Hello, and welcome to the Robert Half Fourth Quarter 2022 Conference Call. Today's conference call is being recorded. [Operator Instructions] 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..

Thank you. 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 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, 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 press release today.

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 its 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.

2022 was a very successful year across the entire Robert Half enterprise. We grew full-year revenues and earnings per share both by more than 12% and achieved new record levels for each. All of our major practice areas, contracts, permanent placements and Protiviti reached all-time highs over and above the very strong growth in the prior year.

We enter 2023 optimistic about our ability to navigate the uncertain global macroeconomic environment and the tight labor markets around the world. For the fourth quarter of 2022, company-wide revenues were $1.727 billion, down 2% from last year's fourth quarter on a reported basis, but up 1% on an as-adjusted basis.

Net income per share for the fourth quarter was $1.37 compared to $1.51 in the fourth quarter a year ago. Cash flow from operations during the quarter was $202 million. In December, 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 11.2% annually since its inception in 2004, the December 2022 dividend was 13.2% higher than in 2021. We also acquired approximately 800,000 Robert Half shares during the quarter for $61 million. We have 3.8 million shares available for repurchase under our board-approved stock repurchase plan.

Return on invested capital for the company was 39% in the fourth quarter. Now I'll turn the call over to our CFO, Mike Buckley..

talent solutions, 36% to 38%, Protiviti, 14% to 16%, overall, 30% to 32%. Segment income for talent solutions, 8% to 11%, Protiviti, 8% to 11%, overall, 8% to 11%. Tax rate, 27% to 28%; shares, $106.5 million to $107.5 million.

2023 capital expenditures and capitalized cloud computing costs, $100 million to $120 million, with $20 million to $25 million in the first quarter. 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. Global labor markets remain tight and the demand for talent remains high despite continued economic uncertainty. Clients continue to hire, albeit at an even more measured pace, which has the effect of lengthening the sales cycle.

Although recent metrics have come off their all-time highs, talent shortages persist in the United States, unemployment stands at 3.5%, a 50-year low, and remains even lower for those with a college degree where the rate is 1.9%. Job openings and quit rates remain elevated. Unemployment claims remain low.

Similar reports across the globe also point to labor market resilience. Protiviti continues to have a very strong pipeline across an increasingly diverse offering of solutions. Both the regulatory risk and compliance practice and the technology consulting practice show particular strength.

In 2022, Protiviti achieved record high revenues of nearly $2 billion, even while overcoming the wind down of very large financial services project and a shift in the trend of public sector engagements to projects more applicable to talent solutions.

Demand for Protiviti services remains robust and is only mildly impacted by current economic conditions. While there remains volatility in the macroeconomic environment, we are optimistic about our outlook for 2023. We've successfully navigated many economic cycles each time achieving higher peaks.

This was demonstrated by our ability to achieve the fastest recovery in our company's history following the COVID-19 downturn. We also continue to benefit from Protiviti's resiliency, which stems from its diversified solution offerings that are much less tied to the economic cycle.

Longer term, we are encouraged by the growth and margin prospects from our ongoing focus on services related to talent with higher skill levels. These include management resources, full-time engagement professionals, managed solutions, Robert Half Technology and Protiviti.

In addition, the structural shift to remote work, particularly for higher skills, creates new competitive advantage as it highlights our numerous strengths, including our global brand, office network, candidate database, and advanced AI-driven technologies.

Also, our very successful investments in innovation and technology, which continue to position us to meaningfully improve both the digital and recruiter experience for our clients and candidates and the internal productivity of our staff.

We remain committed to our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and subject matter expertise they need to constantly compete and grow.

I could not be more proud of all our global teams, including talent solutions, Protiviti and corporate services professionals who put so much energy and dedication into our results this year. Their efforts made possible a record number of awards and accolades in 2022.

Fourth quarter recognition included being named one of the best workplaces for parents and honored by Forbes as one of the world's top female-friendly companies. We are particularly proud of the recognition we continue to receive for our commitment to diversity, equity and inclusion. 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..

[Operator Instructions] Your first question comes from the line of Mark Marcon with Baird. Please go ahead..

Good afternoon, Keith and Mike. Wondering if you can talk a little bit about Protiviti. You're basically guiding to a reacceleration with regards to the revenue growth. You obviously mentioned that regulatory risk and compliance as well as technology continues to be a source of strength.

But I'm wondering if you can give a little bit of detail, a little bit of what are you seeing from a visibility perspective, to what extent is it being driven by any sort of reacceleration in terms of public sector or how you're assuming about that? And to what extent is R2 integrated contributing to the reacceleration? And it seems like R2 is fairly small with about 40 employees, but wondering if that's having an outsized effect or how we should just think about the reacceleration in Protiviti?.

Well, so first of all, the impact of the wind down of financial services project and public sector impact their growth rate by about 11 points. So you take the 4% growth that was reported, that becomes 15% on a core basis.

That 15% is due to, as you spoke about, the regulatory risk and compliance where they've got some regulatory consent order remediation projects that are quite good. On the technology side, you've got managed technology solutions, you've got data analytics, you've got security. All of those are good. The R2 integration, it's small.

It doesn't move the needle overall, but we're very happy to have those capabilities around digital transformation, customer experience, primarily based on the Adobe platform, which ironically, we're going to use internally to replatform our own websites in 2023.

If you look at the guide for the coming quarter, midpoints high-single digits, the drag from the big project line down and public sector becomes 5% or 6%. So you're still in that mid-teens double-digit growth rate for Q1. Protiviti's pipeline is very strong. It's very diversified. They feel great about where they are.

We feel great about Protiviti overall. From a profitability standpoint, as is always the case, quarter one seasonally is their lowest.

They have all their raises that are effective Jan 1, they front load their staff additions to some degree and in their internal audit and SOX business, it always seasonally slows while their clients focus on external audit focused on following their SEC documents, which, to some degree, crowds out SOX and internal audit.

So Protiviti, we're very bullish about the profitability you see is typical seasonal impacts, as I just described..

That's perfect. And then can you give us a little bit of help on the contract staffing just in terms of thinking about – you gave the overall guide, but just how we should think about it in terms of finance and accounting versus admin and customer support and technology.

And to what extent – what are we thinking with regards to just the temp contract gross margin just from a sequential perspective?.

So we did give the overall guide, which is hopefully the most conservative we've been in quite some time. From a practice group standpoint, we're seeing strength in finance and accounting, particularly at the senior level and above. Within that, our full-time engagement professionals remains incredibly strong, has held up incredibly well.

Administrative and customer support has been impacted by public sector falloff. It's been impacted by less open and real mix. It's also impacted to the extent clients get more cost-conscious, stretching their administrative staff seems to be one of the first places they go. So ACS would have a bigger negative impact in Q1 than F&A.

Tech looks more like F&A, again, because our tech clients are largely SMB, as is the case for F&A. Our tech nature of services skews largely to infrastructure and operations rather than software and applications, and they tend to be a little more impacted than is the case with software and applications..

And then the sequential gross margin?.

Sequential gross margin, the fourth quarter, we got a lift as we trued up estimates to actual for workers' comp and for state and federal employment. We got some credits. Those credits don't repeat. And so frankly, most of the sequential difference Q4 to Q1 is the absence of those true-up credits. Pay bill spreads continue solid.

Conversions were a little lighter in Q4 consistent with perm and that same kind of level is what's embedded in the Q1 guide..

Perfect. Thanks very much Keith..

Your next question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead..

Hi, Keith. I know you guide for talent solutions, which is your contract business and our perm business together. When thinking about the midpoint for the first quarter margins for talent solutions of 9.5%.

Could you just give us a sense of how that might break down between perm and temp? I know you just gave us a little sense of why the contract gross margin will be down.

It just still feels like a kind of a sequential conservatism when you're trying to model – when I'm trying to model the contract operating margin in the first quarter even past the gross margin comment that you just made..

Well, contract versus perm, we don't split out our guidance. I think it would be safe to assume based on the Q4 trends, the early post-quarter trends that our perm assumption is lower than our contract assumption for the first quarter.

From a contract operating margin standpoint, since our stance toward headcount adjusting has always been never to anticipate, but pretty much to just coincident with what we see at the topline, there's always going to be a one or two-quarter lag between the actions we take on our cost, particularly headcount and how they show up in the P&L.

And so you'll see a little bit of negative leverage in contract operating margins in Q1 for that reason, which adjusts, autocorrects, shows up, if you will, in Qs two and three..

And then lastly, when you say you're optimistic about 2023 and you use that where we enter 2023 optimistically, do you mean like Robert Half is ready for whatever scenario the economy brings? Or are you saying you're optimistic that the economy will hold up?.

It's more of the former. We've been through many downturns of different intensities and durations. We've emerged from every single one of them to make new highs. We're the most nimble we've ever been with our cost structure. We manage our headcounts on an individual basis relative to how they stand, relative to a standard given their tenure.

And so we just feel really good about where we are with our cost structure, where we are with the capability to take advantage of what business is there. We have some businesses growing quite nicely, quite double-digit. We talked about Protiviti before, but in talent solutions, management resources, higher-level F&A, still growing nicely double-digit.

Full-time engagement professionals growing at really high double-digit levels. And so we've been particularly pleased with the way that has held up, and we'll add to staff there. So our optimism is whatever hand we are dealt, we'll deal with it. And we believe we'll emerge on the other side, whatever the other side is higher than ever..

Excellent. Well said. Thank you so much Keith..

Ms. Balsky, your line is open, please go ahead..

Hi. Thank you. I appreciate you taking my question. You talked about being nimble with your cost structure and you gave a little bit of color around headcount. I would love to hear how you're thinking about the investments you're making in your business, and you've been making your business and managing those costs.

And then also with regards to headcount, I think in the past, you typically have adjusted SG&A to be kind of in line with sales, although with a lag. Is that how you're thinking about things currently in this environment? Thanks..

We're not thinking any differently than we traditionally have thought. As to headcounts, we adjust to topline, as we just talked about, there's a lag of a quarter or two, but trading that against anticipating downturns that may not occur, will take that lag of a quarter or two as it relates to technology, AI innovation.

The thought is our spending for 2023 will be flattish with what we spent in 2022. We're very pleased with the returns we've gotten, particularly in AI. They've transformed how we identify and select candidates. We're turning our attention to using AI to identify the warmest leads for our field professionals on the sales side.

It's early days, but we're optimistic. I talked earlier about we've got a new website coming. We're replatforming that. We're very focused on improving the digital experience of our clients and candidates. That new website will come sometime second half of the year, probably the latter part of that.

So we're continuing our innovation technology spending pretty much at a level flat with 2022, which we think is strategic and we think is appropriate. But other than that, our cost structure is the most nimble it's ever been.

Our highest cost by leaps and bounds is our branch payroll cost, and as I spoke to earlier, we have the tools to manage that individually the best we've had in our history..

And one quick question on the January trends. I think in the July quarter, you had noted that because of the July 4th holiday, there can sometimes be some noise in those three-week trends. I'm curious just given that January, you're coming off the holidays, if there's any seasonality or noise that may be in those numbers? Thanks..

Well, holiday impacts are always hard to predict. Generally speaking, I'd say for the Christmas, New Year holiday we had more clients take time off. We had more internal staff take time off, which had some impact. The view was they came back a little later than normal, but that's anecdotal. It's hard to get a super precise read on holiday impacts.

We've always talked about in perm placement, which was the weakest in January as we reported. It's also the least predictive if you take the early part of a quarter for perm, relative to the full quarter, the early part is the least predictive of the fall.

And so to some extent, we always discount the post-quarter early following quarter results of perm. That said, would I'd rather be up 20% than down 20%? Sure, I would. But by the same token, we don't get overly excited about post-quarter perm..

Thank you. Appreciate it..

We'll take our next question from the line of Jeff Silber with BMO Capital Markets. Please go ahead, Jeff..

I'm going to try again.

Can you hear me now?.

We can’t..

I wanted to focus on contract Talent Solutions bill rates. They were very strong in the quarter.

Do you expect them to stay at this level? I'm just curious what's incorporated in your outlook for the first quarter and what should we expect for the rest of the year?.

We would expect them to subside somewhat. And so while that might have a topline impact, as we've talked before, they will have not much gross margin impact because with the higher pay rates, we pretty much pass them through intact and haven't expanded gross margins.

So if that unwinds to some degree, which I think would be reasonable, given economic expectations that rather than be at 7%, 8%, 9%, it would return to something more normal, call it, 3%, 4%, 5%. It's going to more be a topline phenomenon than a margin phenomenon..

Okay. That's helpful. And then on conversion fees, you gave us a little bit of color what we should incorporate in terms of 1Q.

Can you just remind us what the historical range of conversion fees have been for your company in up cycles and down cycles? And any reason to think things will be different this time?.

Well, depending on what time frame you use, I can remember saying many times the typical range is 3% to 5% of revenue, but that 5% is long ago, if you look at the past 10 years, and I'm not looking at anything specifically, it tops out probably more in the low 4s than getting to 5. And so there's downside 100, 150 basis points versus where we are.

It tracks to some degree with permanent placement, which as a percent of the total, also gets smaller. But again, very normal and comes back strong. In fact, if anything, perm in conversions come back stronger when things improve, that is the case on the contract side..

All right. That’s helpful. Thanks so much..

And your next question comes from the line of Manav Patnaik with Barclays. Please go ahead..

This is Ronan Kennedy on for Manav. Thank you for taking my question. You shed some light on this to a certain extent with regards to the comments on the labor markets remaining tight, demand for talent high, clients continuing to hire at slower pace.

Just wondering, with all the news and the data we see on the labor markets, I think even recently, there were headlines on the contributions from SMB and four out of five open rolls are for SMB, although December had the highest levels of termination at temp since early 2021.

Can you just kind of reconcile what you saw throughout the quarter in December in the first two weeks in your lead comments and results with the broader headlines and narratives within the news media on the labor market?.

Well. First of all, I think this is the most anticipated downturn ever. And the cumulative impact of all that negative news clearly has an impact on confidence. And I believe the same story you're referencing, toward the end, also talked about the NFIB small businesses. Their optimism index was down 12 straight months lower than their 48-year average.

And so while the hard data seems to be hanging in there pretty well, the softer data, which is about expectations be it NFIB, be it conference board's leading indicators, being the NABE, which also had some negative expectation data. I think all of those would point to some continued softness.

But there's no question that there's tension between the very resilient labor market data, which clearly is indicative of supply and the forward-looking expectations data of the groups I've talked about, which we see as more consistent with our clients. Having said that, orders have not dried up. We want to make that clear.

It's just taking longer to get them closed. Our clients are less urgent. They're taking more steps. They want to see more candidates. They want to involve more people in an interview process. It simply lengthens the sales cycle. We still have orders. Orders have not dried up..

That helps. And maybe just shift gears to margins and the dynamics of margin drivers.

Could you talk about the importance of mix and conversions versus, I think, what most people less familiar with Robert Half would think is place an emphasis on wage rate and inflation and bill pay spreads?.

Well, as we talked earlier from a bill rate increase, pay bill spread increase, the point is, for the most part, at these elevated levels, they've been pass-throughs. So we've been 7%, 8%, 9% higher wage rates, bill rates recently, which have had very little margin impact.

Conversions on the other hand, have almost a dollar-for-dollar percent-per-percent impact. And so conversions so far this cycle at a high were 4%, 4.1%. I think this quarter, we're back down to 3.7%. And so clearly, they have a margin impact, but we talked earlier on the call about the traditional range.

And while they do show volatility on the downside, as I mentioned, they show volatility on the upside as well.

And you'll see if you study prior up cycles, perm and conversions recover the most quickly as clients ramp up their staff, particularly if they're coming from tight labor markets, they want to lock up their good staff early in an up cycle, which benefits perm, which benefits conversions..

Got it. Thank you. Appreciate it..

Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead..

Hi. Good afternoon. Thanks for the question. I wanted to know if you have seen any maybe signs of wage inflation being a little bit more subdued or even the other side companies pushing back on what has been a really tight market and a tight wage inflationary environment.

So any improvement there?.

Well, we would say we're definitely seeing clients pushing back more than they were in part because they think they can, which is understandable. As I talked earlier as well, we would expect some dialing back of the wage rate pressures we're seeing as well as the bill rates that go along with that.

So as things soften a bit, we would expect pay rates and bill rates to dial back a bit. But as I talked about, we don't think that have much of a margin impact for reasons that I talked..

Right. No, absolutely. And then just continuing, as we think about – as you look at across talent solutions for the quarter, finance and accounting, administrative and customer support and tech.

Were there any of those that surprised you in terms of the performance?.

Well, the biggest positive surprises were we had strong double-digit growth in management resources, and we had really strong double-digit growth in full-time engagement professionals. And so that was good. On the negative side, I'd say ACS was a little more impacted.

I think clients as they get more cost conscious, tend to go first to their administrative staff in dealing with that, and we saw that in our ACS numbers..

Thank you..

Yes. Tech is interesting. Tech is interesting. On one hand, you've got big tech that over-hired that with great fanfare is announcing all their layoffs.

And while we're not directly impacted much by big tech, I'd say there's a psychological and sentiment impact to all tech and that there's a perception that there are a lot of tech people on the market that the tech market has loosened a lot. The reality is a lot of those layoffs aren't even tech people.

They're recruiters, HR, back-office people at tech companies. Further those that are getting laid off, typically are finding new positions fairly quickly. And so we would say that the tech market, in fact, is stronger than the perception that's being led by big tech, which has very specific, in many cases, company-specific circumstances..

Absolutely. And then, sorry, last one for me. And maybe at this more if you can provide a little bit more of a history lesson just from prior down cycles.

Do you feel like SMBs were in prior cycles slower to kind of respond or slower to see the impact in a weaker economic environment? Or how would you think that kind of played out throughout a cycle? And any reason why this cycle might be different from those in the past on SMBs? Thanks..

History would say SMBs are more nimble, more cost focused and would respond more quickly, not more slowly to macro uncertainty. By the same token, they would recover more quickly than larger enterprise organizations.

That's been the consistent experience we've seen at least across the last three cycles, and we have the reason to believe it wouldn't be the case again..

Got it. Thanks so much..

Your next question comes from the line of George Tong with Goldman Sachs. Please go ahead..

Hi. Thanks, good afternoon. Your goal has been to replace COVID-related public sector Protiviti spend with other forms of public sector spend.

How do you expect federal budget constraints to potentially impact public sector spending on Protiviti? And what's your embedded assumption around public sector spend in your first quarter guidance for Protiviti?.

Well, so first of all, just to kind of step back for public sector for a moment, going into 2022, there was all this concern that there was going to be this cliff event due to the absence of unemployment claims processing that would have to be replaced. As 2022 was ultimately reported, we were down 3% adjusted for currency 2021 for 2022.

And so from where I come from, we were essentially flat in 2022 versus 2021, the feared cliff event didn't materialize, and we were successful at replacing that work. As we move forward into 2023, we're optimistic that on an enterprise basis, you can't just look at Protiviti. You can't just look at talent solutions.

You have to put the two together that on an enterprise basis that we're on solid footing. We've got good foundational client relationships that we can leverage, and we feel good about that given its overall size relative to Protiviti and/or to talent solutions.

We don't plan to make a lot of specific disclosures about public sector going forward because, quite frankly, we have many sectors, many practice groups, many industry groups that are way larger than public sector.

And given that this feared cliff event is behind us, we didn't feel the need to do so, but we're very pleased at how we manage through and replaced all that unemployment claims processing work. We're effectively flat and we'll build from there..

Got it. You mentioned that lower 1Q margins reflects the seasonal impact from compensation and headcount. Your guide for 1Q Protiviti SG&A as a percentage of revenue of 14% to 16% looks like it comes above the prior year's 1Q SG&A as a percentage of revenue of 13%.

Can you unpack that a little bit? What's driving that since it seems like it's a little bit more than seasonality?.

Well, if you look at the progression over 2022 of Protiviti's SG&A percentage, you will see that it grew quarter by quarter by quarter to get back to more normal levels because 2021, early 2022, they didn't have as much training. They didn't have as much practice development. They didn't have as much marketing.

And so those have returned to a more normal level. So from a Q1 only perspective, you're comparing Q1 2023 with normal levels of spending to Q1 2022, that hadn't yet built back to normal levels of spending.

But the featured fight, the main event for understanding Protiviti's Q1 segment margins, operating margins is what happens at the gross margin line, and that's where they're impacted by all the raises that come in all at once on Jan 1, the front ending of some of their hires and from the seasonal softness in their internal audit serving actually that happens every year that they recovered from nicely.

Protiviti had 14% operating margins in Q4. We were very, very pleased with that, though stepped down in Q1, which is very consistent with how they've stepped down in prior years, and that step down is mostly about gross margin, not necessarily about SG&A..

Got it. Very helpful. Thank you..

Your next question comes from the line of Kevin McVeigh with Credit Suisse. Please go ahead..

Great. Thanks so much. Just to unpack the Q1 guidance a little bit. Again, I know there's some seasonality there, but it looks like the range is similar to Q4. And if you take the revenue, looks like the midpoint of the EPS about $0.21 less.

Is that the typical seasonality? Or is there anything else in there that you'd kind of call out one way or another, maybe utilization being a little bit lower. I know there's always the typical seasonal step down.

But is there anything else? Because again, the revenue range looks pretty close kind of Q4 to Q1?.

I'd say you've got typical Protiviti seasonality and maybe it's a little more this year than last because the raises were a little higher this year than last. That would be Point one. Point two, because our perm assumption is more conservative than contract, you've got a smaller perm mix, which has higher margins.

Point three, there's some negative SG&A leverage because of this one to two quarter lag that I talked about earlier as we adjust our headcount to current levels of revenue. You put on top of that, the tax rate is elevated. It was elevated in Q4. It will be elevated again in Q1, in part has caused the stock prices down.

But if you compare Q1 to Q1 a year ago, the tax rate is up pretty significantly. So it's essentially about Protiviti seasonality, less perm mix because of conservative guidance, some negative SG&A leverage because there's a one or two-quarter lag between topline and how we adjust heads. But otherwise, pretty much as expected..

Got it.

And then Keith, you've been around a couple of cycles, I think as a lot of us have any – no two are the same, but if you were to parallel any – I mean it's just so tricky with COVID out and the stimulus – as you think about the outlook, like in your preparing and again, no two are the same, is there any time in history you draw similar parallels to just based on what you're seeing today?.

Well, they're all so different, and there's never been as strong an underlying labor market. We're right through the softness like there's been this time. So one would like to think that that would provide some buffer, make this one milder.

As I said earlier, this is the most anticipated downturn ever and the debate continues about soft landing, hard landing, recession, no recession. So I can't really say it feels like the financial crisis or it feels like the dot-com. It's just too different. Clearly, COVID-19, it's way different than that.

But what is the same, and I'll say it again, in every one of those cycles, no matter what their duration, no matter what their intensity, we came back and made new highs. And we're very confident we will come back and make new highs.

We have our most experienced people absolutely engaged and in place to help us participate in that upside when it comes. Our cost structure is as nimble as it's ever been. So we feel good about what our cost structure looks like, what our margins will look like until that happens.

But the point is when it gets better, we will be there, and we've proven that many times..

That's helpful. And then did you – and if you can [indiscernible]. Did you say what the impact of the R2 acquisition was in terms of the guidance on the first quarter – is the revenue contribution....

It’s very small. I think they had a total of 70, 75 people. It's very small. But important, but important and gives us a capability we didn't have, and that's an important capability. So we love as part of the family..

Got it. Thank you..

Your next question comes from the line of Kartik Mehta with Northcoast Research. Please go ahead..

Mike and Keith, I wanted to ask you a little bit more about permanent placement. Mike, you had indicated that the first part of a quarter, especially first part of a month is difficult to gauge.

And I'm wondering if you look at your clients and the number of job openings they have compared to maybe what they had before, if that's a way to kind of look at it and maybe that's why the conservatism on your part on the conversion.

And just on the permanent placement, just trying to figure out maybe what the reality is compared to maybe what the first three weeks of January might have shown?.

Well, you can't really look to the number of openings either because it takes so much longer to close an opening today than it did a year ago. And so if your client very urgently is filling a need, the time from order to fill is going to be pretty close.

If in fact, they don't sense that urgency, they've got all kinds of reasons how they can slow play you, slow walk you, however you want to call it, it just takes longer. And so there's no magic metric that we can say, well, we understand the revenue say this, but in fact, the order say this, the order flow isn't bad.

But it's the time it takes to close an order that's the issue, not the presence or absence of an order..

Fair enough. And then just one last one. Just on Protiviti.

In terms of competition, are you seeing anything change? Or would you say the environment is about the same?.

Yes, I'd say the environment is about the same. I'd say that in that environment, we're getting a larger and larger share because we have something their competitors don't, and that's under one roof. We have talent solutions and Protiviti. They have access to the operational resources at scale that none of their competitors have.

We're winning more and more every day. And further, as they compete with their traditional big four competitors, I believe even their clients would tell you that Protiviti's resources are more specialized as to industry.

They're more specialized as to their capabilities because Protiviti doesn't have near as broad a solution offering as those other firms do where many times they're leveraging the staff across those solution offerings in a way to keep their chargeability up that Protiviti doesn't have to.

So a, Protiviti is more specialized, b, Protiviti has access to talent solutions, both of which give Protiviti competitive advantage and they're increasing market share and they're doing great..

Well, thank you both. I really appreciate it..

And your next question comes from the line of Mark Marcon with Baird. Please go ahead..

I recognize we're out of time, but I wanted to ask this in a public forum. Just are you seeing any sort of differences from a regional perspective just in terms of the trends, whether it's Northeast California versus, say, Texas, Florida, or industry differences that are illuminating in any way, shape or form.

And then if you want to discuss briefly just the potential impact of AI in terms of increasing the efficiency of your operations from a longer-term perspective?.

I guess the only regional comment I would make is that the coasts are a little softer than the middle of the country. I would also point out that Germany and the U.K. had very good quarters. They have much better outlook for this quarter than we would have expected.

So our international results are, frankly, a little better than our United States results in Germany, particularly in U.K. as well impact that. As to AI, we've talked before to totally transform how we identify talent. We have 30 million people in our proprietary candidate database.

In real time, we can get a short list of the most matching candidates, of candidates that have a proven track record with us, of candidates that are active in the job market. We, in real time, can access through that 30 million number of people in that candidate database, which is a huge competitive advantage for us.

It's making our people more productive. It's allowing our people to earn more money. It's – internally, we call it ART, AI recommended talent, but ART is now a household word in Robert Half. A year ago, that would not be the case. We would like to do the same thing on the client side, on the lead side, as I talked about earlier.

So we would like to have an ARC as well as an ART, receiving AI recommended clients. And so that's where we're focused at the moment. I'm cautiously optimistic we'll have an impact there. But we couldn't be more pleased with what AI has done for our organization..

Perfect. Thank you..

Okay. So I think we're a little bit over. So that will be our last question. Thanks, everybody, for joining..

This concludes today's teleconference. If you've missed any part of the call, it will be archived in audio format in the Investor Center of Robert Half's website at roberthalf.com. You can also log in to the conference call replay. Details are contained in the company's press release issued earlier today. You may now disconnect..