羅致恆富 (RHI) 2018 Q1 法說會逐字稿

Hello, and welcome to the Robert Half First Quarter 2018 Conference Call.

Our host 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. We appreciate you joining us.

I'd like to preface today's remarks with a reminder that some of our comments today contain predictions, estimates and other forward-looking statements. These statements represent our current judgment as to 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 roberthalf.com. From the homepage, click on Investor Center at the top of the page. You will find the Quarterly Conference Calls link in the Investors Center.

Now let's review our results for the first quarter of 2018. Company-wide revenues were $1.395 billion, up 8% on a reported basis and up 7% on a same-day, constant currency basis from the year-ago period. Net income per share was $0.78. You may recall that in December 2017, we recorded provisional amounts and a reasonable estimate for the one-time transition tax on our foreign earnings and profits as required by the 2017 Tax Cuts and Jobs Act. At that time, we anticipated additional guidance would be released by the IRS throughout 2018 that would require us to adjust our estimate. The result of additional guidance issued during the first quarter led to our recording a $3 million charge to our income tax provision, or $0.02 per share. Excluding this tax charge, net income per share was $0.80 for the quarter.

Cash flow from operations in the first quarter was $116 million, and capital expenditures were $8 million.

During the quarter, our Board of Directors authorized a $0.04 increase to our quarterly cash dividend, bringing it to $0.28. We paid the dividend in March at a total cost of $35 million. The board also authorized the repurchase of up to an additional 10 million shares of the company's common stock. We repurchased 1.1 million Robert Half shares in the first quarter at a cost of $60 million. We have 11.3 million shares available for repurchase under our board-approved stock repurchase plan.

We were pleased with the company's performance in the first quarter, including across-the-board revenue growth in our U.S. and non-U. S. staffing and Protiviti operations, and particularly strong growth in our permanent placement division. These gains were fueled by continued small business optimism, a growing global economy and low unemployment rates in professional occupations.

We continue to invest in digital innovation initiatives that will seamlessly integrate our customers' digital experience with our industry-leading traditional professional staffing services.

Robert Half's return-on-invested capital was 35% during the first quarter.

I'll turn the call over to Keith now for a closer look at our results.

Thank you, Max.

As just noted, global revenues were $1.395 billion in the first quarter. This is up 8% from the first quarter of 2017 on a reported basis and up 7% on a same-day constant currency basis from the year-ago period. First quarter staffing revenues were up 7% on a same-day, constant currency basis. U.S. staffing revenues were $895 million, up 5% on a same-day basis, while non-U. S. staffing revenues were $293 million, up 16% when adjusted for billing days and currency exchange rates.

We have 326 staffing locations worldwide, including 86 locations in 17 countries outside the United States.

The first quarter had 63 billing days compared to 63.4 days in the first quarter one year ago. The current second quarter has 63.5 billing days compared to 63.3 days in the second quarter of 2017.

Accompanying our earnings release is a supplemental schedule showing year-over-year revenue growth rates on both a reported and same-day, constant currency basis. These figures are further broken out by U.S. and non-U. S. operations. This is a non-GAAP financial measure designed to provide insight into certain revenue trends on our operations. Also included in the supplemental schedule is a reconciliation of the non-GAAP net income per share calculation to the most comparable GAAP measure regarding the previously noted tax charge.

Currency exchange rate movements were favorable and had the effect of increasing reported year-over-year staffing revenues by $29 million in the first quarter, which boosted year-over-year reported staffing revenue growth rates by 2.6%.

Global revenues for Protiviti were $207 million in the first quarter, with $167 million coming from the United States and $40 million from operations outside the United States. Protiviti revenues were up 5% year-over-year on a same-day, constant currency basis.

U.S. Protiviti revenues were up 1% from the prior year on a same-day basis, while non-U. S. revenues were up 22%.

Exchange rates had the effect of increasing year-over-year Protiviti revenues by $4 million in the first quarter and increasing the year-over-year reported growth rate by 1.9%. Protiviti and its independently owned Member Firms serve clients through a network of 76 locations in 26 countries.

Now let's turn to gross margin. Gross margin in our temporary and consulting staffing operations was 37.2% of applicable revenues in the first quarter compared to 37.4% of applicable revenues in the same period one year ago. Higher temp-to-hire conversion fees partially offset higher fringe benefit costs.

First quarter revenues for our permanent placement operations were 10.2% of consolidated staffing revenues compared to 9.5% of consolidated staffing revenues in last year's first quarter. When combined with temporary and consulting gross margin, overall staffing gross margin increased 30 basis points versus 1 year ago to 43.6%.

First quarter gross margin for Protiviti was $55 million or 26.4% of Protiviti revenues. One year ago, gross margin for Protiviti was $53 million or 27.0% of Protiviti revenues.

Staffing SG&A costs were 33.5% of staffing revenues in the first quarter versus 33.4% in the previous year's first quarter. SG&A costs for Protiviti were 19.1% of Protiviti revenues in the first quarter compared to 18.4% of Protiviti revenues in the year-ago period.

First quarter operating income from our staffing divisions was $119 million, up 10% from the prior year. Operating margin was 10.0%. Our temporary and consulting staffing divisions reported $97 million in operating income, an increase of 7% from the prior year. This resulted in an operating margin of 9.1%. For our permanent placement division, operating income was $22 million in the first quarter. This was up 22% from the prior year and produced an operating margin of 18.4%.

Operating profit for Protiviti was $15 million in the first quarter, a decrease of 10% from the prior year, producing an operating margin of 7.4%.

Accounts receivable at the end of the first quarter were $785 million, and implied day sales outstanding, DSO, were 50.5 days.

Before we move to second quarter guidance, let's review the monthly trends we saw in the first quarter of 2018 and so far in April, all adjusted for currency and billing days.

Our temporary and consulting staffing divisions exited the first quarter with the March revenues up 6.3% versus the prior year compared to 6.2% for the full quarter. Revenues for the first two weeks of April were up 7.6% compared to that same period in 2017.

For our permanent placement division, March revenues were up 16.7% versus last year compared to a 15% increase for the full quarter. For the first three weeks in April, permanent placement revenues were up 24.5% compared to the same period last year.

This information is designed to highlight some of the trends we saw during the first quarter and so far in April, but as you know, they represent brief periods of time and we caution against reading too much into them.

With that said, we offer the following second quarter guidance: Revenues, $1,400,000,000 to $1,460,000,000; income per share, $0.81 to $0.87.

The midpoint of our second quarter guidance implies year-over-year revenue growth of 7% on a same-day, constant currency basis, including Proviti, and EPS growth of 31%.

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 Max.

Thank you, Keith.

We were pleased to see broad-based year-over-year revenue growth in all lines of business in the first quarter. International staffing and Protiviti results were solid, and our U.S.-based operations continued to do well.

Despite fewer-than-expected new jobs being added to the U.S. economy in March, the job market is strong with unemployment holding steady at 4.1% for several months now. The unemployment rate is even lower in the professional occupations in which we specialize. Small and midsize businesses remain optimistic about their growth prospects according to the latest Vistage CEO Confidence Index and the NFIB's small business optimism index. This favorable business sentiment is fueling job growth in this segment, which is our key customer base.

At Robert Half, we were also optimistic. Our brands were among the industry's most recognized and respected. Our financial position is strong, and our field management teams are experienced and highly capable of growing the business.

Our industry is at an inflection point, and digital transformation is at the heart of it. We are developing proprietary digital solutions that give our customers multiple ways to interact with us online, from submitting job orders to browsing for job candidates. And we continue to test new online services that we believe will appeal to even more customers.

Proviti is also expanding its offerings by complementing its core internal audit and internal control solutions with a widening suite of consulting services in risk and compliance, technology, data and analytics, and business performance improvement.

We believe we are just scratching the surface when it comes to the opportunities for us in the space where Protiviti leverages our staffing resources. Blending the capabilities of both businesses enables Proviti to provide Big Four-quality consulting services at competitive prices. Global and regional consulting firms that compete with Proviti generally lack the flexible resource capabilities of Robert Half staffing operations.

Now Keith and I would be happy to answer your questions. We ask that as usual you please limit yourself to one question and a single follow-up as needed. If time permits, we'll try to return to if you have additional questions. Thank you.

(Operator Instructions) Your first question comes from Mark Marcon from R.W. Baird.

Good afternoon and congratulations on the quarter. I thought the performance in Accountemps was particularly noteworthy. And I was wondering if you could give some commentary as to the extent that perhaps lease accounting or rev rec or the changes in taxes are contributing to the growth. And then as a follow-up, could you also talk a little bit about what the bill/rate expansion was relative to hours? And are you seeing a pickup in terms of orders as it relates to hours?

Sure, Mark. While each of the items you referenced, rev rec, changes in taxes, lease accounting, they were all helpful for Accountemps. I don't think any of them dominated the acceleration in growth. Growth was broad-based. It was across geographies. It was across skill levels or functional roles as we would call it. Generally, the backdrop remained high, sentiment optimism were high. Regulatory relief, tax cuts, positive GDP growth, you've got more projects being started by clients, more sense of urgency. As to bill/rate increases, as an indication that clients are beginning to pay more, they are beginning to acknowledge the supply/demand dynamics in the marketplace. Our build rates were up 2.5% year-on-year for the quarter. So that's up from the fourth quarter. Frankly, that's expected and welcomed. It's been a long time coming. We do see that continuing to rise as we move forward, and that's typically a good thing from a margin standpoint.

That's great. Just one more. Can you talk a little bit about the conversions? Because it sounds like that was also positive.

So conversions were up 20 basis points, which was a nice positive. Coincident with the demand for more full-time hiring, there was demand to convert temporaries that were performing well on engagements. As you know, conversions have lagged in this recovery. It's certainly another puzzle piece that falls into place and make sense as the labor market tightens, as there's more urgent demand that not only would there be more hiring of people that began as a full-time hire, but also more hiring of those that began as a temporary that perform well and didn't get converted. So we were encouraged, frankly, across the board from an hours-billed standpoint, from a conversion standpoint, from a number of permanent placement standpoint.

Your next question comes from Dan Dolev from Nomura.

Great results,congrats. Two questions. One on the U.S. perm versus temp. I look at temp growth in the U.S. It definitely accelerated, it looks great and so is perm. But how should we think about temp growing about 4 percent-ish and then perm growing 15%? How does that compare to previous cycles? And how should we think about it going forward?

Well, if you look back over time, what you'll see is that directionally, temp and perm move together, that they tend to peak and trough at the same time. Within the peaks and troughs, there is volatility. There's certainly more volatility on the perm side than on the temp side. But frankly, it's usually a earlier cycle sign that perm outperforms temp. So we're encouraged that with the pent-up demand for full-time hiring that, that's beginning to happen. And that typically bodes well for further temp acceleration down the road.

That's very interesting. I didn't know that. And then a follow-up question is in your temp guidance, can you maybe give some color as to U.S. versus international cadence?

So our guidance overall is pretty straightforward. We pretty much superimposed our revenue growth rate from Q1 on to Q2. We've pretty much taken our gross margin and SG&A structure and superimposed among Q2, although maybe there's a touch of upside sequentially in our guidance versus what we just reported. U.S. versus non-U. S., I would say that, if anything, we show a little acceleration in U.S. and a little deceleration in non-U. S. typically more because of comps than anything else. But frankly, both are strong. As you saw, we started out of the gate in April very strong, and that was both in the U.S. and the non-U. S. So good across the board, frankly. And our Q2 guidance model looks a whole lot like Q1 actual.

Your next question comes from Andrew Steinerman from JPMorgan.

I wanted to ask a little bit about the 7% revenue growth at the middle of the second quarter guide. Obviously, the April start on both temp and perm were faster than that 7%, and just wanted to know how do you set the 7% at the middle.

Well, I'd say, first, we look at how did we exit the first quarter. And we exited the first quarter growing about what we grew for the entire first quarter, so that's one input. Clearly, we had a stronger start the first couple of weeks of April than our exit to the first quarter and the first full quarter. And so to the extent the April start plays out over the course of the quarter, that would certainly be upside relative to our guidance. We hope it's conservative, but it essentially flows through into the second quarter, the year-on-year growth we had in the first quarter. The comps get a little bit tougher in the second quarter than the first but not significantly.

That's all right. And then just a second question on build rates. You were very clear to say that you welcomed the acceleration of 2.5% growth in the quarter. Could you just give a comment on domestic versus international? Are you seeing this acceleration in bot markets? Is it a mix thing? Just give some color on domestic versus international on the same question of what's happening with bill rates.

I would say that most of the acceleration that you see this quarter is in the United States, that they're stable outside of the United States. But the acceleration that you saw is principally a U.S. phenomenon.

Your next question comes from George Tong from Goldman Sachs.

In the temp staffing business, gross margins compressed about 20 basis points due to higher fringe benefit costs. Can you discuss how you expect these costs to evolve, and what your views are broadly as it relates to gross margin on just wage growth and bill/pay spreads over the next two to four quarters?

So they did compress 20 basis points. And if you take out the 20 basis point improvement in conversions, they compress 40 basis points due to fringes. And we're talking about holiday pay, we're talking about mandated sick pay. To some extent, we're talking about medical benefits that we pay to certain of our temporaries. Our plan is to raise our pay/bill spreads as we move forward to recover those additional costs. The fact that pay rates are rising and clients acknowledge they're having to pay more, gives us cover, not only to pass through the additional pay rate but also to recover those additional fringes as well. We made sequential progress in the first quarter versus the fourth in our pay/bill spreads. We had credits in the fourth quarter that didn't repeat that camouflaged that progress. So we're cautiously optimistic that as we move forward throughout 2018, that we will see some relief on the gross margin side. Hopefully, conversions will continue to remain strong. Also, the comparisons gets easier as we move forward into 2018. So for all those reasons, we're cautiously optimistic that come the second half of 2018, we won't have temp gross margin dilution compared to the year-ago period.

Your next question comes from Jeff Silber from BMO Capital Markets.

In your prepared remarks, you talked about the bullishness of your clients in terms of their hiring. I'm just curious how you are feeling about that. Have you accelerated your own internal hiring since the beginning of the year? And if so, when?

We are bullish about our clients' bullishness. That said, we had front-ended internal hiring of recruiters and salespeople a few quarters in advance of the acceleration we've seen in the past couple quarters. We have begun to add to our internal staff again. Our plan is to keep those additions in line with the revenue growth rates that we're seeing. So to some extent, we hope to get some leverage of the front-ending of the adds we made the last couple of years. On the other hand, we want to continue to feed the hot hand and we want to continue to have adequate recruiters and salespeople as things continue to accelerate. So we will add to staff. We have added to staff, but not disproportionately to the revenue growth rates that we're seeing.

Okay, that's helpful. And then, Max, in your remarks -- towards the end of your remarks, you talked some of the proprietary digital solutions that you're developing for your customers. I'm not expecting you to give away the secret sauce. But can you give us some high-level examples of the kind of things that you're working on? That would be helpful.

Well, I'm watching Keith here to give me the signal, but I've got to be careful what I say because it is proprietary. As you know, we've done a lot to date that's obvious in terms of enabling clients to search our databases in different markets and so forth. We've done a lot to make it easier for applicants to apply. All of those were probably expected. I'm a little reluctant to say much beyond that, but I'll see if my partner here has anything he wants to add.

Well, we've talked now for several quarters about we intend to be as world-class in the digital experience our clients have as the offline traditional experience that they've had with us. We continue to build-out ways that we digitally interact with our clients. And we think it's important that, that be integrated with our traditional service so that there's transparency whether you're a client, whether you're a candidate or whether you're an internal staff person that they see it all no matter how they interacted. Because frankly, the same client or the same candidate might sometimes interact traditionally and sometimes interact digitally, and it all needs to be understood, analyzed and optimized without regard to have the interaction occur. So it's not just about building digital interaction, it's about doing it in a way that's integrated with what you already do. As Max talked about, we have had what we call candidate browsing for some time. We're the first major staffing firm to allow anybody to go online and see our candidate database. Anybody can go this second to roberthalf.com and do that. We're on a multi-quarter journey here to further optimize, to further make available to clients and candidates, and to make it easier to interact with us digitally as well as traditionally.

Your next question comes from Tim McHugh from William Blair & Company.

Keith, you usually walk through the margins. I know what you said at a high-level, it looks similar to what you saw in the first quarter. Is there any distinctions? Does that play out through all the kind of pieces?

All the pieces will be a little bit different, but generally, the margins won't look that different certainly than our guidance and aren't that different from first quarter actual. Protiviti tends to do a little better sequentially in the second quarter than the first from a margin standpoint. So we would expect them to have higher margins in the first quarter, particularly since they had a couple of one-off items that reduced their margins in the first quarter. But generally speaking, margins for Q2 guidance are about the same. They're a little bit higher. The little bit higher is principally because of Proviti seasonal and absence of one-offs that they had in the first quarter.

Okay. And you mentioned -- someone asked earlier [about] hiring plans internally and you talked about growing in line with or at least not disproportional to revenue. I guess connected to that, can you talk about SG&A leverage for the staffing business as we go forward from here? Are you looking to lever that line in the next 6 to 12 months? Or I guess, are you thinking about you're bullish enough that you're more focused on adding headcount than trying to find leverage out of that line in the near to medium term?

Well, we're very bullish. We do intend to add heads but not disproportionately. So we still think we could get a little leverage on the front ending of the heads that we did the last couple of years. Also, keep in mind that digital innovation spend is directly charged against SG&A and we do not see that subsiding over the next 6 to 12 months. So while we might get a little overall SG&A leverage, I wouldn't expect it to be huge in the next 6 to 12 months.

Okay. And then lastly, the April trends, can you dissect how does Easter impact that as we look at those numbers, the timing versus 2017? Did you try and cut it that way at all?

Well, we looked at it. Everybody has a theory both as to Easter as to how weather hit and impacted. Frankly, it's all noise. I wouldn't get too carried away about Easter impact or weather impacts. The facts are, we had a very solid start notwithstanding both of those matters. We feel great about it. But as far as the guidance we gave at midpoint, we didn't dial that further acceleration up. We hope it continues.

Your next question comes from Manav Patnaik from Barclays.

This is Ryan Leonard on for Manav. I guess, just on that last point, you had called out snow storms when you gave the 1Q guidance. I guess, was there any impact to the first quarter numbers?

Right, but one of the reasons we called out the storms, because relative to a couple of weeks, it has a bigger impact than it does relative to a full quarter. We typically don't talk a lot about whether because every year, you've got some kind of weather impacts. But when you're talking about a very short post-quarter period, weathers can have disproportionate impact. That's the only reason we called it out.

Got it. And then -- so I guess, excluding that tax -- the onetime portion of the tax charge, the rate obviously came in towards the lower end of the range. From your understanding, do you think you were behind any of the onetime tax charges? And is the 26% to 28% range still the right way to think about it?

Absent further clarifications from IRS on the transition to tax code, we do think we're behind them. The 26% to 28% estimate that we gave a couple of quarters ago is still intact. The midpoint of our guidance uses a rate of 27%, which is right in the middle of that range. So absent further guidance, the onetimes are behind us, and the rate we see going forward is consistent with the rate we expected it to be.

Your next question comes from Tobey Sommer from SunTrust.

I wanted to ask a question about market share. Do you expect to increase market share toward domestic S&A staffing? And if so, how important and integral are your online initiatives as well as something you referenced in the prepared remarks, the cross-selling to consulting customers?

Well, we're always looking to increase market share, domestic and international. Online is a piece of it. Something we haven't talked a lot about, which we're getting a lot of traction with, frankly, is our staffing operations, particularly in the accounting and finance area, Accountemps, Management Resources, going to market together with Protiviti. We've had some very significant joint wins where they go to market together. Protiviti manages the project. Much of the staff that work on those projects come from our staffing operations. So we've clearly taken those joint activities to a new level. It's starting to be meaningful. It's starting to move the needle. We're delighted by that. We believe we have competitive advantage by having under one roof both a world-class consulting operations, Big Four consulting operations in Protiviti, as well as the undisputed leader in accounting and finance staffing with our finance and accounting brands. So it's a wonderful thing, and it's been a long time coming. But we're getting more and more traction, we're getting more and more wins, we're having meaningful wins as we go to work together between staffing and Protiviti. And I think that ultimately helps with market share not only on the staffing side, but on the consulting side as well.

How much of the growth in Accountemps, in Management Resources, the two units you cited, is the result of cross-selling and going to market together with the consulting and the Protiviti business?

Well, we clearly don't break it out. I'd say it's more dramatic in Management Resources than it is in Accountemps, but it's not insignificant with Accountemps either.

(Operator Instructions) Your next question comes from Hamzah Mazari from Macquarie.

This is Mario Cortellacci filling in for Hamzah. Wanted to get a sense of whether you see Robert Half diversifying further, whether it be organically or through acquisition, out of accounting and office admin as you have in the past and, say, areas like tech? And maybe you can give us a quick update on your M&A pipeline.

Well, I'd say we're already in tech. Tech is beginning to show signs of life for us. We finally had positive year-over-year growth. If you looked at the late quarter and early April trends, tech participated quite nicely in the acceleration. We're very pleased with that. As far as M&A pipeline, based in Silicon Valley, we see a lot of online-centric start-ups related to human capital staffing to gig economy. We've looked at many of those opportunities. As we've said before, given the opportunity to buy computing capacity in the cloud, given the number of applications in the cloud that are available, we think there's a stronger opportunity to build versus buy than ever. And as we talked about earlier in the call, we're hard at work building. And we've had early success with what we built and we continue to leverage that as well.

And just a quick follow-up and I'll turn it over. Just relating to what you just said regarding new entrants, I know there's been a divergence, obviously, minus this quarter, and your bill/pay and then also wage inflation. I wanted to see, I guess, what your thoughts were on -- if new entrants maybe could be affecting those trends, or what you see, or what you have been seeing going forward.

Well, I don't think new entrants have had much impact on pay/bill trends or pay/bill spread trends, frankly. There's been a very spirited debate for many quarters about how much slack has there been in the labor force throughout, much less the professional segments. We've long said that we thought there was more slack than the overall numbers would indicate. That slack is beginning to tighten and we are seeing wage inflation again, beginning to see it anyway. And typically, that's a good thing for us. Typically, that's a margin expansion opportunity for us. And new entrants that, frankly, in the temporary health business aren't that prevalent, aren't really moving the needle in that way.

Your next question comes from David Silver from Morningstar.

So a lot of the questions on this call has been posed maybe to the managers of this company, but I'd like maybe to change the perspective to the largest owners of the company. So you've always been a cash-rich company. And starting with this quarter, I see a pretty big, permanent maybe 10 percentage point decline in your effective tax rate. Last year, your pretax income was over $500 million. This year, it's probably going to be closer to $600 million. So that 10 percentage point drop is basically increasing your already sufficient financial flexibility. So as the major owners of this company, what is the highest and best use of that incremental cash flow? In other words, will we see a significant increase in cash returned to shareholders? Or might we see increased investments going forward? So just if you could comment on what you see as the optimal way to deploy what's going to be a significant step-change upward in your free cash flow and financial flexibility?

Well, I guess the first comment I would make is that individually, we are very large owners of the company as well. And in fact, by far and away, the largest asset we own is the stock of Robert Half. So we would like to think that not only can we think like managers, we can also think like owners. Further, we have a long history of returning our free cash back to shareholders through a combination of buybacks and dividends. We started the dividend in 2004. We've raised it every year since. I think the compound growth thereafter is around 12%. We dollar-cost-average on the buyback. We don't try to market time. I think we've reduced our outstanding around 25% in the last 10 years. If you look at the average price we paid over that period of time, it's around $31. So we've done okay. But when we think of capital allocation, generally, we first look to what does the business need to thrive and to grow. Given the cash flow characteristics of our business, we can not only do that, but we also have free cash flow. And our capital allocation is what I just described. We're very proud of our return on invested capital, which I believe was 35% for the quarter. That's high, not only for staffing firms, but any service company, frankly. So we are proud of our capital stewardship, of our capital allocation over long periods of time, and we think it's served the owners quite well.

Yes, I completely agree with everything Keith just said so well. I'd just add that much of our capital expenditures and other investments are designed, as we tried to note, I think, in many conference calls and certainly in our annual report, we're trying to develop proprietary solutions that we think will give our customers multiple ways to interact with us. We also think that by being very careful as it were concerning M&A activity, that we have an expectation that that path will carry less risk and better opportunities for return because we think the opportunities are significant and we can develop many of our own proprietary solutions. So there's a rationale to what we do. We do like that high return on invested capital. It feels like a nice hot shower in the morning. Some people have urged us to lever up and so forth, but that doesn't seem prudent to us given our goals, as Keith articulated, in terms of returning excess cash flow to stockholders through buybacks and, of course, through increasing dividends.

And just to clarify, no, Keith's point was the one I was trying to make was that you're both leaders from an operational point of view, but you're also the largest shareholders. So I was kind of asking you to wear both hats for a moment and share a slightly different -- potentially a slightly different perspective. So thank you for that. I appreciate it.

Thank you for the question.

Right. We're very grateful to be able to wear both hats.

And your last question comes from Jeff Silber from BMO Capital Markets.

I'm not sure if you talked about this. But if you look at the operating profit for Protiviti, the operating margin was down a bit year-over-year. It looks like it was all SG&A related. Can you just give us a little bit more color what happened there? And is that something you expect to continue?

Right. So as we talked about on last quarter's call, they have been doing some investing as their pipeline heats up. Further, for the quarter, they had a couple of one-off items that won't repeat, such that we believe for the second quarter, you will see a better profitability from Protiviti than you saw in the first quarter. Their pipeline is very strong across their solutions, FSI, tech security, going to market with staffing. They've now fully absorbed some prior project-ins, which are now anniversaried. And the investment hiring that they've done is getting traction. We're very bullish on Protiviti for the second quarter and the second half of the year, but they did have some one-offs in the first quarter that impacted their profitability.

Thank you very much. That was our last question. We appreciate your interest.

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.