Robert Half International Management Discusses Q2 2012 Results - Earnings Call Transcript

Robert Half International (RHI)

Q2 2012 Earnings Call

July 24, 2012 5:00 pm ET

Executives

Harold Max Messmer - Chairman, Chief Executive Officer and Member of Executive Committee

M. Keith Waddell - Vice Chairman, President and Chief Financial Officer

Analysts

Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Kelly A. Flynn - Crédit Suisse AG, Research Division

Jeffrey M. Silber - BMO Capital Markets U.S.

Paul Ginocchio - Deutsche Bank AG, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Thomas Allen - Morgan Stanley, Research Division

James Samford - Citigroup Inc, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Kevin D. McVeigh - Macquarie Research

James J. Janesky - Avondale Partners, LLC, Research Division

Jennifer Huang - UBS Investment Bank, Research Division

Presentation

Operator

Hello, and welcome to the Robert Half International Second Quarter 2012 Conference Call. Our host for today's call are Mr. Max Messmer, Chairman and CEO of Robert Half International; and Mr. Keith Waddell, Vice Chairman, President and Chief Financial Officer. Mr. Messmer, you may begin.

Harold Max Messmer

Hello, everyone, and thank you for joining us. Before we begin, we would like to remind you that comments made 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 but would remind you that they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. We've described some of these risks and uncertainties 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 the statements made on this call.

Now let's discuss the second quarter. Global revenues for the second quarter were $1.03 billion, an increase of 10% from the second quarter of 2011. Income per share was $0.32, up 28% from the second quarter of last year. Net income and income per share this quarter were reduced by $8.1 million, or $0.06 per share, related to a nonrecurring litigation settlement and the resolution of certain tax matters disclosed in our July 5, 2012, 8-K filing.

Cash flow from operations during the second quarter was $92 million. Capital expenditures were $14 million. We paid our stockholders a cash dividend of $0.15 per share at a cost of $21 million. We also repurchased 1.5 million RHI shares for a total of $43 million. There are approximately 3.6 million shares still available under our board-approved stock repurchase plan.

Demand for our specialized staffing and consulting services remains strong during the quarter, particularly in our U.S. staffing operations, which grew 17% versus the prior year. Gross margins continued to expand with an increasing mix of permanent placement and temp-to-hire conversion revenues.

Now I'll turn the call over to Keith Waddell for a more detailed review of our second quarter financial results.

M. Keith Waddell

Thanks, Max. As you noted, second quarter revenues for the company were $1.03 billion, an increase of 10% over last year, or an increase of 1% sequentially. On a same-day constant currency basis, global staffing revenues increased 13% year-over-year, with the U.S. growing 17% and international locations growing 3% on this basis.

U.S. staffing revenues were $672 million in the second quarter of this year, while international staffing revenues for the quarter were $246 million. We have 353 staffing locations worldwide, including 103 locations in 19 countries outside the U.S.

We calculated 63.1 billing days in the second quarter compared to 63.3 days in last year's second quarter, and compared to 63.8 days in the first quarter of 2012. The lower number of billing days had the effect of reducing year-over-year staffing growth rates by 0.4% in the second quarter. The current quarter has 63.2 billing days.

Currency exchange rates reduced second quarter 2012 sequential revenues by $5 million and second quarter year-over-year revenues by $22 million. This had the effect of reducing year-over-year staffing growth rates by 2.4% in the second quarter.

Last quarter, we added a new supplemental schedule to the Investors' Center of our website at rhi.com. We have included a supplemental schedule again this quarter, both on our website and in our earnings press release. The schedule shows year-over-year revenue growth rates for each of our staffing lines of business on both a reported and also a same-day constant currency basis. It further splits the data between the U.S. and non-U.S. operations. Their information is presented for each of the 5 previous quarters. We've provided this information because we believe it better reflects our actual growth rates and aids in the evaluation of revenue trends over time. This information is considered to be a non-GAAP financial matter -- measure. Additional information, including a reconciliation of these growth rates to reported growth rates also is available on our website.

Second quarter revenues for Protiviti were $110 million, including $83 million in the United States and $27 million outside the U.S. Year-over-year growth rates were 5% globally, with U.S. revenue up 10% and non-U.S. revenue down 8%. Protiviti and its independently owned member firms serve clients through a network of 71 locations in 22 countries.

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