Hello, and welcome to the Robert Half First Quarter 2022 Conference Call. Our hosts for today’s call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half, and Mr. Michael Buckley, Chief Financial Officer. Mr. Waddell, you may begin.

Hello, everyone. We appreciate your time today. Before we get started, I'd like to remind you that the comments made on today's call contain forward-looking statements, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds. However, they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are described in today's press release in our most recent 10-K and 10-Q filed with the SEC. 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 a supplemental schedule to our earnings press release. We'd like to remind you that beginning this quarter, our financial disclosures for contract operations, formerly temporary and consulting staffing are based on functional specialization rather than our previously branded divisions. The functional specializations are finance and accounting, administrative and customer support, and technology. Finance and accounting combines the former account temps and management resources. Administrative and customer support was previously OfficeTeam. And technology was formerly Robert Half Technology. Protiviti and our permanent placement operations continue to be reported separately. Also, what we previously referred to as staffing operations are now referred to as talent solutions. There's no change to our underlying business operations or organization. Our presentation of revenues and the related growth rates for each of our contract functional specializations includes intersegment revenues from services provided to Protiviti in connection with the Company's blended talent solutions and consulting operations. This is how we measure and manage these businesses internally. The combined amount of intersegment revenues with Protiviti is also separately disclosed. The supplemental schedules just mentioned also include a revenue schedule showing this information for 2020 through 2022. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. We are very pleased to report another very strong quarter driven by a robust demand environment across the globe. First quarter revenues grew 30% and net income grew 52% on a year-over-year basis. Our permanent placement talent solutions again led the way, achieving year-over-year revenue growth of 67%. Our contract talent solutions and Protiviti also continued to post very strong results, growing year-over-year revenues by 30% and 19%, respectively. Our continued success would not be possible without the dedicated commitment of our entire global workforce, including talent solutions, Protiviti and corporate services professionals. Company-wide revenues were $1.815 billion in the first quarter of 2022, up 30% from last year's first quarter on a reported basis and up 31% on an adjusted basis. Net income per share in the first quarter was $1.52, increasing 55% compared to $0.98 in the first quarter one year ago. Cash flow from operations during the quarter was $69 million. In March, we distributed a $0.43 per share cash dividend to our shareholders of record for a total cash outlay of $47 million. Our per share dividend has grown 11.7% annually since inception in 2004. The March 22 dividend was 13.2% higher than in 2021. We also acquired approximately 475,000 Robert Half shares during the quarter for $55 million. We have 6.7 million shares available for repurchase under our Board-approved stock repurchase plan. Return on invested capital for the Company was 47% in the first quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.815 billion in the first quarter. On an as adjusted basis, first quarter talent solutions revenue were up 35% year-over-year. U.S. talent solutions revenue were $1.046 billion, up 38% from the prior year. Non-U.S. talent solutions revenue were $297 million, up 28% year-over-year on an as-adjusted basis. We have 317 talent solutions locations worldwide, including 83 locations in 17 countries outside of the United States. In the first quarter, there were 62.4 billing days compared to 62.3 billing days in the first quarter of 2021. The current second quarter has 63.4 billing days, unchanged from the same quarter one year ago. Currency exchange rate movements during the first quarter had the effect of decreasing reported year-over-year talent solutions revenue by $13 million. This negatively impacted our year-over-year reported talent solutions revenue growth rate by 1.3 percentage points. Contract talent solutions bill rates for the quarter increased 9.1% compared to one year ago, adjusted for changes in the mix of revenue by functional specialization, currency and country. This rate for the fourth quarter of 2021 was 8.5%. Now let's take a closer look at the results for Protiviti. Global revenues in the first quarter were $472 million, $369 million of that is from business within the United States and $103 million is from operations outside of the United States. On an as-adjusted basis, global first quarter Protiviti revenues were up 20% versus the year ago period, with U.S. Protiviti revenues up 17%. Non-U.S. revenues were up 32% on an as-adjusted basis. Exchange rates had the effect of decreasing year-over-year Protiviti revenues by $5 million and decreasing its year-over-year reported growth rate by 1.3 percentage points. Protiviti and its independently owned member firms serve clients through a network of 88 locations in 29 countries. Turning now to gross margin. In contract talent solutions, first quarter gross margin was 40% of applicable revenues compared to 38.8% of applicable revenues in the first quarter one year ago. Gross margins were positively impacted by expanding pay bill spreads and higher conversion revenues or contract to hire, which were 4% of revenues in the quarter as compared to 3.1% of revenues in the same quarter one year ago. Our permanent placement revenues in the first quarter were 13.9% of consolidated talent solutions revenues versus 11.2% of consolidated talent solutions revenues in the same quarter one year ago. When combined with contract talent solutions gross margin, overall talent solutions gross margin was 48.3%, an increase of 2.7 percentage points compared to the year ago first quarter. For Protiviti, gross margin was 26.2% of Protiviti revenues compared to 26.5% of Protiviti revenues one year ago. Adjusted for deferred compensation related classification impacts, gross margin for Protiviti was 25.3% for the quarter just ended compared to 26.9% one year ago. Gross margin in the current period was impacted by higher staff resource costs, including a significant expansion of headcount during the quarter. Enterprise selling, general and administrative costs were 28.3% of global revenues in the first quarter compared to 30.3% in the same quarter one year ago. Adjusted for deferred compensation related classification impacts, enterprise SG&A costs were 29.8% for the quarter just ended compared to 29.5% one year ago. Talent solutions SG&A costs were 33.6% of talent solutions revenues in the first quarter versus 37.3% in the first quarter of 2021. Adjusted for deferred compensation-related classification impacts, talent solutions SG&A costs were 35.6% for the quarter just ended compared to 36.3% one year ago. The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding 1.5 percentage points to the quarter's adjusted SG&A ratio. First quarter SG&A costs for Protiviti were 13.3% of Protiviti revenues compared to 12.5% of revenues in the year ago period. Operating income for the quarter was $258 million. Adjusted for deferred compensation related classification impacts, combined segment income was $228 million in the first quarter. Combined segment margin was 12.5%. First quarter segment income from our talent solutions divisions was $171 million with a segment margin of 12.7%. Segment income for Protiviti in the first quarter was $57 million with a segment margin of 12.1%. Our first quarter tax rate was 26%, the same as it was one year ago. At the end of the first quarter, accounts receivable were $1.072 billion and implied days sales outstanding, or DSO, was 53 days. Before we move on to second quarter guidance, let's review some of the monthly revenue trends we saw in the first quarter and so far in April, all adjusted for currency and billing days. Contract talent solutions exited the first quarter with March revenues up 28% versus the prior year compared to a 31% increase for the full quarter. Revenue for the first three weeks of April were up 29% compared to the same period one year ago. Permanent placement revenues in March were up 63% versus March of 2021. This compares to a 69% increase for the full quarter. For the first four weeks in April, permanent placement revenues were up 30% compared to the same period in 2021. We remind you that the comparative period in 2021 experienced extraordinary growth with permanent placement achieving 154% growth rates in the first three weeks of April 2021 and 97% for the full quarter. We provide this information so that you have insight into some of the trends we saw during the first quarter and into the month of April. But as you know, these are very brief time periods. We caution against reading too much into that. With that in mind, we offer the following second quarter guidance: revenues, $1.855 billion to $1.935 billion; income per share, $1.53 to $1.63. Midpoint revenues of $1.895 billion are 22% higher than the same period in 2021 on an as-adjusted basis. Midpoint EPS of $1.58 is 19% higher than 2021. Note that in the prior year, Q2 2021 revenues and EPS had very strong year-over-year growth rates of 40% and 227%, respectively. The major financial assumptions underlying the midpoint of these estimates are as follows: revenue growth on a year-over-year basis, talent solutions, up 25% to 27%; Protiviti, up 9% to 11%; overall, up 21% to 23%. Gross margin percentages, contract talent, 39% to 40%; Protiviti, 27% to 28%; overall, 41% to 43%. SG&A percentage of revenues, excluding deferred compensation classification impacts, talent solutions, 36% to 37%; Protiviti, 14% to 15%; overall, 30% to 31%. For segment income, talent solutions, 12% to 13%; Protiviti, 13% to 14%; overall, 12% to 13%. Our tax rate, 26% to 27%; shares outstanding 109 million to 110 million. Second quarter capital expenditures and capitalized cloud computing costs $25 million to $30 million. We limit our guidance to one quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings. Now I'll turn the call back over to Keith.

Thank you, Mike. The future of work continues to evolve as remote and hybrid work models gain wider acceptance and the swift recovery across global labor markets has significantly increased the demand for our services. More than ever before, clients are willing to recruit from outside their geographic region and to access deeper talent pools and lower price points that may be available locally. Job candidates also benefit from the broader experiences and wider selection of jobs derived from out-of-market engagements. This remote work environment increasingly plays to our strengths and presents an unparalleled opportunity to capitalize on a structural shift in how companies source talent. Additionally, our global brand, office network, candidate database, and advanced AI-driven technologies allow us to successfully recruit the necessary talent for our clients to thrive and grow amid the great reshuffle as professionals continue to change jobs at record levels and companies across the globe struggle to navigate unprecedented employee turnover. Global labor markets remain very robust. In the U.S., this is seen in the elevated levels of job openings and quits rates as well as low initial unemployment claims and a low unemployment rate particularly those with a college degree where the rate is 2% for small businesses. The National Federation of Independent Businesses, NFIB, recently reported that 92% of those hiring or trying to hire had few or no qualified applicants for open positions and 47% of all small business owners had job openings that could not be filled. As a result of this very strong demand environment, coupled with our unique ability to successfully secure hard-to-find candidates for our clients, we continue to see our talent solutions results recovering at a faster pace than we've experienced in the past. Our permanent placement and contract talent solutions segments, included blended solutions with Protiviti, have achieved cumulative sequential growth of 163% and 64%, respectively, during the seven quarters since the pandemic trough, similar numbers for the financial crisis and dot-com recoveries were 83% and 30% and 87% and 41%, respectively. Protiviti again reported double-digit revenue gains, which it has achieved for each of the last four years. Internal audit and blended solutions with contract talent solutions reported the strongest growth. The growth in technology consulting and risk and compliance solutions was impacted by the wind down of a very large regulatory remediation project during the quarter. While replacement projects have already largely been secured, the second quarter will also be impacted as the wind down completes and the new projects start on a staggered basis. Protiviti's pipeline continues to be very strong and the aggressive hiring that took place during the first quarter was in support of anticipated additional resource requirements. First quarter public sector revenues exceeded expectations, grew 34% year-over-year to a total of $90 million, of which $72 million was reported by Protiviti and the balance reported by talent solutions. As was expected, work directly related to stimulus programs moderated in the quarter, and we began to realize revenues from new work that leverages the credentials and deep relationships we've developed with this new client base. Educational institutions and government entities at all levels are experiencing talent shortages across their organizational structures, creating opportunities for us to provide contract talent, consulting services and managed solutions as their needs dictate. We expect second quarter 2022 public sector revenues to be $95 million to $105 million. And we continue to expect full year 2022 public sector revenues to be at least flat to up 10% for the year. To aid with prior year comparisons, we've included a table on our website in the Supplemental Financial Information section of the Investor Center showing our quarterly public sector revenues for 2021. For both talent solutions and Protiviti, we're very optimistic about the year ahead as we draw strength from our people, our technology, our brands, and our business model. We remain steadfastly focused on our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and deep subject matter expertise they need to confidently compete and grow. We are proud to be recently named one of only a few select companies by Fortune as a Most Admired Company for 25 consecutive years. In addition to making Barron's annual list of the 100 Most Sustainable Companies and Forbes list of America's Best Employers for Diversity. This recognition would not be possible without the dedication and exemplary efforts of our employees across the globe. Now Mike and I will 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.

Your first question will come from Andrew Steinerman with JPMorgan.

Keith, I hope this question is okay. How long do you think Protiviti could maintain double-digit revenue growth? You mentioned that you have achieved that for years, and you provided specific insights on the public sector's performance within Protiviti this year. Will this be a year of more than 10 percent growth for Protiviti? I noticed the second quarter is projected to reach about 10 percent at the midpoint.

Well, right. So Andrew, the fact that we started up 20% even with some of the short-term challenges we talked about for the second quarter we're projecting up 10%, we would expect for the full year that Protiviti for 2022 would grow double digits up to mid-double digits. So, we're bullish on Protiviti it's got this one large client that has decided to take many of the requirements in-house, which ended the engagement more quickly than we expected. The good news is if that were going to happen, there's not a better market for that to happen because we've essentially already redeployed people. It's just a matter of timing. So notwithstanding that, notwithstanding some of the headwinds that Protiviti has with public sector work, we're quite bullish. In fact, we feel the best we've felt in a long time about its prospects. But even if you just focus on Protiviti public sector, we still think, for the year, we can get double-digit revenue growth.

Your next question will come from Mark Marcon with Baird. Your line is open.

Keith and Mike, a couple of questions. One would basically be the topic de jour, which is, obviously, there's some concerns out there regarding the potential for cyclical slowing. All of your results thus far seem to belie that. Are you seeing any signs anywhere within your book of business that would suggest that there are some signs of slowing or any chatter from any of your clients along those lines?

The simple answer, Mark, is no, we have not seen signs of slowing. The demand environment remains very, very strong, not only in the U.S. but globally as well. And so we sit here today just as optimistic as we were 90 days ago, in fact, maybe even more.

That's great. And then the follow-up is you've made a lot of investments in terms of tools and technology. You can't be helped but be struck by the margin improvement that you're seeing both on the talent side and on the perm side in terms of the margins and the efficiency that's coming through. I'm wondering if you could take this opportunity to discuss a little bit about what you've done to make the process more efficient, how you're actually taking advantage of virtual work and all the work that you've done on AI and systems like that to improve your efficiency as well as your reach and to continue to gain share.

We have made a bunch of investments in technology. We've seen meaningful benefit from those. We leverage our database from the standpoint of previous candidate engagements to determine how they compare to our elite candidates. We use AI to compare a client's requirements to the profile of resume of the candidates. We're adding some exciting dimensions to what's already working very well in that we're now looking at how contract proven in a given candidate based on whether we have placed them before or vetted them before. We're also improving how we view a candidate's likelihood to respond to our request for them to apply to jobs by evaluating their activities with us as well as activities with other firms in our ecosystem from a standpoint of how active they are in the job market. All of that considered, our people are more productive than they've ever been. Part of that is because, on average, they're more experienced. Part of that is because we've got the least turnover we've ever had. We've been very flexible with our people and letting them completely decide when and where they work. That's worked out very well for them. That's worked out very well for us. So across many dimensions and for many reasons, our people are more productive.

No. The last time we talked, you mentioned you wished someone had asked you about that, so I had to bring it up. It's clear that you are very effective in raising margins and improving productivity. It seems you still have more improvements planned. How much further do you expect to go, or how long will the journey of optimization take?

Well, first of all, just the adoption rates of what we already have has upside. You put on top of that the improvements that I just talked about, that’s further upside, so it's mid-innings at best.

Your next question will come from Heather Balsky with Bank of America.

I was hoping you could talk about the Protiviti margins, the EBIT margin during the quarter and the give and take there. There was some commentary regarding headcount. Just curious what's going on there? And also, you mentioned earlier that you had lost one large customer. I was wondering if that was a headwind to the margins during the quarter?

Okay. We did aggressively add to headcount, and it was high single digits just in the quarter. They also do their annual reviews, salary-wise, promotion-wise. Both of those were planned and embedded in our guidance. What was different than our guidance was that, on the one hand, internal audit significantly exceeded plan. And because our people there are totally utilized, we had to go and get more contractors to do that work. That was new direct cost. On the other hand, this large regulatory remediation client, we didn't lose it. I mean the work wound down, but the biggest ones were winding down slowly. The client decided to take the function in-house, which accelerated the wind down. But for that sector, they were below plan on revenues. However, you've got your risk and compliance cost at plan; you've got your internal audit costs because of the contractors above plan, that resulted in margin compression. But again, this is a one or two quarter challenge, a headwind that we can manage around. It's just the nature of any consulting business that sometimes you're going to have large projects that end that take some time to replace.

That's really helpful. I have a follow-up question regarding hiring. How do you feel about your recruiter base, especially considering the recent hiring? Do you anticipate continuing to grow it for the rest of the year? I'm curious about the current situation.

On the talent solutions side, we've been actively adding to permanent placement headcount, kind of low double digits less than the top line growth, but still low double digits. On the contract talent solutions, we've had more capacity. Cumulatively, the growth rates haven't been as robust as permanent placement. So the hiring hasn't been as rapid, but we do plan to continue to add heads more aggressively in permanent placement for obvious reasons.

Your next question will come from Kevin McVeigh with Credit Suisse.

You've been pretty clear on this. I just want to make sure. Like the delta in the Protiviti margins in Q1 and Q2, is that the timing of that contract? Or is that increased capacity in anticipation of demand that's coming because I know there's always a little bit of a timing mismatch between when people are onboarded. And is there any way to think about what utilization is? I know you typically don't give that, but maybe Protiviti utilization just so we can get a sense of the flexibility in terms of delivery.

There will be some of both. Clearly, with the enormous addition of heads in the first quarter, we have a group of interns that come in later in the summer. So we haven't completely stopped hiring in Protiviti either. And so there's some margin dilution as they get chargeable or utilized. And in addition, as we talked about, there's this large contract that also has an impact. But the impact in Q2 shouldn't be great as it was in Q1. And if that large client would have been flat in Q2 versus a year ago, the top line growth would have been five to eight points higher.

For sure. It seems like the client shifted pretty abruptly. Any thoughts on what drove that decision? It seems like they completely reversed their stance. Was it funding or something else?

No, no, no. It's a project that's been going on for three or four years. It's not been a recent thing. It was a remediation project. Clearly, as you remediate, the client gets in better condition and there's less remediation work to do. Also, they decided to bring the compliance function in-house rather than outsource it or co-source it. It was that latter decision on their part for financial savings reasons that accelerated the wind down of the project. But we're still in very good standing with the client. There are various work streams we're still proposing on, and we're quite optimistic. It's just part of the consulting business that your project portfolio changes. Let me just say one thing about public sector that we're typically asked that hasn't yet been asked, but let me preempt that. So Q1 did exceed our expectations. Public sector grew 34% on an enterprise basis. Our Q2 guide is only 3% below last year, which is a quarter where sequentially, it was up 45%. So from a public sector standpoint, Q2 is the toughest comp of the year. We had many business-as-usual contract wins. As we said in our script, you've got state and local governments and educational institutions dealing with the same great reshuffle that commercial clients are, which has given rise to a lot of requirements that are right in our wheelhouse. The project pipeline does continue to build, housing assistance, IT and accounting modernization, project management. The pipeline builds, the win rates are good. Putting that all together, we are extremely pleased with how public sector is playing out. We talked last time where we thought for the full year we would be up the same or grow. We're even more convicted to that than ever.

And your next question will come from Tobey Sommer from Truist Securities.

I was hoping to get your comments on bill rate growth, wage inflation. Where do you see that going? It was pretty strong, high single digits. Are we close to a peak and then just going to be at strong rates? How do you see that evolving in the coming quarters?

Being up over 9% year-on-year is high versus historical standards. Usually, it's up 4% to 6% for an extended period of time. How long it lasts? I don't know. There are 11.3 million job openings in this country and fewer than half of that and unemployed people. So, the labor market remains very tight. Our margin expansion has come more from contract-to-hire conversion growth. We're getting more margin expansion from adding these full-time engagement professionals where we get a higher margin than we do from our core contractor base. So, we're slightly expanding pay bill spreads, but the big margin expansion is more about conversions and full-time engagement professionals.

I appreciate that. As a follow-up, I wanted to see if you could comment on your exposure in Europe. We receive inquiries about the effects of the war and whether there is any softening in that area. While it represents a small portion, you are still a significant player in several countries.

So we're 78% U.S., 22% international. Continental Europe is 10%. And of that 10%, it's Germany 4%; Belgium 4%; France 1%, another one. I would say, at least to date, there certainly hasn't been an impact, and Germany, arguably, would be the most impacted. But Germany had a very good quarter, in fact, probably had the best quarter of any of our non-U.S. countries in the first quarter. Their outlook for Q2 is good.

Your next question will come from Jeff Silber with BMO Capital Markets. Your line is open.

I know it's late, I'll just ask one. In looking at your technology revenues within talent solutions, year-over-year growth accelerated compared to the prior quarter. Can you talk about what drove that and how sustainable that is going forward?

It's about better execution. I think it went from 21% to 24%. The comps were pretty similar in the two quarters. Technology talent solutions have been a focus for some time. We've focused a lot of the other initiatives, candidate-based initiatives that I talked about earlier, also extend to technology. We've had good results, and we're optimistic as we go forward. Okay. Well, I believe that is our last question. So, we appreciate everyone joining the call today. Thank you very much.

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 www.roberthalf.com. You can also dial the conference call replay. Dial-in details and the conference ID are contained in the Company's press release issued earlier today. Thank you for participating. You may now disconnect.