Max Messmer - Chairman and CEO Keith Waddell - Vice Chairman, President and CFO.

Jeff Silber - BMO Capital Markets Mark Marcon - R. W. Baird Tim McHugh - William Blair & Co. Sara Gubins - Bank of America Anjaneya Singh - Credit Suisse Andrew Steinerman - JPMorgan Paul Ginocchio - Deutsche Bank Tobey Sommer - SunTrust George Tong - Piper Jaffray Gary Bisbee - RBC Capital Randy Reece - Avondale Partners.

Hello, and welcome to the Robert Half First Quarter 2015 Conference Call. Our hosts for today’s call are Mr. Max Messmer, Chairman and CEO of Robert Half, and Mr. Keith Waddell, Vice chairman, President and Chief Financial Officer. Mr. Messmer, you may begin..

Thank you, and hello, everyone. We appreciate your time today. Before we begin, I’d like to point out that some of the comments we’ll make on today’s call contain predictions, estimates and other forward-looking statements.

These statements represent our current judgment of what the future holds and include words such as forecast, estimate, project, expect, believe, guidance and similar expressions.

We believe these remarks to be reasonable; however, they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Some of these risks and uncertainties are described in today’s press release and in our SEC filings, including our 10-Ks, 10-Qs and today’s 8-K.

We assume no obligation to update statements made on today’s call. For your convenience, our prepared remarks are available now on our website at www.roberthalf.com. Click on Investor Center, then the Quarterly Conference Calls link. Now, let’s review our first quarter results. First quarter 2015 revenues were $1.21 billion.

This is an 11% increase from the year-ago first quarter. Income per share was $0.58, up 28% from last year. Cash flow from operations was $84 million in the first quarter and capital expenditures were $13 million. It has been our longstanding practice to return cash to stockholders through open market repurchases and cash dividend payments.

In February, we increased the quarterly cash dividend from $0.18 to $0.20 per share. This was the 10th consecutive year we have raised the dividend amount for our stockholders. We paid the dividend on March 13, at a cost of $27 million. We also repurchased 500,000 Robert Half shares during the quarter, at a cost of $29 million.

There are approximately 4.3 million shares available for repurchase under our board-approved stock repurchase plan. Led by Protiviti and Robert Half Technology, all of our divisions contributed to a solid first quarter. We saw broad-based revenue gains and higher service demand in every line of business.

First quarter revenues from our staffing operations were up 10% from the year- ago first quarter. Protiviti revenues for the quarter were up 22%. Growth rates remained the strongest in our US operations, but currency-adjusted revenues outside the United States grew nicely, also.

This was Robert Half's 20th straight quarter of double-digit net income and earnings per share percentage growth on a year-over-year basis. Our unlevered return on equity was 32%. At this point, I’ll turn the call over to Keith for a closer look at our first quarter results..

$0.63 to $0.68. We limit our guidance to one quarter. All estimates we provide on the call are subject to the risks mentioned in today’s press release and in our SEC filings. Now, I’ll turn it back over to Max..

internal audit, financial services risk and compliance, and IT controls and security. The collaboration between our staffing divisions and Protiviti is also resulting in new business. We offer clients a full spectrum of services ranging from staff augmentation to full-service consulting and project-based deliverables.

At this time, we will be happy to answer questions. We would request that you please limit yourself to one question and a single follow-up, as needed. If time permits, we will certainly try to return to you later in the call if you have additional questions. Thank you..

[Operator Instructions] Your first question comes from the line of Jeff Silber, BMO Capital Markets. Your line is open..

Hi, it’s Henry Chien calling in for Jeff. Thanks for taking my question. Just looking at Protiviti, it looks like you had a pretty strong year-over-year operating margin improvement and seeing some nice leverage in SG&A.

Could you comment on what you expect that trend to continue going forward?.

So you’re correct, Protiviti did have a particularly strong quarter, not only in the United States, but outside the United States as well.

Our expectation is in the second quarter, there would be some sequential improvement versus the first, but given the strength of the first quarter, the magnitude of the sequential improvement wouldn’t be quite what it is in the past, but on a year-over-year basis, I think you would be very pleased with what’s embedded in our guidance for Protiviti in the second quarter..

Got it. Thank you. And just a follow-up on international revenue, it sounds like there could be I guess reacceleration for second quarter, could you comment on maybe what markets that you are seeing improving? Thanks..

Well, I am not sure where the reacceleration comment comes from, but we had a very solid second quarter outside the US, not only in staffing, but in Protiviti as well. Our guidance for the second quarter outside the US is that it doesn’t change dramatically from a currency-adjusted growth rate standpoint versus what we saw in the first quarter.

And we certainly saw strength in France, we saw strength in Belgium, UK remains solid, Germany was solid, quite frankly we were pretty pleased across the board in our top six non-US markets in staffing, which make us the bulk of our international operations in staffing.

On the Protiviti side, we had a particularly good quarter in Asia, which is the first time in many, many quarters I can say that. Clearly that was a meaningful portion of the operating margin improvement, not to say that the US didn’t improve nicely as well led by financial services, risk and compliance..

Got it. Thanks so much for the color..

Your next question comes from the line of Mark Marcon, R. W. Baird. Your line is open..

Good afternoon. You had a really strong acceleration with regards to RH technology and last call, you had mentioned you weren’t really investing much above and beyond your normal method of investing.

So I am wondering, what drove the strength there and how should we think about the forward outlook for RH technology?.

a couple of reasons; a) the nature of the things we are working on, mobility, cloud, security, app development, web development are stickier than some of the projects we had done in the past and further with the candidate shortage, many clients didn’t want to give up their candidates because they felt like correctly, if they gave them up, they might not get them back.

So the sequential improvement we got in the first quarter was quite different than what we have seen in most years in the past where you saw some sequential decline. That candidate tightness, nature of what we are working on..

Okay.

You did overinvest a year-ago and a number of quarters ago, but my recollection was the last six months, is there some element in terms of the productivity just across the board? In other words, did you pick up – have you increased the pace of hiring again in technology?.

So the first half of last year was very technology centric in our internal hiring. Second half of last year was much broader based where in addition to technology, we hired in the other divisions, management resources notably, to some extent perm placement and accountemps.

Because of the outsized hiring in the first half of the year, it took those people some time to get up to speed and that began to pay off toward the latter part and into the first quarter. So we did benefit from the hiring we had done previously.

I would say, as we look forward into the second quarter and into the third, the hiring we will do will continue to be aggressive, but more in-line with our top line across the board than ahead of our top line..

Got it.

And then with regards to the international staffing operations, in your prepared remarks, you actually noted that on a monthly basis, there was some deceleration, was that across the board? And you just said, you would expect things to basically stay steady in the second quarter relative to the first, so I was just wondering is that relative to the exit rate or just relative to the average or is there anything that was occurring that was driving that deceleration?.

It’s a little bit country by country. I'd say that our comments as to guidance whereas that our second quarter average rate would be close to our first quarter average rate notwithstanding the trend lines that we talked about..

Okay.

And is there anything that was operational about those trend lines or you would say, generally speaking we think things are actually getting a little bit better?.

No, I would say, one of the biggest issues with staffing outside the US is we have not made the headcount investments there, we have made in the US, because from a macro standpoint they have lagged.

And so I think you’re going to see over the next few quarters, we are going to begin to make more headcount investments outside of US, particularly in permanent placement.

And if you look at non-US permanent placement growth rates, you will see they are among the lowest we have had and that’s also where we have made the fewest headcount investments in the last 12 to 18 months and that’s where we are going to begin to change..

Got it. Perfect. Thank you..

Your next question comes from the line of Tim McHugh with William Blair & Co. Your line is open..

On the gross margin I guess, qualitatively you said bill pay spreads and conversion rates, I guess.

Can you quantify how much was each? And I guess in particular is the conversion fees, feel like stepping up here, where I guess this is a sustainable improvement in gross margin, and perhaps even room for further improvement?.

We were particularly pleased with our gross margin performance there in the quarter. Our bill rate increases were 4.1% as that’s currency-adjusted compared to 3.5% a quarter ago. As we’ve talked about in the past, the environment that allows us to raise bill rates also allows us to expand our bill pay spreads.

So of that 90 basis point improvement, it was not quite half and half, but it was close. I think conversions improved 40 basis points year-over-year. They improved 20 basis points sequentially. You are still at 3.3% of revenues, so in that 3% to 5% range, we are still relatively low in that range.

And quite optimistic that we can continue to move up that range that we’ve talked about for quite some time. So from our standpoint, one of the highlights of the quarter was the progress we made with the gross margins, not only with our pay bill spreads, but also with our conversions..

Okay. On the perm side, you just talked about a little bit, but I guess can you talk a little bit more I guess if there is part of the business that at this point in the cycle I guess I might have thought there would be a little faster growth maybe.

It’s the perm side, is it the mix of the international business in there and as you described, the lack of investment or can you talk about more broadly what you are seeing and how that’s trending relative to what you might have expected at this point?.

Sure. Permanent placement has the largest non-US mix of any of our lines of business. So clearly the fact that we haven’t invested in head count, because it’s a lag from a macro standpoint impacts our global permanent placement growth rates as well. And even in the US you saw some deceleration there. Our recruiters had really good years in 2014.

They took more time off in early 2015. That’s part of it. You are seeing candidate shortage, you are seeing more counter offers being made to candidate’s existing employer, that slows down the placement process a little bit. But none of those things are a huge concern, but it’s principally non-US mix that we are only beginning now to invest more in.

And we are optimistic that perm will still participate nicely in the remainder of this cycle which we think is significant..

Okay, great. Thank you..

Your next question comes from the line of Sara Gubins with Bank of America. Please go ahead..

Thanks. Good afternoon.

Have you heard any anecdotal impact from the decline in oil prices? Are there particular regions or clients that are in the oil and gas related industries?.

Well, Sara, if you could see our faces you would see a smiling. We were just with a lot of our people last week and this was a topic. First of all, we don’t have huge exposure to oil and gas whether it would be Texas, whether it be Calgary, whether it would be Oklahoma City.

But if our Houston team who are sitting here, they will tell you that there is a petrochemical boom going on in Houston and in the East Houston particularly and that the ethylene market is on fire. So net, while we do have exposure to oil and gas, it isn’t a significant exposure.

Clearly the growth rates we are seeing from Texas generally are moderating that we are fairly diversified even in those markets and it’s not a huge concern..

Okay, great. And then separately, you were mentioning candidate shortage on the perm side. I am wondering if you are starting to have more difficulty in recruiting on the temp side as well given how low the unemployment rate is for college educated workers..

I would say, yes, we are finding it more difficult. It depends on the functional role, it depends on the line of business. It’s been tight for quite some time in technology, particularly for technology developers. There are certain roles in accounting finance that are also getting tighter financially and will stand above.

But we believe that we can manage through the candidate tightness as we see it. With technology we are exposed to more candidates than we ever have been in our history. And so hopefully we will benefit from that as the market is tightening..

Thank you..

Your next question comes from the line of Anjaneya Singh with Credit Suisse. Your line is open..

Hi, thanks for taking my questions. I think on productivity, you had originally anticipated it to slow a bit in Q1 on comps and some large projects that were winding down.

Would you help us understand what drove the productivity performance above your expectations in the quarter?.

I would say two things. I would say in the risk and compliance area, we got a couple of those projects extended that did better than we expected. We also started a few new projects in the FSI risk and compliance area. And further as I mentioned earlier, productivity Asia performed much better than we expected.

The Japanese economy has clearly improved and further we diversified our revenue sources nicely, principally more financial services in Japan which is also helping..

Okay, thank you. And then we continue to have some severe weather in parts of the country in Q1. Wondering if you can size up what impacts weather may have had in your Q1 results..

So we believe it negatively impacted our growth rates by about a half of 1% and that compares to a year ago where it negatively impacted our growth rates by a full percentage point. So the differential year-over-year is about half a percentage point..

Got it. Okay..

It came later this quarter than it did a year ago’s first quarter. It’s still I gave you the orders of magnitude of the impact..

Okay, I appreciate that. Thank you..

Your next question comes from the line of Luis Javier with JPMorgan. Your line is open..

Hi, it’s Andrew. I wanted to ask you Keith about IT flex.

It seems like this must be an area where some vendors are struggling especially it sort of puzzles me since everyone say it’s such a tight market, just give us a sense how are you doing on IT flex and is it sort of directionally the same as the lift that you’ve seen overall in your flex gross margins?.

Well, I would say generally our flex gross margins did very well in the quarter. Conversions did very well in the quarter. Not only the number of conversions, but the fee we get for our conversion has firmed and that is also true in IT if not more so than it is in the other business.

The more candidates are in demand, the more clients will pay to convert them full time. So the strength that we saw generally, we also saw in tech, we saw strength broadly both in conversions and in pay bill spreads..

Great.

Can I just throw just one more in? After flex margins of 37% in the first quarter, what’s assumed in the guide in the second quarter for flex gross margins?.

So I will answer that, but let me talk a little more generally about our guidance. On the top line, our guidance assumes that due to tougher comps the same day and reported growth rates will come down 2 or 3 percentage points.

Currency will reduce revenues in the $50 million range year-over-year and the $13 million to $15 million range sequentially, which would be drag of 4.5 to 5 percentage points. Temp gross margins, where our midpoint assumes flat sequential temp gross margins, which still gives you 50 basis points to 60 basis points lift on a year-over-year basis.

From a SG&A standpoint, the hiring we’ll do will be more normalized relative to the revenue growth we expect, which means we do expect to get some SG&A leverage as a percent of revenue. Our incremental operating income will still be nicely double digit. Our tax rates going to raise a bit.

Rather than being 39-ish percent, we think it’s going to be around 40% and that raise is going to cost us a $0.01 and we dialed into the guidance the loss of a $0.01 from a higher tax rate..

So helpful, thank you..

Your next question comes from the line of Paul Ginocchio with Deutsche Bank. Your line is open..

Great, thank you. You came in at the top end of your guidance in the fourth quarter and this quarter, I think even adding back to weather, you’d be a little bit below the midpoint.

Is that because of perm or is there something else? Then second, if you could just -- the April growth rates you talked about, are those similar to what you saw in March or were they little bit better? And then finally just on the tax rate you just mentioned, is that 40% going forward, is it just for the quarter? Thanks..

So, clearly with Protiviti, having a much stronger quarter than expected, incrementally that helped dramatically to getting us pass the midpoint. I’d say the single largest factor in why we were above midpoint was the strength in our temp gross margins for reasons that we talked about here already.

April growth rates versus March, I would say they’re not significantly different. The first quarter is always back loaded to March, but that was also true the March a year ago. So, I’m not sure there is a huge story in the April growth rates versus the March growth rates.

And the tax rate -- the tax rate is a little elusive kind of plus or minus one or two points, because it’s the mix of your US, non-US and it’s not only that but it’s within the non-US, which countries, which tax rates, which credits.

So, it moves around a bit on us, but our view is that it’s going to be a bit higher next quarter and I think we gave guidance earlier that the full year rate would be in the 39% range, but whether it’s 39% or 40%, that’s probably about as close as we can pay it..

Keith, I’m sorry, I think maybe I’m calculating it wrong. I think on the revenue side, I should have made more clear, I think you can came in slightly below on the midpoint. I’m just wondering why that was --..

Sure, sure, right, absolutely. So, we expected currency to be about $30 million year-over-year, about $10 million sequential and it came in $10 million more than that. So, the single biggest reason the revenues below the midpoint is currency impacts. At the bottom line, the currency only impacted us a $0.01 total.

So, relative expectation, there isn’t much difference at the EPS line due to currency but at the revenue line, the biggest single reason, we were below midpoint is currency. Other than that, term was a little light that we talked about earlier, but overall, we were pleased that the single largest reconciling item is currency..

Thank you very much..

Your next question comes from the line of Tobey Sommer with SunTrust..

Currency-adjusted bill rate growth continues to make a nice progress.

Do you still think that the old barometers of where that bill rate growth has hit in the past are relevant as we look out over the next couple of years?.

We do, we do. Clearly, we talked about mid-single digits is what you would typically see, mid-cycle for two, three years straight. We moved up from two to four over the last four quarters.

So, we’re certainly getting close to the sweet spot we would typically see in a fairly conducive macro environment and with those higher bill rates, inclusive in there is some margin expansion, which we’re already beginning to see that we’re very happy about..

Would that temp to perm conversions drift towards the higher end of the historical range typically in those -- in that two to three year period with the bill rates are growing at mid-single digits?.

So, we’ve long said the range is 3% to 5%. We talked earlier that we’re at 3.3%. So, we’re still near the bottom. What we talk about for some time now is that if we can just get to the midpoint, which would be 4%, right, there is 70 basis points of margin improvement versus where we are today.

So, in our minds, anything above 4% would be grabby, but even getting to that point, there is 70 basis points of margin improvement, which would put our temp margins at all-time highs..

Thank you for your help..

[Operator Instructions] Your next question comes through the line of George Tong with Piper Jaffray. Your line is open..

Hi, thanks. The technology vertical is performing particularly well on the temp side in a lot of the trends that you’re seeing in March and April.

Are there other verticals that are beginning to show a positive inflection in growth?.

So, we have revenue acceleration for multiple quarters in a row now. I would say management the resources is also particularly strong. They partnered well with Protiviti on some larger projects that have been quite successful. We’re optimistic about management resources.

It is more project-driven, it is a little lumpier than our other temp divisions, but I’m not sure talking inflection points captures where we are, given that our growth rates have accelerated for several quarters in a row that we feel good about and we feel good about the momentum that we have going into the second quarter..

I guess other specific verticals where you see an outsized acceleration then in growth that might put those verticals on par with technology growth?.

Well, Protiviti has outrun every division we’ve had, including technology for several quarters and is expected to for the foreseeable future as well.

Protiviti is doing very well across its line of business, be it internal audit, be it financial services risk and compliance, be it IT consulting, be it what we call enterprise solutions, where it teams with our staffing division and goes to market together.

So, I would say across our lines of business, it is true now and it has been true for the last couple of years quite frankly, Protiviti has been the strongest line of business that we’ve had..

Right.

And how much of this growth would you say is coming from market share gains and how would you describe the competitive environment for Protiviti?.

Well, it’s hard to be precise about that answer. Cleary, the risk and compliance market overall is growing. There is no question with the regulation of the financial services industry. There are many opportunities for everybody that serves that market. Protiviti is largest competitors of the big four accounting firms.

At a minimum, we’re holding our own, the last time I checked, they weren't growing at the rates we're growing but whether you slice and dice their revenues for precisely the same services that we're offering, I'm not sure that's even available but what's clear is we're certainly not losing any market share..

Great, thank you..

Your next question comes from the line of Gary Bisbee with RBC Capital. Your line is open..

Hi, good afternoon, I'll ask one on Protiviti as well.

Is there anymore color you can give on just the demand drivers, I know you've talked about all the major practice areas doing well, but what's driving just the massive acceleration you've had in the last two years, and is there any way to have a sense about like runway left in terms of these demand, are there any big pockets that you see that's potential for them to slow or do you feel like you're really into sweet spot and there is quite a bit more to go in terms of the strong growth? Thanks..

Well, the good news is, that the demand drivers are diverse, it's internal audit, you got the PCAOB leaning on the outside accounting firms that companies aren't doing enough to document their control environment, test of control environment that's trickled down to internal audit departments, which is Protiviti sweet spot.

Further in the risk and compliance area, you've got anti-money laundering which is a huge compliance issue for most banks and large financial institutions, you've got consent decrees. In the consumer lending area, we're doing a lot of portfolio, consumer lending portfolio analysis, as part of that practice.

In IT, you've got security, you've got privacy, you've got ERP control reviews. So all three of those areas have grown significantly in the last couple of years led by financial services, risk and compliance and quite frankly, we certainly don't see any near-term end to the regulation of financial institutions.

And further, there is Tier 2 financial institutions beyond the Tier 1s that we're working with currently that would further give you some runway that you don't have with the Tier 1s..

Okay, and then, how impactful has this concept of going to market Protiviti with staffing then and I guess, what's the sales pitch to a customer, is that the flexible labor component allows them to do this more cost efficiently or is it more about the skills that you're bringing to the table?.

Well, its sum of each, every client has a different sense of how much they want to manage a project versus how much they want to outsource the management of that project.

Some clients simply need supplemental staff, some clients need full outsourcing, and when Protiviti and staffing go to market together, that continuum, they can move the slider to any point in that continuum to match what the client needs and typically by blending in our staffing contractors as part of a team, sometime which is a significant component off of a team, the average labor cost of the package is typically lower than the average cost they would see from our competitors, which is usually the big four..

Okay, great and then one clean up one, do you happen to have the number of days you're expect in the back half of the year?.

Sure, just a second. In quarter three, we’re expecting 64.2 days, in quarter four, 62.3 days, which gives you 251.7 days for the year..

Thank you..

Your final question comes from the line of Randy Reece with Avondale Partners. Your line is open..

Good afternoon.

Have your views changed at all as to the timing of recovery of international business in any particular market just over the past three months?.

Have our views changed generally or by any particular market? I would say, not (technical difficulty) I think grants has been stronger of late than we had expected or it had been performing and that's not a huge part of our business but it's clearly for the quarter just ended, it had the best year-over-year growth rate of any of our non-US operations in part because the comparisons were a little easier.

But I would say, our views haven't changed dramatically, we certainly see broad-based improvement in Europe, our big operations there being Belgium, Germany, France, I just talked about.

So we're optimistic, as we talked earlier, we're going to start investing more in perm placement that will be focused in the UK and in Germany but we feel good about non-US operations..

And you're setting up some really difficult comparisons for Protiviti, I just, I was wondering if you could give my any help in trying to avoid making the mistake of growing that too fast, when we start comping over these numbers.

They’re huge numbers, and do you have any kind of conservatism take that I should be incorporating when forecasting beyond the next couple of quarters?.

Well, clearly as you anniversary very tough numbers, it gets harder to maintain growth rates. Further, part of the margin lift they've gotten has been to get lower utilization or chargeability levels up to standard sustainable chargeability levels.

Once you get at those sustainable levels, you're not going to have as much lift thereafter, because your utilization rates are about what they're going to continue at.

So I would caution you to go crazy from a margin improvement standpoint, particularly as you look at progress we've had the last couple of years, you can't layer on similar progress as we move forward.

That said, we've always talked about double-digit full-year operating margins in Protiviti, the first quarter is usually our most challenged profitability quarter for Protiviti and we were at 9.9%, so we were almost there in the most challenged profitability quarter of the year.

So we were extremely pleased with the quarter we had at Protiviti, they had their highest variable cost eliminate ever by using contractors from our staffing operations on their assignments. They had their most success ever with higher bill rates year-on-year, which were mid-single digit.

So the combination of the better rates, the combination of the more variable cost structure when seasonally, it's their slowest season of the year produced what were very good margins in what's typically their lowest margin quarter of the year.

That said, the last thing we want you to do is dial up your expectations that everything rises in a straight line, but the facts are, Protiviti is doing very well; the demand drivers that have driven it the last four quarters are still very much intact..

Thank you very much..

There are no further questions; I now turn the call back to Mr. Messmer for closing remarks..

Thanks to all of you, that was our last question; we appreciate your time and joining us on today's call, thank you..

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.

This concludes today's conference call, you may now disconnect..