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