Hello and welcome to the Robert Half Second Quarter 2016 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. Harold M. Messmer - Chairman & Chief Executive Officer: Thank you, and good afternoon, everyone; and 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 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 About Us tab, go to our Investor Center, where you will find the Quarterly Conference Calls link. Now let's discuss Robert Half's second quarter 2016 results. Quarterly revenues were $1.344 billion, up 6% from the second quarter one year ago. Income per share was $0.71, also up 6% from last year's second quarter. Cash flow from operations was $129 million, and capital expenditures were $25 million in the second quarter. We paid our stockholders a quarterly cash dividend of $0.22 per share on June 15, for a total cash outlay of $29 million. We also repurchased one million Robert Half shares during the quarter at a cost…

Your first question is from Mark Marcon with R.W. Baird. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): Good afternoon. I've got one question and one follow-up. With regards to the first question, could you just talk a little bit about the trends that you are seeing in RH Technology, specifically with regards to what you're seeing in terms of order rates relative to fill rates and how that's impacting trends? And then the second question has to do with what you're anticipating in terms of the new systems that are going into place in the U.S. in the third quarter, both in terms of potential disruption for revenue as well as incremental expense that maybe just for one or two quarters? Thank you. Harold M. Messmer - Chairman & Chief Executive Officer: Sure, Mark. I'd say, our Robert Half Technology division – our growth rates did slow during the quarter on very tough comps. Note that a year ago, we did grow at 19%. For our Tech Support division or subdivision, which is desktop support, helpdesk et cetera, clients did get more cautious on the demand side. There was less sense of urgency. For our tech development positions, which were the programmer, analysts, the software engineers, candidate supply was the issue which continued to tighten. Further, in the tech development area, we withdrew from a very large client due to their, what we viewed, as excessive pricing demands. Our support and development mix is about 50-50 based on hours, and it's 40-60 in favor of development based on dollars. As it relates to our new systems, let's talk a little bit about those then we'll talk about impact as well. So first of all, we're replacing 15-year-old proprietary legacy systems which were very difficult to use…

The next question is from Sara Gubins from Bank of America Merrill Lynch.

Great. Thanks for taking my question. Protiviti slowed down quite a bit in the U.S. the growth rate. Could you talk about the trends that you're seeing there and what you're expecting aside from the impact of the new project management system? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Sure. So Protiviti did grow 8% on super tough comps. They grew 23% a year ago, but clearly fell short of their estimates as well. So our FSI regulatory consulting practice was negatively impacted by heightened client cost-cutting, which impacted both our hours billed and our rates. New projects that we started had lower rates than previously completed projects. Our other solution practices had a very solid quarter. Our gross margins compressed by about 180 basis points due to this lower mix of higher margin, FSI regulatory practice and the lower staff utilization attributable to less-than-expected revenue growth. Protiviti operating margins were still quite good at 9%, but they certainly compared unfavorably to a year-ago's very strong 11%. Our Q3 Protiviti guidance assumes mid single-digit revenue growth, again, on very tough comps. They grew 23% a year ago in the third quarter. Operating margins, which – while they're projected to rise sequentially, they will be quite a bit lower than the very high levels a year ago.

Great. Thank you. And then, last quarter you had talked a bit about seeing lengthening in the sales cycle with some caution on the client side, but confidence on the candidate side. Have you seen any changes in that in the last couple of months? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Well, on the client side, we would say they're incrementally more cautious, they incrementally have less sense of urgency, and therefore, there is some slowing for that reason. On the candidate side, the most acute supply issue we have is Tech development, but even in the other divisions we see the lower level positions, call it accounting operations, with relatively more supply than we do the upper level positions where supply is more of an issue, but not as much of an issue as it is intact. I think one of the highlights for the quarter is how we did – how well we did with our gross margins that's particularly in accounting and finance and that's not only better pay/bill spreads, but that's also mix gravitating to higher level longer duration assignments. So, we were very pleased with our accounting gross margins during the quarter.

Thank you.

The next question is from Jeff Silber from BMO Capital Markets.

Thanks so much. Wanted to focus on your 3Q guidance, you were just kind enough to give us a little bit more color on Protiviti's impact on the guidance. Can we do the same thing on the Temp and Perm divisions if we can talk about revenue and margin trends you're expecting in the third quarter? Thanks. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: So overall, our staffing growth rates do decelerate slightly, but that's less than a point. As we just said, clients remain cautious. There's less sense of urgency. Our higher level and demand candidates have options as we've talked about in the past. We've got the conversion to our Salesforce platform that we've also talked about. So, absent the Salesforce conversion, the trends would say there's some continued slowing, but it's not necessarily off trend line from what it has for the past few quarters.

Yeah. And I'm sorry, that would be both – that would be the Temp side. How about the Perm side, and again some margin color would be great. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Okay. The Perm side, there the lengthening of the sales cycle clearly has an impact. You've got clients ever more selective. They want to see more candidates before making a decision. There is more vetting as a way to slow play us or slow the process generally. So, we clearly are seeing sales cycle slowing in the Perm side. As we go down the P&L, gross margins, we do expect to see up 10 basis points to 20 basis points year-over-year due to continued strong spreads, due to continued mix shift to the higher level accounting and finance assignments. Protiviti gross margins going to be down 3.5 percentage points to 4 percentage points. That's lower mix of the higher margin FSI regulatory and it's the cost impact of the annual campus hires and the interns, which come on board in the third quarter. SG&A up 60 basis points year-over-year, 40 basis points to 50 basis points of that is the Salesforce and Protiviti conversion. One thing that was quite unusual in the quarter and continues on into the third quarter a bit, is our internal medical insurance costs. For the first time in many, many, many, many years, we had a negative surprise in our internal medical insurance costs which were up almost 40 basis points into the second quarter year-over-year. Those higher costs are expected to continue into the third quarter, but maybe not quite to that extent on a year-over-year basis. Protiviti's SG&A would be up 1 to 2 percentage points, with the additional training and travel cost related to their conversion, which then as you go down to the P&L, at our midpoint of guidance, you've got Temp operating margins down about 50 basis points primarily due to the higher SG&A from the conversion to Salesforce. Perm operating margins down 1 to 2 percentage points, primarily because of the conversion to Salesforce.com. And then Protiviti, it's operating margins would be down about 5 percentage points, as the combination of the lower gross margin that we talked about earlier and the higher SG&A because of, one, their conversion; two, the training and travel costs relative to their new hires and their interns. But again, remember, comparable for Protiviti, its third quarter operating margins were 15.7% Those were the toughest operating margin comps we had of any division a year ago. So while they will make sequential progress in both revenues and operating margin, notwithstanding their conversion, they're comparing to a year ago's very high comps.

We appreciate the color, if I could sneak just one more in; just about tax rate and share count for the third quarter. Thanks so much. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Yeah, the tax rate is going to be in the range of 38.5% plus or minus 0.5%. And the share count, if you carry through the repurchases that we did during the quarter and assume some in the quarter to come, the share count should be somewhere down 700,000 shares, 750,000 shares. Note that, on a year-to-date basis, we've returned over 90% of our free cash flow back to shareholders, either as a dividend or as stock repurchases.

Okay. Thank you so much.

The next question is from Tim McHugh from William Blair. Stephen H. Sheldon - William Blair & Co. LLC: Hi. It's Stephen Sheldon for Tim today. Thanks for taking my questions. First, strong performance internationally in the quarter, so could you talk some more about what you're seeing in Europe specifically on a country level basis, and also what trends are like throughout the quarter and end of July? Thanks. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: So internationally, as we talk about for many quarters, Germany carried the day. Germany had a very, very strong quarter that we are very proud of. We've invested head count in Germany for some time and it's paying off significantly. Belgium also had a very strong quarter. The UK was solid. France, a little less so. Australia, very strong quarter; and Canada not quite as negative as it had been in quarters past. The trends, they're mixed, they're uneven. I would say, those that were strong in the second quarter that continued their strength into the third quarter. So we certainly have high expectations of Germany and Belgium specifically. In the UK, with all the Brexit talk, remember UK is 3% of our revenues. While on the one hand some clients have deferred hiring, on the other hand some clients need help figuring out what Brexit may mean, which is stimulated hiring. And net-net so far, there hasn't been much impact, but the focus is on so far. Stephen H. Sheldon - William Blair & Co. LLC: Okay, great. Thank you. And then just one follow-up. You mentioned that you withdrew from a large client in RH Technology. Could you just quantify the impact of that in the quarter? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: It's not you huge, huge, but it's 2 percentage points or 3 percentage points on our growth rate. Stephen H. Sheldon - William Blair & Co. LLC: Okay. Thanks.

The next question is from Gary Bisbee from RBC Capital Markets.

Hi. This is actually Jay Hanna on the line for Gary today. Given the level of margin contraction, particularly within Protiviti, how much of that is attributable to additional new hires in the quarter if at all? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Well, so the margin contraction is principally mix-related, where you've got significantly less mix toward higher margin financial services regulatory compliance. There weren't necessarily that many hires during the quarter, but you had the carryover impact of the raises that were granted January 1. Protiviti's hiring is largely campus hiring and interns, and that largely occurs during the third quarter. So while Protiviti will have a nice lift sequentially in quarter three revenues, they will also have incremental payroll costs from the campus hires and the interns they committed to almost a year ago.

Okay. Thank you. And then, just given the current level of demand in recent margin performance I guess in this quarter and previous quarter, with reduction in head count a strategy to consider going forward or at least somewhat of a slowdown? Harold M. Messmer - Chairman & Chief Executive Officer: Well, so first of all, let's not forget, overall we're still growing. And while we front-ended our head count for this year into the latter part of last year, we've almost caught up with that. So the thought would be, because we're still growing our headcounts will grow a little toward the divisions that are growing. And again, I would offer that our accounting and finance divisions; particularly Accountemps, particularly Management Resources, they had very good quarters and we will add to their headcounts. That said, we had other divisions that aren't showing that kind of growth, so we would let attrition play out to some degree and fund the head count additions to we make to those divisions that are growing. So net, we see small increases to our net overall head count. But let's not forget, we need to continue to feed our accounting and finance staffing divisions, because they're growing nicely.

Okay. Thank you.

The next question is from Anj Singh from Credit Suisse. Anjaneya K. Singh - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks for taking my questions. The first one, following up on the Protiviti margins. What's your outlook for Protiviti margins in light of some of the issues on mix and the CRM systems migration that you highlighted? Do you still anticipate hitting double-digit operating margins for the full year, as you did at Q2? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Well, we certainly haven't changed our long-term view of Protiviti operating margins. Clearly, given that we made head count commitments almost a year in advance, with the benefit of hindsight, we were a little aggressive in the hiring that we committed to with Protiviti. But over a few quarters, we can work that out. We had double-digit operating margins the second half of last year. We still believe, and our estimates consider, that we'll have double-digit operating margins in the second half of this year, just not as strong as they were a year ago. So, there's been a pullback with our financial services clients that have gotten much more focused on their costs. That's had a double impact, because it's not only fewer hours for us, but they're the most profitable hours that we've had, but that's something we can adjust to over time. It's just that when you commit to your staff levels three quarters or four quarters in advance, you can't turn on a dime marrying that to the demand as we now see it. So, the margins are still going to be good and decent and double-digit. There's nothing wrong with a business growing at Protiviti's rates, given the comps that they have, to have low double-digit operating margins. It's…

The next question is from Randy Reece from Avondale Partners.

Hey, guys. This is Ben Flox on for Randy. I wanted to circle back on Perm for a second. Can you talk about the competitive landscape there and kind of how that's escalated over the last four quarters to six quarters? Harold M. Messmer - Chairman & Chief Executive Officer: I'm not sure the competitive landscape's really changed in the last four quarters to six quarters. Again, I think it's more about our middle market client base getting incrementally more cautious.

Okay. Harold M. Messmer - Chairman & Chief Executive Officer: I really don't think it's about new competition or heightened competition in the last four quarters to six quarters.

Okay. Got it. And then, can you talk about – when you talk about Temp trends you're seeing in the first few weeks of July, can you speak to that specifically to the U.S. and kind of where you're seeing strengths and weaknesses? Harold M. Messmer - Chairman & Chief Executive Officer: There are always state-by-state differences. Northern California is the strongest, it's been the strongest for some time. That's not surprising. Texas is the weakest, it's been the weakest for quite some time. That's not surprising. Everything else is somewhere in between. There are always pluses and minuses. I think nothing just screams at you and moves the needle in a major way.

Looking at segments rather than geographically? Harold M. Messmer - Chairman & Chief Executive Officer: Segments, the trends that you've seen in the last few quarters continue. We would expect that Accountemps and Management Resources would do the best in quarter three. We would believe that Robert Half Technology and OfficeTeam, again with very tough comparisons, would do, not as well, as the accounting and finance divisions.

Okay. I appreciate the color. Thanks, guys.

The next question is from George Tong from Piper Jaffray. George K. F. Tong - Piper Jaffray & Co. (Broker): Hi. Thanks for taking my questions. Digging deeper into the Protiviti business, can you discuss your expectations around financial services, regulatory mix going forward, and any actions you have to improve staff utilization? Harold M. Messmer - Chairman & Chief Executive Officer: So, we believe that FSI regulatory mix will continue to drift downward and we've seen that now for two quarters in a row. But we've built that into our guidance, and notwithstanding that, we're still estimating that we're going to get nice double-digit operating margins in the third quarter. Staff utilization, again as we talked about earlier, we commit to campus hires, we commit to interns well in advance. We remain committed to them, and it will take a few quarters to get the utilization backup to where it had been in the near past. As we look forward to this year's hiring season, on-campus and within interns, we will throttle that back further. We'll look at the contractor usage of Protiviti, where they do have variable labor costs, primarily with contractors sourced through Robert Half. Those will be looked at. But we will have solid operating margins for the next few quarters, and in the background we will throttle back our capacity, our additions to capacity given new revenue realities. George K. F. Tong - Piper Jaffray & Co. (Broker): Very helpful. In your temp and consulting segment, gross margins expanded year-over-year yet operating margins declined. Does this reflect elevated recruiter hiring or other investments you made in the quarter? Harold M. Messmer - Chairman & Chief Executive Officer: No, it's actually quite simple. The delta is the outside medical insurance expenses we incurred during the quarter which were about a 40 basis points surprise. It is very unusual that we would have that kind of spike in that short a period of time. Some of that spike will continue for a quarter or two, but we're certainly told by our outside advisors and actuaries in that area that our company specific trend at the moment is very unusual and would expect to normalize itself in the next year. George K. F. Tong - Piper Jaffray & Co. (Broker): Got it. Very helpful, thank you.

The next question is from Manav Patnaik from Barclays.

Hi, thanks. This is Ryan filling in for Manav. Just a question on buybacks, looking out obviously another pretty solid quarter. Is that a trend you think you could continue or is it something where it's clearly opportunistic and you'll just kind of play it as the market goes? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: I think, again, so far this year we return to shareholders about 92% of our free cash flow. That's a continuation of something we've done for many, many, many quarters. So the plan would be, we first determine what our operating requirements are and then with the residual, we pretty much return it to shareholders, first through dividends and then with what's left through buybacks. So what we did during the second quarter is very similar to what we've done in prior quarters and as the price goes up and down, we get fewer or more shares and over time we dollar cost average and it seems to work out just fine.

All right. Fair enough. Thanks. Is there anything in the quarter to call out just in terms of kind of one time seasonality events, obviously, we saw it in the May jobs report there seem to be an outsize impact I guess from the Verizon strike. I mean, were there any kind of timing things in the quarter that kind of, could skew growth trends in your business? Harold M. Messmer - Chairman & Chief Executive Officer: I don't – nothing comes to mind and we were not impacted by Verizon.

Fair enough, thanks a lot.

The next question is from Andrew Steinerman from JPMorgan.

Hi Keith. I understand you're saying that the midsized clients are just more cautious on the labor front here. I was just wondering if you sense that the U.S. is not in a 2% real GDP environment like our JPMorgan economist think we're already back in. And so, what needs to change for Robert Half's revenue growth to stabilize and perhaps reaccelerate? Is there anything on the supply side? M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Well, I mean, frankly, Andrew the only division that's significantly impacted by supply is Tech Development for us. The rest of our divisions, primarily need more orders...

Right. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: Than they need more candidates. So, you ask kind of in a double negative way, it appears that the U.S. economy is slugging along in the 1% to 2% GDP path that it has for some time, but as clients have gotten more cautious, our growth rates have slowed. And then the third quarter is going to be a very noisy quarter for these conversions that we've got going, that are going to impact virtually every single person that works for us in the United States. So third quarter, it's very hard to figure out trend lines given how noisy it's going to be. But if you step above that, it seems to be more of the same versus the last three quarters – versus the last few quarters, maybe with clients getting a little more cautious.

Right. But if you... M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: What has to change – what has to change is...

Yeah. M. Keith Waddell - Vice Chairman, President & Chief Financial Officer: They need to get less cautious, right? They need to do less vetting. They need to say yes, I'll take them rather than show me somebody else or let me compare.

Perfect. Thanks Keith. Appreciate it.

The next question is from Sara Gubins from Bank of America Merrill Lynch.

Hi, thanks for taking my follow-up. I just wanted to clarify your response to a prior question. The large client that you withdrew from, you said it was a 2% to 3% impact on the growth rate, was that for revenue overall or for Robert Half Technology specifically? Harold M. Messmer - Chairman & Chief Executive Officer: That's just Robert Half Technology.

Okay. Thank you.

And the next question is from Randy Reece from Avondale partners.

Hey, guys. Ben Flox again. Just wanted to follow-up on one last thing kind of higher level. If hiring demand in the U.S. does regain some momentum, how far behind should we expect Accounting and Finance Staffing demand to lag? Harold M. Messmer - Chairman & Chief Executive Officer: Well, I would argue quite frankly it's doing the best in the current environment, and therefore, would participate quickly in an improved environment. So it would be the one I would least be concerned that there's any lag for. As I say, this trend toward higher level more complex has certainly served it well for the last few quarters relative to the market and our other lines of business, but I would think as market conditions improve, because I think you'd see it in our accounting operations positions which tend to be more transactions volume driven than the more complex accounting analyst, senior accountants and above. So I don't think there'd be that much of a lag in Accounting.

Okay. That's very helpful. Thank you.

It looks like we have just one more question. The last question is from Tobey Sommer from SunTrust.

Thanks. I'm curious in the tech space, you had contracted – there was some pricing that you didn't like. Is there – are you seeing the same kind of behavior among large customers as well as your more traditional ones? I know generally you don't serve a lot of large customers, but in the tech space, that's a little bit more inherent in the market. Thank you. Harold M. Messmer - Chairman & Chief Executive Officer: I would say financial services clients be it tech or otherwise are more focused on controlling their cost than any other sector, and to the extent we have exposure to financial services, we've talked very openly about Protiviti and the impact on Protiviti. But other than that sector, and as you pointed out, larger clients aren't our sweet spot, but we do have a few here and there and when we can get reasonable margins, we're happy to do that business. When we can't get reasonable margins, we withdraw. And other staffing firms don't have that same view. But that's who we are, and that's who we've been for a long time.

Have you notice a difference between a public demand from public companies versus private entrepreneur owned and led businesses? Harold M. Messmer - Chairman & Chief Executive Officer: No, I mean sweet spot is more the privately held 75 to 150 employee firm. So, I think if you look at our results and say it's a proxy for anything, it's not for public companies. It's for smaller, midsized private companies.

Thank you very much. Harold M. Messmer - Chairman & Chief Executive Officer: That was our last question. We'd 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 Investors 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 conference press release issued earlier today.