Mike Buckley, CFO, Robert Half0: All right, great. Thanks so much.

Call Moderator: And our next question will come from Kartik Mehta with Northcoast Research.

Mike Buckley, CFO, Robert Half1: Good afternoon. Keith, just on the Protiviti capacity, obviously, you want to be prepared for as business confidence grows and the business grows. But as you stand today, how would you measure capacity in terms of the people that are on staff?

Keith, CEO/Executive, Robert Half: Well, I think there is clearly utilization capacity for their full time staff. But one of their competitive advantages is how quickly they can scale by using contractors sourced through talent solutions that can be scaled very quickly. And so the combination of the 2, I'm very optimistic about and that's one of the beauties of having this just in time capacity that they can whistle onto the field via talent solutions.

Mike Buckley, CFO, Robert Half1: And then Mike, just to understand, obviously, fewer days in FX playing a part in the Q1. Does that get outside of FX, does that get made up in the Q2? And if so, what's the impact outside of FX?

Keith, CEO/Executive, Robert Half: So it does not get made up. And the impact that days so one day billings is 22,500,000 dollars And depending on what type of margin assumption you're going to have because you're talking incremental margins and not average margins, I mean, it works out to up to several pennies a share.

Mike Buckley, CFO, Robert Half1: Thanks. That's helpful. So it's a pretty big impact for you guys.

Keith, CEO/Executive, Robert Half: Yes, for the industry generally. It's essentially a full day.

Mike Buckley, CFO, Robert Half1: Thank you very much. That's helpful.

Call Moderator: And the next question comes from Tobey Sommer with Truist Securities.

Mike Buckley, CFO, Robert Half2: Thank you. Of the expected changes contributing to improved small business optimism, what do you think is the most important for the new administration to deliver on to catalyze that optimism into hiring action and improved KPIs that Robert

Keith, CEO/Executive, Robert Half: It would be some combination of less regulation, more M and A friendliness as part of that and then at least of continuation of current tax rates if not lower ones.

Mike Buckley, CFO, Robert Half: I think those are the ones that are

Mike Buckley, CFO, Robert Half2: Would you rank them in that order?

Keith, CEO/Executive, Robert Half: Hard to say. I think they're both significant drivers of what is perceived to be a pro business administration.

: Okay. That makes sense. And

Mike Buckley, CFO, Robert Half2: then on kind of double clicking in one of those topics, with respect to capital markets and M and A,

: what are you seeing in Protiviti,

Mike Buckley, CFO, Robert Half2: maybe even in the staffing segments to the extent they have any exposure? And maybe a comment about the financial services vertical for Protiviti also? Thanks.

Keith, CEO/Executive, Robert Half: Well, I'd say Protiviti is most directly impacted by M and AIPO and they've seen a little bit of an uptick, not a lot. But clearly, if M and A were to improve like some believe they will, Protiviti will be a big beneficiary of that. Private equity exits be it IPO or M and A create a lot of work as to internal controls, as to integration. That's where Protiviti has enjoyed in times past that they've had very little of for the last 2 or 3 years. So it would be a very positive development if in fact M and A picks up and private equity exits IPO or M and A pick up.

At the Financial Services vertical, doing very well across Protiviti solutions. So it's not only anti money laundering, but it's also as well internal audit at financial institutions where frankly they don't have enough internal staff to do the work they have to do and even internal audit to some degree is regulated by the regulators because they demand that they actually get completed, which is not necessarily the case in the commercial space where many times if you didn't complete part of your internal audit in a given year, you just roll it over to the next year. 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.

Mike Buckley, CFO, Robert Half2: Thank you very much.

Keith, CEO/Executive, Robert Half: Okay. So that was our last question and thank you for joining us today.

Call Moderator: So long. Thank you. 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 atroberthalf.com. You can also log in to the conference call replay.

Details are contained in the company's press release issued earlier today.

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