羅致恆富 (RHI) 2012 Q2 法說會逐字稿

Hello, and welcome to the Robert Half International second-quarter 2012 conference call. Our hosts 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.

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 have 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 remained strong during the quarter, particularly in our US 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 will turn the call over to Keith Waddell for a more detailed review of our second-quarter financial results.

Thanks, Max.

As you noted, second-quarter revenues for the Company were $1.03 billion, an increase of 10% over last year and an increase of 1% sequentially. On a same-day constant currency basis, global staffing revenues increased 13% year-over-year, with the US growing 17% and international locations growing 3% on this basis. US 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, and including 103 locations in 19 countries outside the US.

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 US and non-US operations. The information is presented for each of the five previous quarters. We 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 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 US. Year-over-year growth rates were 5% globally, with US revenue up 10% and non-US revenue down 8%. Protiviti and its independently owned member firms serve clients through a network of 71 locations in 22 countries.

Now let's look at gross margin. Second-quarter gross margin in our temporary and consulting staffing operations was 35.8% of applicable revenues. This was an 80 basis point increase over the second quarter of last year, and a 20 basis point increase from the first quarter of 2012. The quarter-to-quarter increase relates primarily to higher temp-to-hire conversions, while the year-over-year increase relates primarily to higher pay bill spreads.

The most recent semi-annual actuarial review of our workers compensation reserves resulted in a second-quarter credit of $400,000, compared to $1.3 million a year ago. Perm placement revenue was 9.7% of staffing revenue for the quarter. Together with the higher temporary and consulting gross margins previously discussed, this resulted in an 80 basis point increase in overall staffing gross margin, compared to last year's second quarter. Protiviti's second-quarter gross margin was $29 million, or 26.4% of Protiviti revenue, compared to $28 million, or 26.9% of revenue a year ago.

Turning to selling, general, and administrative cost, in the second quarter our SG&A cost and staffing were 34.4% of staffing revenues, including the nonrecurring charge of 2.1% of revenues related to the previously mentioned litigation settlement. Absent this charge, SG&A would have improved by 170 basis points from the prior year. Second-quarter SG&A costs for Protiviti were 24.6% of revenue. This was 140 basis point improvement from the prior year.

Second-quarter operating income from our staffing divisions was $70 million, or 7.6% of staffing revenues. This was reduced by 2.1% of revenues for the aforementioned litigation charge. The temporary and consulting divisions reported $52 million in operating income for the quarter, or 6.2% of applicable revenues. Second-quarter operating income for our permanent placement division was $18 million, or 20.6% of applicable revenues.

Protiviti's operating profit was $2 million in the second quarter, compared to $1 million in the second quarter a year ago. Accounts receivable were $532 million, with implied days outstanding of 47.1 days. This compares to 48.1 days at the end of the second quarter last year.

Now let's turn to third-quarter guidance. We saw the following trends in the second quarter and the first few weeks of July. On a same-day constant currency basis, for our temporary and consulting staffing divisions, the year-over-year growth rates in April were about the same as March, then the growth rates gradually moderated in May and June. On a same-day constant currency basis, for our permanent placement business, the year-over-year growth rates decelerated slightly in April, decelerated further in May, and then were about the same in June as in May. During the first two weeks of July, revenues for our temporary and consulting businesses were up 8% on a same-day constant currency basis, compared to the same period last year. For the first three weeks of July, permanent placement revenues were up 37% on a same-day constant currency basis, compared to the same period last year. We would caution, however, it's difficult to evaluate trends over such short time periods.

Taking this information into account, we offer the following third-quarter guidance. Revenues, $1.01 billion to $1.06 billion. Income per share, $0.36 to $0.41.

It is our policy to limit guidance to one quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release. Consistent with prior quarters, our guidance does not include any additional amounts for the settlement of outstanding legal claims.

Now I'll turn the call back over to Max.

Thank you, Keith.

As noted earlier on the call, we were pleased to see broad-based demand for our professional staffing and consulting services during the quarter. This is our eighth straight quarter of double-digit year-over-year revenue growth for the Company on a same-day constant currency basis. Our results were strongest domestically, both within our staffing operations and Protiviti. Our growth rates outside the United States were not as strong, owing in large measure to ongoing concerns over the European debt crisis. Our business has limited exposure to the hardest hit countries in Europe, but we did feel some of the effects of a more cautious business environment and lower currency exchange rates in Europe and other parts of the world. We continue to aggressively manage non-US operating costs.

We remain encouraged by the trends we are seeing in the temporary staffing industry in the United States. Since March, 2010, when non-farm payrolls reached their lowest point in the current cycle, 17% of US jobs created have been temporary ones, versus 8% in the comparable period in the prior cycle. We believe skilled temporary professionals are becoming a permanent part of the human resources mix for a growing number of businesses.

Our Protiviti business also had a solid quarter, particularly in the United States, as a result of higher demand for its consulting services. Among other areas, Protiviti is benefiting from growth in IT-related consulting services, as well as its consulting business that specializes in the financial services industry.

At this time, Keith and I are happy to answer questions. 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.

Thank you.

(Operator Instructions) Mark Marcon, Robert W. Baird.

Good afternoon and congratulations on the strong results. I was wondering if you could talk a little bit about the trends that you're seeing in the US. I think in international markets, it's fairly obvious that the world is slowing down. But did you see any sort of deceleration in the US over the course of the quarter in the temp areas? And then secondly, can you speak to how you're thinking about investing, given the choppy nature of the headlines in terms of SG&A throughout the world?

Okay, Mark. As to the US trends, as we talked about in our formal remarks, there was a modest deceleration in our temp business in the US as we went through the quarter. That deceleration continued post-quarter, although we would caution that post-quarter is heavily impacted by 4th of July, which as you know this year fell on a Wednesday. Many of our clients took the whole week off. And so we are little suspicious that the post-quarter numbers were overly impacted by 4th of July. But again, it's hard to know that for sure.

As to investing, we will continue to invest in tech, both in the US and in Germany. That continues to do quite well. And we will also continue to invest in perm, consistent with the revenue gains that we see, but pretty much in line with the revenue gains that we see.

Great. And then, just a clarification, the legal settlement, did that all fall into the temp SG&A?

The legal settlement is 100% in the temp SG&A. The pre-tax amount is $19 million.

Great. Thank you.

Tim McHugh, William Blair.

Yes, hello. Just want to ask about the perm margins which were much better than I would have expected, given the slowdown. How aggressively did you pull back on that, particularly internationally? And is the productivity levels there so high now that you'll have to start to invest in it to get future growth? Is there still productivity opportunity in that business?

Well, we did expand our perm margins nicely during the quarter, as you note. As we stated on the last call, we pulled back our head counts in Europe, particularly in countries that were the most impacted. We are quite pleased with our ability to adjust our cost structure outside of the US during the quarter. We do not feel our perm margins are unsustainably high, and we will continue to be vigilant with our headcount and our cost investments, particularly outside the US, with the exception of Germany, as we go forward.

Okay. And then just a numbers question for me. The tax rate here, if I adjust out for that charge, it seems like it was maybe 41.5% on a more normalized basis, which is turning back up. Is that just the shift in earnings between the US and international?

That's precisely the case. And the go forward assumption, whereas before we were 40% to down a bit, I would say we are 40% to up a bit. Let's call it 40% to 41%.

Okay. All right. Thank you.

Andrew Steinerman, JPMorgan.

Hello there. Keith, did you say something about when looking at flex gross margin sequentially, that was driven by temp-to-hire conversions and year-over-year by spread. My question is, is there any pause in the Company's pricing power? How is the spread environment looking in the second quarter?

The sequential improvement was conversions that, while improved by 20 basis points, are still at the low end of the traditional range. So we still feel like there's plenty of upside there. As to pricing power, we certainly don't see any pause in that. The actual bill rate changes for the quarter were 1.2% year-over-year, and that compares to 3.4% year-over-year last quarter. That decline is heavily impacted by non-US operations. US operations continue to get nice year-over-year bill rate increases.

And how will flex gross margin look going into the third quarter?

Our modeling, and for our guidance, and we will talk a little bit more about that in just a second. Given the somewhat volatile nature of conversions, or temp-to-hire conversions, our guidance has flattish flex gross margins, to use your term, embedded in it.

Let's talk a little bit about guidance generally. While on a reported basis, the range would show growth rates of 3% to 8% between low and high, if you adjust that for currency and days, that would instead be 7% to 12%. The 12% being real close to the 13% we just reported for the second quarter; the 7% at the low end being just less than the post-quarter start we got, which we are hoping was July 4th impacted. The third quarter will be more impacted by currency and be more impacted by days than was the second quarter.

As to currency, the biggest impact is in the euro. A year ago, the euro was $1.41. The current euro is at a $1.21. We think the currency will probably have three growth rate points impact in the third quarter. Further, on the days, we will have one fewer day in the third quarter than the third quarter a year ago, which will impact the growth rate by 1.5 points. Whereas in the second quarter just ended, there was about a three-point differential between reported growth and real growth, which is constant currency same-day, in the third quarter, we think there will be a four- or five-point differential between the real growth and reported growth.

Right. And just to make sure I got it, when you say flat flex gross margins, you meant sequential, right?

Correct.

Okay, perfect. Thanks, Keith.

Kelly Flynn, Credit Suisse.

Thanks. I was hoping you could talk in a bit more detail about the international trends. I heard you say the 3% growth, and I think you implied how it progressed through the quarter. Can you give a little more color on how much it deteriorated as the quarter progressed, and are you assuming declines in the third quarter?

First of all, let's talk a little bit about country composition. Our strongest country by leaps and bounds was Germany, which would be no surprise. And in order, we still had positive growth in Australia, we still had positive growth in Canada, we were slightly negative in Belgium, we were a little more negative in France, and we were the most negative in the UK. Although I'll add that the UK has slightly more operating income than a year ago, notwithstanding their revenues, for which we congratulate them.

As to trends, if you look at our supplemental schedule and you look at the international trend lines, I think you can pretty easily see that it would not be unexpected to see the year-over-year growth rates in the international region to go negative during the quarter. And our guidance is assumed as such.

Okay. Great. Can you talk a bit more about the UK and why that is so weak? Is it financial services related? What is going on there?

I would say there are two things going on there. The industry has been more challenged there for a while. In addition to that, we've walked away from really low margin business, which exacerbate the revenue change. But as I said, if you look at the operating income line, they are actually up year-over-year. And we are quite pleased with that.

Okay. Great. Can I ask you about SG&A? We can back into it from what you just said about gross margin, but just higher level. Should we expect that to actually start to decline, given some of the things you talked about, or ratchet up over time, over the next few quarters?

As a percent of revenue, given the range we gave for guidance, I wouldn't see it changing that much. If you look at the operating income line for staffing, the last few quarters have been 8%, 9%. We just did 9.7% adjusted for the charges. So we are quite pleased with the way our staffing operating income is progressing. And we would hope to stay on that trajectory given, particularly, the top end our guidance range.

Okay. Thank you.

Jeff Silber, BMO Capital Markets.

Thanks so much. Wanted to focus a little bit on the supply side of the market. I'm just wondering if any of your verticals or any of your geographies are starting to run up against any supply constraints?

Jeff, clearly technology would have the most supply issues. That said, I wouldn't put it in the chronic category. And if you look at the growth rates, I would not say it is overly growth constraining. Generally speaking, the better candidates across our lines of business still get multiple offers, they still get counteroffers from their current employers, particularly on the perm side. So while there are pockets of supply issues by line of business, I don't think it rises overall that it's terribly growth constraining. We see job order flow is remaining steady. We see demand remaining solid. We would say that clients are getting a little more methodical with their hiring processes. The hiring process is a little bit slower. The sales cycle is a little bit longer. We are seeing some deceleration in our growth rates, even in the US. But it's deceleration against very high growth rates; and for the growth rates that remain, we are quite pleased with them in this environment.

And I will make a further comment on the environment. If you look at our revenues for this quarter, when the unemployment rate was 8.2%, you have to go back to 2006 to find similar revenues. And at that time, the unemployment rate was 4.5%. So we are quite happy that we could return to revenue levels in the US where unemployment rates were 4.5% versus today, where unemployment rates are 8.2%. The point being, if we can ever get those unemployment rates down to a more normal recovery level, we think we can do significantly better.

One other comment on the supply issue, the quality of candidates, as you might expect, is and has been for some time extremely high. And that's a function, of course, of the overall unemployment rate. But subject to the exceptions Keith mentioned in certain areas, particularly technology, the quality of candidates is excellent.

That is very helpful. If I can sneak in just a few numbers questions. What share count is embedded in your third quarter guidance? What should we be using for CapEx for the year? And then jumping ahead to the fourth quarter, I'm not asking for guidance, but are there any billing days issues between Q4 2012 and Q4 2011? Thanks.

Okay. Share count won't change dramatically. Maybe it will be down a touch as we continue to buy stock, which we have done consistently in the first couple of quarters. CapEx, we said $60 million to $70 million early in the year. I think year-to-date we are at 24%, 25%, say annualized we are at 50%. I think the 60-ish number is still probably very reasonable, so actually I wouldn't change the range versus what we first gave you. As to billing days, Q4 '12, 62 days. Q4 '11, 61 days. So that day we lose in the third quarter, we get it back in the fourth.

Okay. Great. That's very helpful. Thanks so much.

Paul Ginocchio, Deutsche Bank.

Hello. Just a question about healthcare reform. I know it's early, and I know the elections could change everything, but I think there is something within healthcare reform that if you have less than 50 employees, you are exempt from healthcare reform or from the mandate. I'm just wondering what percentage of your clients has less than 50 [employees]. And do you think there could be a potential pickup in demand from those as they try to keep their headcount below 50 to stay below the mandate? And do you try to think about what the potential positive is for your business? Thanks.

While it's a theoretical potential positive, the sweet spot of our client size is more 75 to 100 employees, rather than 50 or fewer. So while maybe some of that will happen in a good way, that is not something we have certainly dialed in. The two big issues on healthcare reform, Paul, would be how do you define full-time employees for purposes of who is eligible? And further, how do you define minimum essential coverage? And the Treasury Department has some regulations out there that are out for comment. Those regulations aren't bad, from the staffing industry's point of view. But how those regulations end up, nobody knows for sure at this time.

If I could just ask a follow-up on the gross margin on the temp. Looks like the year- [over]-year growth wasn't as good in the second quarter as the first. Even adjusting for the workers comp differential this year versus last, the restatement or the add back, what was the driver there, if I missed it? Thanks.

Clearly, there is an international zone impact on gross margins overall. As I said, we progressed nicely in the US versus the first quarter. But the international zone gross margins, not unexpectedly, took somewhat of a hit during the second quarter.

Great. Thank you.

Sara Gubins, Bank of America Merrill Lynch.

Thank you. Just a question on the perm growth that you saw in the first two weeks of July. 37% is pretty impressive, particularly given what you were seeing in the second quarter. I know that is highly variable and three weeks is a short period of the quarter. But could you talk about what you were seeing in the beginning of the quarter?

As you know, perm is the most volatile week to week business we have. And to add to the irony of the post-quarter start, the international operations were stronger than US in perm out of the gate. So while I don't want to totally discount the 37% growth, I wouldn't place a huge amount of weight in it.

Okay. And then it looks like total office count was flat in the first half. Is there any possibility of office consolidation in Europe?

We haven't changed our office count significantly in quite a number of years. Unlike other general staffing firms, we have many fewer, much larger locations. And for that reason, we tend not to open as many nor do we tend to close as many. So I don't expect any significant office consolidations in Europe or anywhere else.

Okay. Thank you.

Gary Bisbee, Barclays Capital.

Hello. Good afternoon. The question is on the Robert Half Technology business. It continues to have very strong growth, but it actually decelerated the growth rate, same-day constant currency growth rate versus last quarter, more than some of the other segments given the strong demand and shortages and all of that. Is that just that it had been growing so quickly that it's a tougher comps issue, or is there some softening within that business?

It is primarily that there are tougher comps because frankly, if you look sequentially at the first quarter versus the second quarter, on a real basis, technology actually had the highest growth rate, not the lowest. And so if you are looking a year ago, technology was just knocking the cover off the ball with the growth rates, which made for much tougher comparisons. But actually in the second quarter just ended, our technology division had the highest sequential growth rates.

Okay. Fair point. And then I just wanted to probe -- given that you continue to put up such strong results and the stock really doesn't do a lot, do you ever consider being more aggressive with share repurchases, given how strong the balance sheet is? Or are you very comfortable with the consistent pace with which you have been pursuing that strategy over the last year or so?

I think history would say that we are comfortable with our consistent pace, the dollar cost average. So for the first six months of the year our free cash flow was $86 million. Of that, we paid $42 million in dividends and our repurchases were $73 million. So we're actually a little ahead of our cash flow, which is our stated goal over time, to spend our cash flow on dividends and repurchases.

Okay. Thank you.

Thomas Allen, Morgan Stanley.

Hello, guys. Can you give us an update on the regulatory front? There have obviously been a number of changes with government in Europe. Anything that we should be keeping our eyes out for? Thanks.

Nothing comes to mind. In the US, there has been further discussion of IFRS. I think most pundits believe it's going to be a standard by standard adoption endorsement, such that there is not going to be the big bang, one date, everybody has to convert. But instead it's going to be a standard by standard conversion over time. And I actually think that would be preferable. There's talk about mandatory audit rotation. There's talk about separation in Europe between external and internal audit. There are a lot of things in the air. I don't see anything that's going to have a huge short-term impact.

We are starting to get a little more traction in Protiviti on Dodd Frank. We actually have a couple of pretty significant Dodd Frank readiness engagements with some of Protiviti's larger financial institutions. So that is nice to see. But that's about it on the regulatory front. We talked about healthcare earlier, obviously.

Yes. And the just following up on Protiviti, obviously, results are improving there. How should we think about the operating income trajectory there?

So the results are improving. They improved both in the US and they actually improved a little bit non-US, year-over-year. Quarter 3, particularly in the US, is usually Protiviti's strongest quarter. Quarter 3 outside the US is impacted by August vacation holiday periods. But generally, quarter 3 is when Protiviti has its strongest operating margins of the year.

We have talked before, our long-term objective which we remain optimistic about, is that Protiviti can have consolidated double-digit margins. We are not there yet, but we are pleased with the US margins, which are expanding and we think will expand further. And we are starting to see a little light at the end of the tunnel outside the US. That said, the market conditions in Europe aren't exactly the best they have ever been.

Okay. Thanks.

James Samford, Citigroup.

Thank you. Just wanted to touch on, I think you mentioned that the bill rate spreads in the US were strong. Any color on what is going on on the European side?

Clearly, there are more market challenges in Europe, other than Germany, than is the case in the United States. And you see some compression of pay bills spreads. That was to be expected. We modeled it in. We expect a little more in the quarter that we are in. I don't think there is anything there outside of what you would expect, given the market conditions.

Any other competitive dynamics that are taking place in any particular countries?

There are no real changes in competitive dynamics of note. Again, we are doing extremely well in Germany, not only in accounting and finance, but technology as well. We're very bullish on Germany. We continue to invest in headcount in Germany. Germany is very profitable. The margins in Germany approach the margins in the United States, which we are very pleased with. So we couldn't say more good things about Germany. But competitively, I'm not sure the landscape has changed enough to comment on.

That's perfect. Thank you.

Tobey Sommer, SunTrust.

Thank you. Within the technology business, I was wondering if you had domestic rates of growth for the staffing business? And if you could comment about whether the perm trends had a variance from the overall perm growth rates that you've described?

As far as domestic growth rates for staffing technology, we don't break out line of business between US and non-US. The biggest non-US tech operation we have is in Germany. So it's doing well and ramping up, as we speak. As to perm versus temp in tech, perm actually is doing a little better than temp, but they are both doing well. And we talked last time that perm tech is 18% to 20% of perm overall. So it's a little larger portion of the perm business than temp tech is of the temp business.

Even though you don't describe the segment growth rates between global and domestic, is it fair, based on the rates of sequential growth and year-over-year growth that you have described for the tech business, that the domestic piece must have been somehow above average?

Above average? So on a sequential basis, tech grew the fastest of any of our lines of business. On a year-over-year basis, it was within 10 basis points of being the fastest there as well. So I think -- as supported by the schedules that we put out there, that tech is the strongest part of our business, which is not surprising given the investments we have made.

Right. Thank you. Could you describe what your plans are for increasing recruiter staff, and any color you could give us across the different segments would be great. Thanks.

As to additions to staff, the general answer that applies to virtually all lines of business is that we expect to invest proportionate to what we expect the revenues to grow by. Where we don't expect the revenues to grow, which is some of the European countries, we would be in a headcount reduction mode. Where we do expect growth, we would expect to add headcount at no greater rate than what we expect revenues to grow.

Thank you.

Kevin McVeigh, Macquarie.

Great. Thanks. Keith, can you just remind us, in terms of international, what percentage is Germany versus Australia versus Canada versus Belgium today, in terms of overall contribution?

Sure. Actually, I will read these off to you. But you can also go to our website, under our Investor slides, and we have a couple of slides that have this data. Of the total 28% that is international, 13% of that is Europe, 6% is Canada, 5% is Asia-Pacific, and 4% is the UK, and that further, if you look at Europe, that 13% breaks down to 5% is Belgium, 4% is Germany, 3% is France, and 1% is all other. But again, go to our website, go to the Investor slides, and we have slides there that break out what I just told you.

That is helpful. And can you remind us, I know there's been a lot of investment on the IT side. In terms of perm overall, how much of the perm is IT placement now versus traditional F&A?

So perm tech is 18% to 20% of perm overall.

Got it. That is helpful. Thank you.

Jim Janesky, Avondale Partners.

Good afternoon. Can you let us know what your clients in Europe, particularly, are signaling down the road? So for example, should we assume that the growth rate, even past the third quarter, is going to be impacted for some time to come, or do you have any sense when that could snap back?

As you know, perm is the most volatile and hardest to read trends. The fact that perm is still positive, and in fact, even outside the US, as our supplemental schedule shows, grew twice as fast as temp for the quarter ended. I would say we are pleased by -- do we expect that to moderate more? Yes, we do. Is it in free fall? Absolutely not. Are our people more bullish than our overall guidance? They are, indeed. So again, there is no steep cliff on the horizon that our people see or we see, but further deceleration just seems to be a prudent assumption on our part. And if you look at the trend line, the last several quarters on the supplemental sheet we have given you, you see that the rates of growth have decelerated, but they are still positive. And they are actually greater than they are on the temp side.

Keith, did you say that if we take the litigation settlement or add it back pre-tax to operating profit, that the temp operating profit was 9.7% of revenues?

I believe it is -- the overall staffing operating profit is 9.7%.

Got you.

The temp unadjusted is 6.2%, adjusted is 8.5%.

Okay. Great. Thanks.

-- which is an improvement over the last many quarters, on the temp side and overall.

Right. Okay. Thanks for clarifying that. And then, a final numbers question. Stock compensation in the quarter?

Stock comp. $12 million.

Okay. Thank you.

Jennifer Huang, UBS.

Hello. Thanks for taking the question. I think last quarter you mentioned you were in the process of passing through SUTA increases. I was just wondering how those have been going, whether or not now they are going to be passed through.

The SUTA increases that we talked about last quarter were expected to be 30 basis points over 2011. When all was said and done, and when all the states reported, they actually ended up a little bit less than that. But at this point, we are very pleased that we passed through the SUTA increases and we don't have that headwind the rest of the year.

Okay. Great. Thank you very much.

That's all the time we have today. We appreciate your interest. Thank you for joining our call.

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 International's website, at www.RHI.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.