羅致恆富 (RHI) 2015 Q4 法說會逐字稿

Hello and welcome to the Robert Half fourth-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 good afternoon, everyone. Thank you for joining us. As is our custom, I would like to remind you there are comments on the call today that 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 such 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 the statements made on today's call.

For your convenience, our prepared remarks also are available on our website at www.roberthalf.com. From the About Us tab, go to our Investor Center, where you will find the Quarterly Conference Calls link.

Now let's review our fourth-quarter 2015 results. Quarterly revenues were $1.305 billion, up 7% from the fourth quarter one year ago or up 9% on a same-day constant currency basis.

Income per share was $0.71, up 14% from this time last year. Cash flow from operations was $111 million in the fourth quarter. Capital expenditures were $27 million.

We returned $27 million to our stockholders during the quarter through a $0.20 per share cash dividend. We also repurchased 1.4 million Robert Half shares for $67 million.

In October, our Board of Directors approved the repurchase from time to time of an additional 10 million shares of common stock. All told, we have 10.4 million shares available for repurchase under our Board approved stock repurchase plan.

Demand for our professional staffing and consulting services remained strong in the fourth quarter, fueled by a healthy US job market and low unemployment in numerous professional occupations as well as a more positive economic backdrop in many of our non-US markets. We saw year-over-year revenue growth across the board in our staffing and consulting operations both in the United States and abroad.

This was the Company's 23rd 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 37%. I will turn the call over to Keith now for a closer look at our fourth-quarter results.

Thank you. As Max said, global revenues were $1.305 billion in the fourth quarter. This is up 7% from the fourth quarter one year ago on a reported basis and up 9% on a same-day constant currency basis.

Fourth-quarter staffing revenues were up 8% on a same-day constant currency basis. US staffing revenues were $892 million in the fourth quarter, up 8%.

Non-US staffing revenues were $217 million, up 4% when adjusted for billing days and currency exchange rates. We have 332 staffing locations worldwide, including 92 locations in 17 countries outside the US.

The fourth quarter had 62.3 billing days compared to 61.7 days in the fourth quarter a year ago. The current first quarter has 62.7 billing days compared to 62 days in the first quarter of last year.

Accompanying our earnings release is a supplemental schedule showing year-over-year revenue growth rates for our lines of business on both a reported and same-day constant currency basis. This is further broken out by US and non-US operations. This is a non-GAAP financial measure that offers insight into certain revenue trends in our operations.

Currency exchange rates had the effect of decreasing reported year-over-year staffing revenues by $30 million in the fourth quarter. Exchange rates also decreased year over year reported staffing growth rates by 3 points.

Global revenues for Protiviti were $195 million in the fourth quarter with $164 million in revenues in the United States and $31 million in revenues outside the US. Protiviti revenues were up 15% year over year on a same-day constant-currency basis. US revenues were up 15%, and non-US revenues were up 17% from the prior year.

Exchange rates had the effect of decreasing year-over-year Protiviti revenues by $3 million in the fourth quarter and decreasing the year-over-year reported growth rate by 2%. Protiviti and its independently owned member firms serve clients through a network of 75 locations in 25 countries.

Gross profit margin in our temporary and consulting staffing operations in the fourth quarter was 37.3% of applicable revenues. This is a 40 basis point improvement from the same period a year ago. The improvement relates primarily to higher pay/bill spreads. The fourth quarter of 2015 also includes a $1.2 million workers compensation and other payroll-related credits.

Fourth-quarter revenues for our permanent placement operations were 9.2% of consolidated staffing revenues, which is unchanged from last year's fourth-quarter. Together with temporary and consulting gross margin, overall staffing gross margin improved 40-basis points versus a year ago to 43%.

Fourth-quarter gross margin for Protiviti was $62 million or 32% of Protiviti revenues. Gross margin one year ago for Protiviti was $53 million, or 30.7% of Protiviti revenues.

Staffing SG&A costs were 32.5% of staffing revenues in the fourth quarter versus 32% in last year's fourth quarter. We ended 2015 with 12,800 full-time employees in our staffing divisions, up 14% from the prior year.

SG&A costs for Protiviti were 18% of Protiviti revenues in the fourth quarter compared to 18.3% of Protiviti revenues in the year-ago period. We ended 2015 with 3,800 full-time Protiviti employees and contractors, up 15% from the prior year.

Operating income from our staffing operations was $117 million in the fourth quarter, up 5% from the prior year. Operating margin was 10.5%.

Our temporary and consulting staffing divisions reported $99 million in operating income, an increase of 5% over the prior year. This resulted in an operating margin of 9.9%. Operating income for our permanent placement division was $18 million in the fourth quarter, up 2% from the prior year and producing an operating margin of 17.3%.

Fourth-quarter operating profit for Protiviti was $27 million, an increase of 29% from the prior year. This produced an operating margin of 14%.

At the end of the fourth quarter, accounts receivable were $705 million. Implied days sales outstanding, DSO, was 49.2 days.

Before we move to first-quarter guidance, let's review the monthly revenue trends we saw in the fourth quarter and in January, all adjusted for currency. Globally, year-over-year revenue growth rates for our temporary and consulting staffing divisions accelerated modestly in October, then decelerated the latter part of the quarter. We exited the quarter with December growing 6% compared to 7% for the full fourth quarter.

Revenue growth for the first three weeks of January was also up 6% compared to the prior year. Global permanent placement revenue growth rates also accelerated in October, then moderated the balance of the quarter with December growing 8% compared to 8% for the full quarter. And then, for the first four weeks in January, permanent placement revenues increased 7% compared to the same period last year.

This information is designed to offer a glimpse into trends we saw during the fourth quarter and in January, but as you know, we hesitate to read too much into these numbers as they represent very brief periods of time. That said, we offer the following first-quarter guidance.

Revenues: $1.27 billion to $1.33 billion. Income per share: $0.61 to $0.67. The mid-point of our guidance implies year-over-year revenue growth of 8% on a reported basis and adjusted for currency (including Protiviti), and EPS growth of 10%.

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 will turn the call back over to Max.

Thank you, Keith. We were pleased with the Company's performance during the fourth quarter, and we are optimistic about our prospects. Annual revenues in 2015 crossed the $5 billion mark for the first time.

We anticipate the high demand for skilled talent will remain a growth driver for us. And we have every confidence in the opportunities ahead for Protiviti. While the stock market has been volatile and economic uncertainty persists, the US labor market remains strong, and international markets have also started to rebound.

In the United States, nearly 300,000 jobs were created in December alone, and 2.7 million jobs were added over the course of the year in 2015. A number of professional occupations are near full employment, which is placing pressure on the supply of available talent and increasing our value to clients. This is particularly true in technology staffing, and we're responding with investments to capitalize on this potential.

Locating hard-to-find talent is a specialty at Robert Half. The secular demand for temporary staffing also is ongoing. The use of flexible workers matched an all-time high during the fourth quarter. Temporary employees now represent 2.06% of the US workforce.

And a word about Protiviti. We continue to be pleased with how Protiviti is performing. This is a very good business with an excellent management team.

Protiviti has successfully diversified its service offerings, built a loyal and growing client base and is seeing steady demand in all of its major consulting segments. Protiviti serves its clients in areas such as internal audit and financial advisory services, risk and compliance, and information technology consulting, among others.

At this time, Keith and I would be happy to answer questions. We ask that you please limit yourself as usual to one question and a single follow-up as needed. If time permits, we will certainly try to return to you. Thank you.

(Operator Instructions)

Jeff Silber, BMO Capital Markets

Thanks so much. Wanted to focus on the additions of full-time employees you had mentioned in your staffing divisions. I think you said it was up about 14% year-over-year. Were they weighted to any specific area? And if you'd also talk about when was most of the hiring done? Was it done throughout the year, towards the beginning or the end? Thanks.

Jeff, we did add about 14% to our staff. It was very back-loaded to the second half of the year. We talked about that a little bit on the last call. Our thoughts are for the quarter we are now in, the first quarter, we will absorb the hiring that we did in the second half of 2015 and wouldn't add significantly to headcount during this quarter.

As to line of business, it was pretty broad-based. It was a little heavier toward permanent placement, a little heavier toward technology. Certainly all of the divisions participated in the headcount increase.

Okay, great, and just a couple of numbers-related questions. I was hoping you could give us what your expected tax rate and capital spending budget will be for 2016.

Sure, the tax rate, volatile as always. It was low in the fourth quarter because we had more benefits from foreign operations than we expected, plus when Congress passed in late quarter the tax extenders, which I guess was the PATH Act that freed up some payroll tax credits that we recognized. We would not expect those to continue to that degree into the current first quarter. So the tax rate we're using for the first quarter and 2016 is around 39%. But as you know from prior quarters, that means somewhere between 38% and 40%.

CapEx, we do expect to increase our capital expenditures during 2016. The range we would give would be somewhere between $90 million and $100 million; mid-point would be $95 million. That's up from $75 million in 2015. Two or three things going on there. We are upgrading our IT internal infrastructure to cloud-based systems both for our front office and client and candidate relation management systems on the staffing side. We are converting to a cloud-based HR and staff payroll system as well.

Further, we continue to invest in data science, data analytics and artificial intelligence as it relates to identifying, matching, prioritizing both leads for clients and candidates. And then further, we've got more lease expirations in 2016 than in 2015, and there would be more tenant improvement costs that relate to that. But as a percent of revenue, CapEx in 2016 will be a little bit higher. I think the historical average is 1.5% of revenue, and I think 2016 is going to be 1.7%, 1.8% of revenue.

Okay great, thank you so much.

Andrew Steinerman, JPMorgan.

Hi Keith, could you make a comment about the Protiviti fundamentals that are implied in the fourth-quarter guidance, particularly on both the revenue side and the profitability side, noting first quarter is usually a lower profitability seasonally for Protiviti?

Sure. For the fourth quarter, Protiviti had another very good quarter. Mid top-line growth, much better than bottom-line growth. Going into the first quarter year-on-year, we would again expect a mid-double-digit top-line growth and bottom-line growth at least as much as that. Sequentially, because the first quarter seasonally is Protiviti's slowest, sequentially, it will be down as is always the case. But year-over-year we expect very solid revenue growth. We expect a little bit of margin expansion, which means nice operating income growth.

Right, and when you say mid double-digit, you mean mid-teens, right?

Correct.

Thank you, I appreciate it.

Tim McHugh, William Blair.

Thanks. Just want to ask -- you gave the color obviously by month, and I know you caution us not to over read them. But given the stock market movement, I guess what is your read of sentiment from clients? Is there something to read into the difference in growth rates later in the quarter than in January even though they are not very much? But are you hearing any different, are you sensing any different environment out there right now?

I would say that our people would observe that in November, December, clients got a little more cautious, whether that's due to market uncertainty or other reasons, the headlines about China, oil, et cetera, we could all debate. Our clients did get a little more cautious, not significantly more cautious.

Further, December is always a somewhat odd month because our internal staff had a very good year in 2015. They probably checked out a little earlier as did our clients, frankly, so we felt like we had a little more December effect than we would typically have. But generally speaking, the fourth quarter was in line with our expectations. I think we were within $5 million of the mid-point of our $1.3 billion estimate.

And generally speaking, our guidance for the first quarter isn't significantly different, so it's mostly more of the same. The fourth quarter wasn't that different from the third quarter. The first-quarter guidance isn't that different than the fourth quarter. Now, the tax rate swings things around, so the tax rate Q4 was low as we talked about. The tax rate Q1 goes back up. So if you look at sequential progress one to the other, the tax rate has a big impact.

What about with perm? Was that sensitivity more felt in perm? The growth rate, the year-over-year growth rate was a little slower in Q4 versus before. What would you attribute that to?

We would say that clients becoming more cautious certainly impacted perm. It's odd in that on the one hand, clients are still picky. Candidates are also harder to close. They are accepting counteroffers. They are accepting competing offers. They are declining offers. So it's a little odd that at the same time, clients and candidates are being picky. And that has the effect of increasing the days to fill or increasing the sales cycle, however you would like to describe it.

But the point is, perm was a little bit light of what we had projected for the fourth quarter. It wasn't dramatically light. We believe the current tone of business in perm is solid, and the guidance we've given for the first quarter reflects that.

Okay, thanks.

Mark Marcon, Baird.

Hi, good afternoon. Just in light of the comments you just made, Max and Keith, how are you thinking about adding to headcount over the course of the coming year? You've got a solid business, but obviously there are some concerns and maybe on the margin some increased cautiousness among both candidates as well as employers. So I'm just wondering how you are thinking that through?

Just as we back-loaded the headcount growth in 2015, we've essentially front-loaded the headcount for 2016. So clearly in the first quarter that we are now in, we don't expect virtually any net additions to headcount. We will see how that goes. We will then look toward the end of the first quarter as to what we do in the second quarter. But it's not that unlike 2015 where the headcount was back-end loaded, and the first half of 2015 there wasn't a lot of headcount addition either. We should have a couple of quarters where we leverage our SG&A better than what we've done intentionally the second half of 2015 by being more aggressive with the headcount.

Frankly, it's been a few years since we added more headcount than our top line grew by. I think in rough numbers, we added 14% to our staffing headcount, and our revenues were up 10%. So simple math says we front-loaded, we've added to capacity at the beginning of 2016. We will play it by ear for the rest of the year.

Great, and the 10-K is going to be out shortly, but do you have the actual number in terms of the internal headcount?

Yes. The staffing number was 12,800, the Protiviti number was 3,800. So staffing up 14%, Protiviti up 15%.

Great, and then one last question if I may. With regards to RH Technology, on a sequential basis, it was down a little bit. Is there anything you are seeing there?

The theme is similar to the theme we just talked about. Clients got a little more cautious in the fourth quarter. We had the December wealth effect where internal staff checked out sooner, clients checked out sooner. There's always natural project-ends near the end of the year. That's something you deal with every year. So Tech was a little bit lighter than we would have expected for the quarter, but not significantly so. Similarly as we roll into 2015, Tech is solid. Our Q1 guidance reflects that. We feel good about Tech, but it was a little light but not significantly so for the fourth quarter.

Great, thank you for the color.

Paul Ginocchio, Deutsche Bank.

Hey Keith, thanks so much for the color into January from December and the fourth quarter globally for both perm and temp. Was there anything to talk about US versus international as the trends went from December into January?

There's no significantly different story there, Paul. I would say, generally speaking, when we look outside the US, the UK remains solid, Germany remains solid. We had a nice quarter in Belgium, which should continue into the first quarter. Those were the three markets outside the US that were the strongest. We've talked about Canada with energy impact. We've talked about Australia with energy impact. And France is running a little behind for us than what the other continental European countries are. But no major difference between how we reentered 2016 versus how we exited 2015 between US and non-US.

Great, thank you.

Sara Gubins, Bank of America.

Thanks, good afternoon. Could you run us through your expectations for the first quarter in a bit more detail around temp versus perm expectations, and how you are thinking about gross margins in temp and SG&A trends overall? Thanks.

Sure. So embedded in the mid-point of our guidance, and all of this is adjusted for currency and days, we see temp growth continuing to decelerate slightly. We see perm growth stable-ish. The comps helped us out there a year ago. The comps get a little easier.

We see Protiviti year-on-year growth flat to down a little bit on very tough comps. Sequentially due to normal seasonality, Protiviti will be down. Temp gross margin year-on-year, we see 10 to 30 basis points of improvement, which is principally a carryover of the higher pay/bill spreads that we've experienced through 2015.

SG&A year-on-year will still be up 10, 20 basis points because of the carryover impact of the headcount additions, but sequentially we should be down 10 to 30 basis points as we lever that headcount as revenues grow in the first quarter. Protiviti SG&A year on year, flat to up slightly as they make some infrastructure investments. They're also redoing their front office over the course of 2016.

Staffing operating income, flat to down slightly year-over-year for the reasons I just talked about. Protiviti up 30 to 50 basis points year on year. Strong mid-teen top-line growth, bottom-line growth at least to that degree. Tax rate 39% as I talked about earlier, which is about flat year on year. It's up sequentially as we discussed.

Shares down [1] million or so as a flow-through of the buy-backs we did during the fourth quarter. We again, as we have done many, many quarters, spent our free cash flow on some combination of a dividend and share repurchases. And then CapEx, as we mentioned earlier, our 2016 range is $90 million to $100 million as we make the infrastructure investments that I talked about.

Great, thank you, very thorough. And then just two other quick ones. Perm operating margins were down year-over-year in the fourth quarter. I'm assuming that's because of the hiring but wanted to check?

Perm's internal cost structure is more payroll dependent than any division we have. So it's almost per se, if it's up or down, it's going to be because of headcount.

And presumably you expect to see some leverage on that as the new staff gets ramped up?

Sequentially, yes. Year-over-year, it will take some time to absorb that.

Got it. And last question, could you update us on bill rate trends?

Sure, bill rates for the quarter were up 5% globally adjusted for currency. That was up a touch relative to last quarter. It's essentially the first time in this cycle we've gotten a 5% up front bill-rate increase. Our pay-rate increases lag a little bit, the 5%.

All this discussion of cycle, what inning are we in, we continue to believe as you compare it to prior cycles from a GDP standpoint, this cycle has been much more sluggish. From a wage inflation standpoint, not only for the economy generally where the employment cost index is up 2%-ish rather than high 2% in prior cycles, but for Robert Half, we've also seen a lot more wage inflation in cycles past than we've seen in this cycle. But we are, as I just mentioned, for the first time seeing bill rate increases begin to touch 5%.

Thank you.

Anj Singh, Credit Suisse.

Hi, thanks for taking my questions. I was hoping to dig into the perm side of the business a little bit. I appreciate the comments earlier, but just wondering are you seeing any difference in the tone between your US clients and your international clients? Just trying to get a sense if there's more apprehension on a relative basis to the recent trends in the respective regions as you look ahead?

I'd say we continue to be bullish in the UK and Germany, particularly in perm placement. We added headcount later last year outside the US in those countries than we did in the US. So IZ, the International Zone, perm growth has lagged what's happened in the US, and that's in part because we haven't invested in the headcount. But we did do that more recently late in the fourth quarter. So we're hoping that will help see some acceleration in perm growth in the UK and Germany. Other than that, I would say the general discussion of clients got a little more cautious during the quarter would also apply outside the US, particularly to Europe as it did inside the US.

Okay, got it. And obviously you have been through several cycles, and I also realize you have noted that this cycle is unlike others. So hoping you can discuss a little bit more about what your outlook is for perm as we get further into this cycle. Should we be taking the wage inflation that we are seeing, the bill rates that you are seeing increasing as a sign that the perm acceleration is still yet to come? Or do you think it should still be a little bit stubborn as you said earlier?

As I said earlier, this recovery has been very sluggish relative to the past. And you can look at peak-to-peak growth rates during past-to-peak to now growth rates perm and temp, and clearly this recovery has been more sluggish.

Outlook wise, we continue to be positive about perm. If you look at perm versus temp last cycle, every year during the last recovery cycle, perm outgrew temp. That's no surprise. Perm takes a much bigger hit during a downturn than does temp. If you look at this cycle so far, while more sluggish than past cycles, perm has also outgrown temp every year in this cycle as well. That's not unusual. The degrees are something I guess we can have a discussion about.

Our outlook for 2016 and our guidance for the first quarter of 2016 essentially assumes we continue to see more sluggish growth the way we have for several quarters. And quite frankly we're pretty proud of how we've done the last several quarters. So to tell us there is more sluggish growth ahead, we can deal with that. We've shown the world what we have done with that. Our planning is that's what continues for the near term.

Okay, I appreciate those thoughts. One quick one, if I may, on your business levered to energy in Canada and Australia, could you just talk a little bit about what your client conversations there are like? Are you seeing more declines with oil at these levels, or are you perhaps seeing cuts beginning to stabilize? Just any color as we try to understand the go-forward impact energy may have. Thank you.

Well first of all, none of those operations are material to Robert Half, so we don't have a lot of super-detailed discussions on the topic. Those discussions we have certainly aren't getting any more positive, we will put it that way.

Okay, thank you.

Manav Patnaik, Barclays.

Thank you, good evening gentlemen. The first question I wanted to ask was in the prepared remarks, you said you were planning to respond with investments to capitalize on the technology staffing opportunity. I was just wondering are those the same things that you referred to around data quality and artificial intelligence and so forth? Or is there something different to it? Then just around that, is that going to be all internal build, or is there an opportunity to acquire technology or so forth with respect to that?

So when we talk about investing in our technology division, it's a combination of adding more headcount, which is a combination of recruiters and salespeople. It's also investing in internal tools. Those internal tools for the most part relate to all of our lines of business. So because our technology clients and candidates are more technology savvy, we often go first to our technology division as we roll out new initiatives. So the data analytics, the data science, the use of algorithms, all the things that I talked about would particularly relate to our technology division, clients, candidates, leads. But those also relate more broadly to all of our lines of business, perm and temp.

Okay, fair enough. And just around the geography comments, you mentioned France is lagging behind. I'm just curious if you could elaborate on if that was internal factors, external factors, or a combination of both. Just any color there?

Well first of all, France is not a very large portion of our business, and when I say lagged, I mean it was a few percentage points behind the rest. So I certainly don't want everybody in France to be mad at me because I singled them out negatively, because I didn't intend to do so. But while they are listening and being competitive, they didn't do quite as well as the UK and Germany.

Okay, and just one more, modeling-wise, do you have the number of billing days for each quarter for this year?

Sure. Let me find that. I will tell you. Q1 62.7, Q2 63.9, Q4 64.1 -- excuse me, that was Q3. Q4 is 61.4 to give you 252.1 for the year.

All right, thanks a lot gentlemen. I appreciate it.

Tobey Sommer, SunTrust.

Thank you. I'm curious if you noticed any differences in the technology segment among your traditional small and medium-sized business customers and the slightly larger ones that occasionally you touch in that line of business? Thank you.

Since most of our business in Tech is smaller and middle-sized businesses, while they are modestly larger companies than we service with Accountemps and OfficeTeam, they are still significantly smaller than the Fortune 1000. So we don't tend to do a whole lot of analysis between our typical sweet spot middle-market tech firms and those -- let's call it the minority of those Fortune 1000 firms that we also work with. But having said that, there's certainly nothing that screams at us that would bubble up a trend worth noting.

Okay, and then within the Accountemps segment, within the creative line of business, was there a discernible difference in the growth rates or trends there?

It seems like you are trying to get a read through potentially to others. Our creative business did very nicely in the fourth quarter. We don't break that out, as we've talked about in the past, but we're very pleased with our creative business. There are synergies between our creative business and our technology business among others. They are managed by the same leadership group at Robert Half. We're pleased with how creative performed.

Thank you. My last question has to do with the technology segment. Do you expect that to be the fastest rate of your bill-rate growth in 2016, or should it just be on par with the Company average?

I would say more than likely, it will be mostly on par. On the one hand, the candidate shortages are more acute than they are in our other divisions. On the other hand, technology clients tend to be more dollar-per-hour sensitive on bill-rates than they are either markup percentage or gross margin percentage, which some of our other divisions would be more attuned to. I wouldn't think that technology bill-rates would grow that differently than our other divisions. And for the fourth quarter just ended, our bill rate increases in technology were not that different from the bill rate increases we saw on the other lines of business.

Thank you very much.

Gary Bisbee, RBC Capital Markets.

Hi guys, good afternoon. I guess I just wanted to ask, a year ago, you discussed the potential for temp margins to potentially go 100 to 150 basis points above prior cycle, but the cycle kept going based on employment taxes, rising wages, a bunch of different things. Given the somewhat slower pace of revenue today, is it still reasonable to think if the cycle goes on for a while, that is something that could happen?

So first of all, let's talk about 2015. And I think we absolutely delivered everything we talked about with respect to gross margin expansion. And in fact, if you look up and down our P&L, probably the single most impressive thing that happened in 2015 is the way we expanded our gross margins led by pay/bill spreads.

As we move into 2016, given where our margins start from, incrementally you shouldn't expect as much improvement in 2016 as you saw in 2015. But our conversions as an example, are still low relative to the past at 3.2% versus a range of 3.0% to 5.0%, mid-point being 4%. We still have that upside on state unemployment rates.

As the national unemployment rate goes down, as the unemployment claims that get filed against Robert Half go down, our unemployment rate as we go forward should continue to trend down. There is upside there. Let's call that another at least 10 to 30 basis points depending on how aggressive you want to be.

So that's still ahead of us. Just on the pay/bill spreads, we brought those a long way already, and while the environment will be conducive -- if there is wage inflation -- to us getting not only that passed through but a little more for the house, incrementally that will not be what it was in 2015.

Okay great, thank you.

Kevin McVeigh, Macquarie.

Great, thanks. Can you give us a sense of how much FX weighs on the Q1 revenue guidance and earnings from a dollar perspective?

So from an earnings standpoint, it's probably no more than $0.01 per share. From a revenue perspective, it's certainly not as impactful as it has been for the last few quarters. I want to say it's in the neighborhood of half of what it's been. So if it were $30 million this quarter, it's $15 million, call it half of that in the current quarter because you are starting to anniversary FX rates that are less different than has been the case the last couple of years. So if you look at our Q1 guidance, essentially the extra billing day due to leap year offsets the impact of FX, and your reported and your currency adjusted growth rates are about the same, orders of magnitude.

Got it. And then given where we are, it definitely sounds like there are some candidate shortages out there. Is there any way to frame how much that impacted revenue in the fourth quarter? And was that primarily in technology or was that across all segments in terms of just sourcing tougher-to-fill slots and things like that?

So clearly in technology, we are seeing in technology development -- the programmers, the engineers -- we are seeing the most acute shortages. Accounting, internal audit, financial services, regulatory compliance. There are also pockets of accounting and finance where there are candidate shortages.

As I talked about earlier, we are simultaneously dealing with pickier clients and pickier candidates. Candidates are getting more counter offers. Candidates are getting competing offers. Candidates are turning down offers that our clients give them.

There is an art to deciding whether to work with a candidate as to whether they are a tire-kicker that you will take through the process and at the end of the day they are not going to take the job, or whether they are sincerely interested. There's an art to deciding which orders to work, whether it's an impossible-to-fill order that you spend a lot of time on that you never fill, or it's a fillable order. So there's an art to deciding which candidates, there's an art to deciding which clients, but there's no question that there are candidate shortages. But we believe manageable candidate shortages.

There's more exposure, there's more transparency to the candidate, the availability of candidates than ever with social media, with the job boards, with the job aggregators. We feel like we're exposed to a larger portion of the labor market than has ever been the case. And that's certainly something we're trying to address with our technology initiatives so that we continue to manage our way through the candidate shortage.

Thank you.

Randy Reece, Avondale Partners.

Good afternoon. Various people in the recruiting business keep telling me that any day now, we're going to see some alternatives to contingent search start taking share in that neighborhood. I'm just wondering if there are any new entrants adjacent to your business that really matter at all yet or if that is more just marketing noise?

As I just explained, it's getting harder and harder to close deals because you've got to close the client and you've got to close the candidate. There's an art to both of those.

As to new entrants, nothing has come around in the last couple of years. We've talked about LinkedIn at length in calls past. And LinkedIn is still there. It's a source. It's not the source of perm candidates for us. It's not particularly impactful to sourcing candidates for our temporary businesses. So on balance, are there any new entrants that are moving the needle? I would say no.

Are there any sources of candidates coming out of weaker industries that might help a little bit as we go through 2016?

Our candidates tend to be geographically focused. If we're talking Houston, so clearly we have Houston oil and gas candidates that have freed up by those economic conditions. But for the most part, they are available to the Houston market and not available to markets all over the country. So there is some availability created by pockets of weakness, but it's not like we can transport everybody around the country to fill a three-month engagement in Boston because we have somebody available in Houston. For the most part, it's a local business. The temp business particularly is a local business that is confined to the local market.

It's been a few years since we've seen US Protiviti be sequentially down in revenue in the fourth quarter. Is there any message there or any carryover, or is that more of a timing issue?

Let's remember now, that year-on-year Protiviti grew 15% on monster comps, so Protiviti had a wonderful fourth quarter. It is true that during the fourth quarter in the financial services regulatory compliance area, they had a couple of projects that ended earlier than expected. They had one larger project where the client ran out of budget and delayed the project for a few weeks until the New Year when they got a new budget. So there is always going to be project variation with Protiviti.

And by the way, Management Resources, which nobody has asked about, actually did better than expected in the fourth quarter sequentially and year-on-year. It's just the opposite story where again, in financial services, they had some big projects come in line better than expectation. So project timing hurt Protiviti a little bit. Project timing helped Management Resources.

So it's just the ebb and flow of projects that impacts those results. There's nothing particularly earth-shattering about Protiviti's fourth-quarter sequential performance, and here again, Protiviti had a great quarter, Protiviti had a great year. They've had the toughest comps. They?ve grown the fastest top-line, and bottom-line profitability 14% for the quarter is wonderful. We're at that mid double-digit profitability level we've long talked about. We couldn't be happier with Protiviti, but there is project variability in their revenues.

I learn something every quarter, and I'm not used to seeing you beat my expectations in temp staffing and miss on the perm side. Usually when one is stronger, the other one doesn't fall short, but this is an interesting environment. Thanks a lot.

George Tong, Piper Jaffray.

Hi thanks, good afternoon. Keith, I'd like to further explore the growth outlook for Protiviti. What trends are you seeing in pricing, in competitive dynamics, customer demand and customer penetration that could have contributed to the deceleration in growth and that might impact longer-term growth?

The deceleration in growth we're talking about, rather than growing 20% on 20% on 20%, or lag at 15% on tough comps. It certainly isn't viewed as a major issue that Protiviti slowed down from 20% to 15%.

The underlying trends in internal audit, financial services, regulatory compliance, technology security, privacy, infrastructure; we did a small acquisition during the quarter that relates to IT business intelligence data analytics. We are very proud to have them part of our team.

We feel good about Protiviti, we feel good about its prospects. We've posted very good numbers for two or three years running. We expect that to follow into 2016. Competitively we're very well positioned against the Big Four. We believe we've got Big Four-level resources that are much more responsive and much more agile for clients given our relative sizes.

Got it. And I guess as a follow-up, Max, a follow-up on the question around the rebound in international markets. Can you provide some data points that show which verticals or end markets are seeing the most positive inflection?

We talked about the UK and Germany, of course. They've been strong more or less across the board, I would argue.

It's not necessarily any vertical. Just as we are in the United States, we're very diversified. We don't have a huge client concentration by industry, et cetera. And therefore while our non-US clients are modestly larger than our US clients, we still don't have any big concentration.

Great, thank you.

Mark Marcon, Baird.

Thanks for taking my follow-up. I'm just wondering, are you seeing anything that's different in California or elsewhere on the regulatory front that's impacting the business in any way, shape or form?

The only regulatory thing I can think of, there are sick pay regulations that initially were limited to Northern California, San Francisco more specifically, that have now been extended statewide. There are a few other cities/states around the country that have also mandated sick pay benefits for temporary employees. Those put a little bit of pressure on gross margin. We're trying to pass those through, but I can't think of a regulatory requirement, a new regulatory requirement that's moving the needle in any way.

It's not exactly responsive to your question, but let me just add I was at a business meeting with a bunch of CEOs recently, and it was noted that there are over 75,000 pages in the Federal Register this year alone. I would say the regulatory state is a great ally of Robert Half. We live in an environment where there are more and more rules and regulations, and of course we're in the business of helping people deal with those. So on a positive note, regulations can be our friend as well as our enemy.

Fully appreciate that, Max. Thank you.

That was our last question. We would like to thank everyone again for joining us on today's 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'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.