Robert Half(RHI) - 2024 Q2 - Quarterly Results

Financial Highlights Summary of Q2 2024 Results Robert Half reported Q2 and H1 2024 revenue and net income declines, with Protiviti showing strong growth despite macroeconomic caution Q2 & H1 2024 Financial Performance | Period | Metric | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Q2 (Three Months) | Revenues | $1.473 billion | $1.639 billion | | | Net Income | $68 million | $106 million | | | Diluted EPS | $0.66 | $1.00 | | H1 (Six Months) | Revenues | $2.948 billion | $3.356 billion | | | Net Income | $132 million | $228 million | | | Diluted EPS | $1.27 | $2.14 | - CEO M. Keith Waddell noted that client and candidate caution continues to impact hiring and new project starts due to persistent macroeconomic and interest rate uncertainty[22] - The Protiviti segment delivered strong results, with U.S. revenues and segment income growing on both a sequential and year-over-year basis[22] - The company received several accolades, including being ranked No. 1 on Forbes' list of America's Best Professional Recruiting Firms and being named one of Fortune's Best Workplaces for Millennials[22] Financial Statements Consolidated Statements of Operations Consolidated operations show year-over-year decreases in service revenues, gross margin, and net income for Q2 and H1 2024 Consolidated Statements of Operations (in thousands, except per share amounts) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Service revenues | $1,472,524 | $1,639,478 | $2,948,461 | $3,355,813 | | Gross margin | $576,679 | $660,169 | $1,139,476 | $1,349,901 | | Income before income taxes | $96,462 | $151,211 | $187,149 | $320,109 | | Net income | $68,156 | $106,292 | $131,857 | $228,297 | | Diluted net income per share | $0.66 | $1.00 | $1.27 | $2.14 | Supplemental Financial Information Supplemental data shows year-over-year revenue declines across segments, except Protiviti, with decreases in cash and stockholders' equity Service Revenues by Segment (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total contract talent solutions | $854,897 | $999,383 | | Permanent placement talent solutions | $131,063 | $149,254 | | Protiviti | $486,564 | $490,841 | | Total service revenues | $1,472,524 | $1,639,478 | Business Segment Income (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Contract talent solutions | $38,146 | $81,316 | | Permanent placement talent solutions | $16,148 | $21,730 | | Protiviti | $37,286 | $43,566 | Selected Balance Sheet Information (in thousands) | Account | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $547,370 | $722,763 | | Total assets | $2,937,749 | $3,067,641 | | Total stockholders' equity | $1,480,155 | $1,625,271 | Non-GAAP Financial Measures Explanation of Non-GAAP Measures The company uses non-GAAP measures like adjusted gross margin, SG&A, and revenue growth to provide a clearer view of operational trends - The company supplements GAAP results with non-GAAP measures to help readers understand financial performance[12] - Key non-GAAP measures include: adjusted gross margin, adjusted selling, general and administrative (SG&A) expenses, combined segment income, and as-adjusted revenue growth rates[12] - As-adjusted revenue growth rates remove the impacts of billing days and foreign currency exchange rates to better show underlying operational performance[12] Adjusted Gross Margin Reconciliation Q2 2024 total adjusted gross margin was 39.4%, down from 40.6% in Q2 2023, with Protiviti's adjusted margin at 23.2% Adjusted Gross Margin Reconciliation - Q2 2024 vs Q2 2023 (As a % of Revenue) | Segment | As Reported Q2 2024 | As Adjusted Q2 2024 | As Reported Q2 2023 | As Adjusted Q2 2023 | | :--- | :--- | :--- | :--- | :--- | | Contract talent solutions | 39.3% | 39.3% | 39.9% | 39.9% | | Permanent placement talent solutions | 99.8% | 99.8% | 99.8% | 99.8% | | Protiviti | 22.5% | 23.2% | 22.9% | 24.0% | | Total | 39.2% | 39.4% | 40.3% | 40.6% | Adjusted SG&A Expenses Reconciliation Q2 2024 adjusted SG&A expenses were $488.3 million (33.2% of revenue), increasing as a percentage of revenue year-over-year Adjusted SG&A Reconciliation - Q2 2024 vs Q2 2023 (in thousands) | | As Reported Q2 2024 | As Adjusted Q2 2024 | As Reported Q2 2023 | As Adjusted Q2 2023 | | :--- | :--- | :--- | :--- | :--- | | Total talent solutions | $425,171 | $412,668 | $467,588 | $444,565 | | Protiviti | $75,661 | $75,661 | $74,316 | $74,316 | | Total | $500,832 | $488,329 | $541,904 | $518,881 | Combined Segment Income Reconciliation Q2 2024 combined segment income was $91.6 million (6.2% of revenue), a significant decrease from $146.6 million in Q2 2023 Combined Segment Income Reconciliation (in thousands) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Income before income taxes | $96,462 | $151,211 | | Interest income, net | ($5,186) | ($5,320) | | Amortization of intangible assets | $304 | $721 | | Combined segment income | $91,580 | $146,612 | Revenue Growth Rate Reconciliation Q2 2024 total revenue declined 10.1% adjusted year-over-year, with significant declines in talent solutions and near-flat Protiviti performance Q2 2024 Year-Over-Year Revenue Growth (%) | Segment | As Reported | As Adjusted | | :--- | :--- | :--- | | Total talent solutions | -14.2% | -14.0% | | Protiviti | -0.9% | -0.9% | | Total | -10.2% | -10.1% | Global Revenue Growth Globally, all talent solutions sub-segments experienced double-digit adjusted revenue declines in Q2 2024, while Protiviti's decline was minimal Global Year-Over-Year Revenue Growth (%) - Q2 2024 | Segment | As Reported | As Adjusted | | :--- | :--- | :--- | | Finance and accounting | -13.6% | -13.5% | | Administrative and customer support | -9.8% | -9.8% | | Technology | -13.1% | -13.1% | | Total contract talent solutions | -14.5% | -14.4% | | Permanent placement talent solutions | -12.2% | -12.0% | | Protiviti | -0.9% | -0.9% | U.S. Revenue Growth In the U.S., talent solutions saw a 15.3% adjusted revenue drop in Q2 2024, while U.S. Protiviti showed positive adjusted growth of 3.1% U.S. Year-Over-Year Revenue Growth (%) - Q2 2024 | Segment | As Reported | As Adjusted | | :--- | :--- | :--- | | Total talent solutions | -15.2% | -15.3% | | Protiviti | 3.3% | 3.1% | | Total U.S. | -9.6% | -9.7% | International Revenue Growth International operations faced significant headwinds in Q2 2024, with both talent solutions and Protiviti segments posting double-digit adjusted revenue declines International Year-Over-Year Revenue Growth (%) - Q2 2024 | Segment | As Reported | As Adjusted | | :--- | :--- | :--- | | Total talent solutions | -10.7% | -10.0% | | Protiviti | -16.2% | -15.9% | | Total International | -12.2% | -11.6% | Risk Factors Forward-Looking Statements and Risks The report contains forward-looking statements subject to risks including global economic conditions, AI adoption, competition, and cybersecurity breaches - The company's performance is subject to various risks and uncertainties that could cause actual results to differ materially from expectations[3][7] - Key risks include: - The global financial and economic situation and unemployment levels - The development and adoption of Artificial Intelligence (AI) - Entry of new competitors or expansion by existing ones - Ability to attract and retain clients and candidates - Reliance on short-term contracts - Cybersecurity breaches[3] - For the Protiviti segment, specific risks include retaining employees, attracting clients, and ensuring ongoing demand for consulting and advisory services[3]