Robert Half Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2022

Key Takeaways

  • Robert Half delivered 30% year-over-year revenue growth and 52% net income growth in Q1 2022, led by a 67% jump in permanent placement, 30% rise in Contract Talent Solutions, and 19% increase at Protiviti.
  • Contract Talent Solutions bill rates increased 9.1% versus last year and overall Talent Solutions gross margin expanded by 2.7 percentage points to 48.3% thanks to wider pay-bill spreads and higher contract-to-hire conversions.
  • Protiviti grew revenues by 20% on an adjusted basis while investing in headcount, which temporarily weighed on its gross margin but underpins management’s outlook for sustained double-digit full-year growth.
  • For Q2, the company expects revenues of $1.855 billion to $1.935 billion (up ~22% at midpoint) and EPS of $1.53 to $1.63 (up ~19% at midpoint), reflecting continued strong demand.
  • Robert Half sees a robust labor market and structural shift toward remote/hybrid work fueling client demand, with public sector revenues up 34% in Q1 and a healthy pipeline of new assignments.
AI Generated. May Contain Errors.
Earnings Conference Call
Robert Half Q1 2022
00:00 / 00:00

There are 7 speakers on the call.

Operator

Hello, and welcome to the Robert Half First Quarter 2022 Conference Call. Our host for today's call are Mr. Kix Waddell, President and Chief Executive Officer of Robert Half and Mr. Michael Buckley, Chief Financial Officer. Mr.

Operator

Waddell, you may begin.

Speaker 1

Hello, everyone. We appreciate your time today. Before we get started, I'd like to remind you That the comments made on today's call contain forward looking statements, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds. However, they're subject to risks and uncertainties that could cause actual results to differ materially from the forward looking statements.

Speaker 1

These risks and uncertainties are described in today's Press release and our most recent 10 ks and 10 Q filed with the SEC. We assume no obligation to update the Statements made on today's call. During this presentation, we may mention some non GAAP financial measures and reference These figures are as adjusted. Reconciliations and further explanations of these measures are included In a supplemental schedule to our earnings press release, we'd like to remind you that beginning this quarter, Our financial disclosures for contract operations, formally, temporary and consulting staffing, Are based on functional specialization rather than our previously branded divisions. The functional specializations are Finance and Accounting, Administrative and Customer Support and Technology.

Speaker 1

Finance and Accounting combines the former Accountants Then Management Resources, Administrative and Customer Support was previously Office Team and Technology was formerly Robert Half Technology. Protiviti and our permanent placement operations continue to be reported separately. Also, what we previously referred to as staffing operations are now referred to as talent solutions. There's no change to our underlying business operations or organization. Our presentation of revenues and the related growth rates For each of our contract functional specializations includes intersegment revenues from services provided to Protiviti in connection with the company's blended talent solutions and consulting operations.

Speaker 1

This is how we measure and manage these businesses internally. The combined amount of intersegment revenues with Protiviti is also separately disclosed. The supplemental schedules just mentioned Also include a revenue schedule showing this information for 2020 through 2022. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthab.com. We are very pleased To report another very strong quarter driven by a robust demand environment across the globe.

Speaker 1

1st quarter revenues grew 30% and net income grew 52% on a year over year basis. Our permanent placement talent solutions again led the way, achieving year over year revenue growth of 67%. Our Contract Talent Solutions and Protiviti also continued to post very strong results, growing year over year revenues by 30% 19%, respectively. Our continued success would not be possible Without the dedicated commitment of our entire global workforce, including talent solutions, Protiviti and corporate services professionals, Company wide revenues were $1,815,000,000 in the Q1 of 2022, up 30% from last year's 1st quarter on a reported basis and up 31% on an adjusted basis. Net income per share in the Q1 was 1.52 Increasing 55% compared to $0.98 in the Q1 1 year ago.

Speaker 1

Cash flow from operations during the quarter was For a total cash outlay of $47,000,000 our per share dividend has grown 11.7 percent annually since inception in 2004. The March 22 Dividend was 13.2% higher than in 2021. We also acquired approximately 475,000 Robert have shares during the quarter for $55,000,000 We have 6,700,000 shares available for repurchase Under our Board approved stock repurchase plan, return on invested capital for the company was 47% in the Q1. Now I'll turn the call over to our CFO, Mike Buckley.

Speaker 2

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1,815,000,000 in the Q1. On an as adjusted basis, 1st quarter Talent Solutions revenue were up 35% year over year. U. S.

Speaker 2

Talent Solutions revenue were $1,046,000,000 up 38% from the prior year. Non U. S. Talent Solutions revenue were $297,000,000 up 28% year over year on an as adjusted basis. We have 317 Talent Solutions locations worldwide, including 83 locations in 17 countries outside of the United States.

Speaker 2

In the Q1, there were 62.4 billing days compared to 62.3 billing days in the Q1 of 2021. The current Q2 has 63.4 billing days, unchanged from the same quarter 1 year ago. Currency exchange rate movements during the Q1 had the effect of decreasing reported year over year talent solutions revenue by 13,000,000 This negatively impacted our year over year reported Talent Solutions revenue growth rate by 1.3 percentage points. Contract Talent Solutions bill rates for the quarter increased 9.1% compared to 1 year ago, Adjusted for changes in the mix of revenue by functional specialization, currency and country. This rate for the Q4 of 2021 was 8.5%.

Speaker 1

Now let's take a closer look at

Speaker 2

the results for Protiviti. Global revenues in the Q1 were $472,000,000 $369,000,000 of that is from business within the United States and $103,000,000 is from operations outside of the United States. On an as adjusted basis, Global first quarter Protiviti revenues were up 20% versus the year ago period, with U. S. Protiviti revenues up 17%.

Speaker 2

Non U. S. Revenues were up 32% on an as adjusted basis. Exchange rates had the by 1.3 percentage points. Protiviti and its independently owned member firms serve clients through a network of 88 locations in 29 countries.

Speaker 2

Turning now to gross margin. In Contract Talent Solutions, 1st quarter gross margin was 40% of applicable revenues compared to 38.8% of applicable revenues in the Q1 1 year ago. Gross margins were positively impacted by expanding pay bill spreads and higher conversion revenues or contract to hire, which were 4% of revenues in the quarter as compared to 3.1 Consolidated Talent Solutions revenues versus 11.2% of Consolidated Talent Solutions revenues in the same quarter 1 year ago. When combined with Contract Talent Solutions gross margin, overall Talent Solutions gross margin was 48.3%, an increase of 2.7 percentage points compared to the year ago Q1. For Protiviti, Gross margin was 26.2 percent of Protiviti revenues compared to 26.5 percent of Protiviti revenues 1 year ago.

Speaker 2

Adjusted for deferred compensation related classification impacts, gross margin for Protiviti was 25.3% for the quarter just ended compared to 26.9 percent 1 year ago. Gross margin in the current period was impacted by higher staff resource Costs, including a significant expansion of headcount during the quarter. Enterprise Selling, general and administrative costs were 28.3 percent of global revenues in the Q1 compared to 30.3% in the same quarter 1 year ago. Adjusted for deferred compensation related classification impacts, enterprise SG and A costs 29.8 percent for the quarter just ended compared to 29.5 percent 1 year ago. Talent Solutions SG and A costs were 33.6 percent of Talent Solutions revenues in the 1st quarter versus 37.3 percent in the Q1 of 2021.

Speaker 2

Adjusted for deferred compensation related classification impacts, Talent Solutions SG and A costs were 35.6 percent for the quarter just ended compared to 36.3 percent 1 year ago. Adjusted SG and A ratio. 1st quarter SG and A costs for Protiviti were 13.3% of Protiviti revenues compared to 12.5 percent of revenues in the year ago period. Operating income for the quarter was 258,000,000 Adjusted for deferred compensation related classification impacts, combined segment income was $228,000,000 in the first quarter. Combined segment margin was 12.5%.

Speaker 2

1st quarter segment income from our Talent Solutions divisions was 171,000,000 with a segment margin of 12.7%. Segment income for Protiviti in the Q1 was 57,000,000 with a segment margin of 12.1%. Our first quarter tax rate was 26%, the same as it was 1 year ago. At the end of the Q1, accounts receivable were 1,072,000,000 And implied day sales outstanding or DSO was 53 days. Before we move on to 2nd quarter guidance, Let's review some of the monthly revenue trends we saw in the Q1 and so far in April, all adjusted for currency and billing days.

Speaker 2

Contract Talent Solutions exited the Q1 with March revenues up 28% versus the prior year compared to a 31% increase for the full quarter. Revenue for the 1st 3 weeks of April were up 29% compared to the same period 1 year ago. Permanent placement revenues in March were up 63% versus March of 2021. This compares to a 69% increase for the full quarter. For the 1st 4 weeks of April, Permanent placement revenues were up 30% compared to the same period in 2021.

Speaker 2

We remind you that the In 2021 experienced extraordinary growth with permanent placement achieving 150 4% growth rates in the 1st 3 weeks of April 2021 97% for the full quarter. We provide this information so that you have insight into some of the trends we saw during the Q1 and into the month of April. But as you know, these are very brief time periods. We caution against reading too much into that. With that in mind, We offer the following 2nd quarter guidance.

Speaker 2

Revenues, dollars 1,855,000,000 to 1,935,000,000 Income per share $1.53 to $1.63 Midpoint revenues of $1,895,000,000 are 22% higher than the same period in 2021 on a TAS adjusted basis. Midpoint EPS of $1.58 is 19% higher than 2021. Note that in the prior year, The major financial assumptions underlying the midpoint of these estimates are as follows: revenue, growth, Revenue growth on a year over year basis, Talent Solutions up 25% to 27% Protiviti up 9% to 11%, overall up 21% to 23%. Gross margin percentages, contract talent 39% to 40%, Protiviti 27% to 28%, overall 41% to 43%. SG and A as a percentage of revenues, Excluding deferred compensation classification impacts, Talent Solutions 36% to 37% Protiviti 14% to 15% overall 30% to 31%.

Speaker 2

For segment income, Talent Solutions, 12 10% to 13%, Protiviti 13% to 14%, overall 12% to 13%. Our tax rate, 26% to 27%, shares outstanding 109 to $110,000,000 2nd quarter capital expenditures and capitalized cloud computing costs, dollars 25,000,000 $30,000,000 We limit our guidance to 1 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 Keith.

Speaker 1

Thank you, Mike. The future of work continues to evolve as remote and hybrid work models gain wider acceptance and the swift recovery across Global labor markets has significantly increased the demand for our services. More than ever before, clients are willing to recruit Job candidates also benefit from the broader experiences and wider selection of jobs derived from out of market engagements. This remote work environment increasingly plays to our strengths and presents an unparalleled opportunity to capitalize on a structural shift in how companies source talent. Additionally, our global brand, office network, candidate database And advanced AI driven technologies allow us to successfully recruit the necessary talent For our clients to thrive and grow amid the great reshuffle as professionals continue to change jobs at record levels And companies across the globe struggle to navigate unprecedented employee turnover.

Speaker 1

Global labor markets remain very robust. In the U. S, this is seen in the elevated levels of job openings and quits rates as well as low initial unemployment claims And a low unemployment rate, particularly those with a college degree where the rate is 2%. For small businesses, the National Federation of Independent Businesses, the NFIB, recently reported that 90 2% of those hiring or trying to hire had few or no qualified applicants for open positions and 47% of all small business owners had job openings that could not be filled. As a result of this very strong demand environment, coupled with our unique ability to successfully secure hard to find candidates for our clients, We continue to see our Talent Solutions results recovering at a faster pace than we've experienced in the past.

Speaker 1

Our permanent placement And Contract Talent Solutions segments, included Blended Solutions with Protiviti, have achieved cumulative sequential growth Of 163% 64%, respectively, during the 7 quarters since the pandemic trough, Similar numbers for the financial crisis and dotcomrecovers were 83% 30% and 87% and 41%, respectively. Protiviti again reported double digit revenue gains, which it has achieved for each of the last 4 years. Internal Audit and Blended Solutions with Contract Talent Solutions Reported the strongest growth. The growth in technology consulting and risk and compliance solutions was impacted by the wind down of a very large regulatory remediation project during the quarter. While replacement projects have already largely been secured, the second quarter will also be impacted As the wind down completes and the new projects start on a staggered basis, Protiviti's pipeline continues to be very strong And the aggressive hiring that took place during the Q1 was in support of anticipated additional resource requirements.

Speaker 1

1st quarter public sector revenues exceeded expectations, grew 34% year over year to a total of 90,000,000 of which $72,000,000 was reported by Protiviti and the balance reported by Talend Solutions. As was expected, Work directly related to stimulus programs moderated in the quarter and we began to realize revenues From new work that leverages the credentials and deep relationships we've developed with this new client base, Educational institutions and government entities at all levels are experiencing talent shortage Across their organizational structures, creating opportunities for us to provide contract talent, consulting services and manage Solutions as their needs dictate, we expect Q2 2022 Public Sector Revenues to be $95,000,000 to $105,000,000 and we continue to expect full year 2022 public sector revenues To be at least flat to up 10% for the year. To aid with prior year comparisons, We've included a table on our website in the supplemental financial information section of the Investor Center showing our quarterly Public Sector Revenues for 2021. For both Talent Solutions and Protiviti, we're very optimistic about the year ahead As we draw strength from our people, our technology, our brands and our business model, we remain steadfastly focused On our time tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and deep subject matter expertise they need to constantly compete and grow.

Speaker 1

We are proud To be recently named one of only a few select companies by Fortune as a most admired company for 25 consecutive years, In addition to making Barron's annual list of the 100 Most Sustainable Companies and Forbes' list of America's Best Employers for Diversity. This recognition would not be possible without the dedication and exemplary efforts of our employees across the globe. Now Mike and I will be happy to answer your questions. Please ask just one question and a single follow-up as needed. If there's time, we'll come back to you for additional questions.

Operator

Your first question will come from Andrew Steinerman with JPMorgan.

Speaker 3

Hey, Keith, I hope this question is okay. I'm going to ask you, how long do you think Protiviti could sustain double digit revenue growth? Obviously, You emphasized that it would be that you have achieved that for years and you also were very specific about how you think Public sector will do this year within Protiviti. Is this going to be A double digit, meaning 10 plus percent growth year for Protiviti, I surely see the 2nd quarter It's calling for about 10% at the midpoint.

Speaker 1

Well, right. So Andrew, the fact that we started up 20%, Even with some of the short term challenges we talked about for the 2nd quarter, We're projecting up 10%. We would expect for the full year that Protiviti for 2022 would grow Double digits, double digits, up to mid double digits. So we're bullish on Protiviti. It's got this one large client that has Decided to take many of the requirements in house, which ended the engagement more quickly than we expected.

Speaker 1

The good news is if that were going to happen, there's not a better market to that to happen in because we've essentially already I redeployed the people. It's just a matter of timing. So notwithstanding that, notwithstanding Some of the headwinds that Protiviti alone has with public sector work, as we talked about, When you take an enterprise level view of public sector, we're quite bullish. In fact, we feel The best we felt in a long time about its prospects, but even if you just focus on Protiviti Public Sector, we still think For the year, we can get double digit revenue growth.

Speaker 3

Excellent. Thank you.

Operator

Your next question will come from Mark Marcon with Baird. Your line is open.

Speaker 4

Hey, good afternoon, Keith and Mike. Couple of questions. One would basically be the topic de jure, which is There's some concerns out there with regards to the potential for cyclical slowing. All of your results thus far seem to belive that. Are you seeing any signs anywhere within Your book of business that would suggest that there are some signs of slowing or any chatter from any of your clients Along those lines.

Speaker 1

The simple answer, Mark, is no. We have not seen signs of slowing. The demand environment remains very, very strong, not only in the U. S, but globally as well. And so we sit here today Just as optimistic as we were 90 days ago, in fact, maybe even more.

Speaker 4

That's great. And then the follow-up is you've made a lot of investments in terms of tools and technology. You Can't be helped but be struck by the margin improvement that you're seeing both on the talent side and on the perm side in terms The margins and the efficiency that's coming through, I'm wondering if you could take this opportunity to discuss a little bit about What you've done to make the process more efficient, how you're actually taking advantage of Virtual work and all the work that you've done on AI and systems like that To improve your efficiency as well as your reach and to continue to gain share.

Speaker 1

So we have made a bunch of investments in technology. We've seen meaningful benefit from those. We leverage our database from the standpoint of Previous candidate engagements to determine how they compare to our elite Candidates, we use AI to compare a client's requirements to the Profile of resume of the candidates. We're adding some exciting dimensions So what's already working very well in that we're now looking at how contract Proven is a given candidate based on have we placed them before, Have we vetted them before and how far up the vetting ladder did they make it? Does our AI indicate they've been placed on a contract basis by another firm, Again, all getting to how proven is a given candidate on a contract basis.

Speaker 1

We're adding that dimension to our AI next month. I'm very excited about that. We're also improving how we view a candidate's likelihood Their activities with us as well as activities with other firms in our ecosystem From the standpoint of how active are they in the job market and based on the nature of that engagement, Make a prediction about how likely they are to respond. So we have a profile based dimension to our AI. We have an interaction with our recruiters, how proven are you dimension to our AI.

Speaker 1

And we have a how active are you in the job market, which enables us to better predict Whether you will respond to our outreach, all three of which are important when you're trying to make placements in today's market. We've embedded that technology in our mobile app. I'm happy to report that we have the highest placement rate of any source From those candidates that apply via our mobile app, it's been very successful. Further, we use our AI In our marketing recommendations program, where every time we get an order, we match those requirements to our database and We proactively reach out to every matching candidate and ask them to apply very effective Even in this tight labor market, getting them to apply to our jobs and in this market, the candidate side is everything. So All of that considered, our people are the most productive they've ever been.

Speaker 1

Part of that's because on average, they're more experienced. Part of that's because we've got the least turnover We've been very flexible with our people and letting them completely decide when and where they work. They're very pleased with that. That's worked out very well for them. That's worked out very well from us.

Speaker 1

So across many dimensions and for many reasons, Our people are more productive. They're making more money. We're sharing our success broadly with all of our employees, All of which comes together to make them more productive and make us continue to be effective managing the candidate side of the equation, which as I just said, the key portion as we speak. That's a long winded answer. I don't know whether I missed anything.

Speaker 4

The last time we talked to you, you mentioned you wish somebody had asked you about that, so I had to bring it up. But I mean, it's pretty clear that you're being very effective in terms of raising margins and the productivity is going up. It seems like you're not done with those improvements and that there how much further do you have

Speaker 1

to go? Or how long

Speaker 4

is the journey in terms

Speaker 1

Well, first of all, just the adoption rates of what we already has, Has upside. You put on top of that the improvements that I just talked about, that's further upside. And so it's mid innings at best.

Speaker 2

Terrific. Thank you.

Operator

Your next question will come from Heather Balsky with Bank of America.

Speaker 5

Hi, thanks for taking my question. I was hoping to talk about the Protiviti Margins, the EBIT margins during the quarter and the give and take there. There is some commentary regarding headcount. Just

Speaker 1

Okay. And so we did aggressively add the headcount and it was High single digits just in the quarter. They also do their annual reviews Salary wise, promotion wise, and so those costs are effectively front ended every year. Both of those were planned and embedded in our guidance. What was different than our guidance Was that on the one hand internal audit significantly exceeded plan And because our people there are totally utilized, we had to go and get more contractors to do that work.

Speaker 1

That was new direct cost. On the other hand, this large regulatory remediation client, we didn't lose it. I mean the work wound down, there's other work streams we're confident we'll get, but the biggest ones We're winding down slowly. The client decided to take the function in house, which accelerated the wind down. But for that sector, they were below plan on revenues, but because The costs were our internal full time people, there was no cost savings.

Speaker 1

So when you put the Above revenue internal audit with the below revenue regulatory or compliance together, revenues came out of plan. However, you've got your risk and compliance cost at plan, you've got your internal audit costs because of the contractors above plan That resulted in margin compression. But again, as I said, we think this is a 1 or 2 quarter Challenge headwind that we can manage around. It's just the nature of any consulting business That sometimes you're going to have large projects that end that you then that takes some time to replace. The good news is, as I said earlier, These have largely already been replaced.

Speaker 1

So we feel good about that. But the margins for the Q1 were impacted And the margins for the Q2 will be impacted, but not as much. And in fact, on a sequential basis, the margins will improve. And by the way, on a sequential basis, Protiviti's revenues are up 4% or 5%, which is pretty much on trend if you look back For several years, notwithstanding the large project that I just talked about. So that's good.

Speaker 5

That's really helpful. Thank you. One follow-up on the hiring piece. Just curious, I guess, how you feel about, especially given the recent hiring, how you feel about your recruiter base? And are you do you expect to

Speaker 1

So when you say recruiter base, I assume now we're talking about talent solutions rather than Protiviti.

Speaker 5

Yes, correct. Sorry about that.

Speaker 1

And so on the Talent Solutions side, we've been Very actively adding to permanent placement headcount, kind of low double digits, less than the top line growth, but Still low double digits. On the contract talent solutions, we've had more capacity. Cumulatively, the growth rates haven't been as robust as permanent placement. So the hiring hasn't been as rapid, But we do plan to continue to add the heads more aggressively in permanent placement for obvious reasons, Thought we're adding to heads on the contract talent side as well. We're very bullish.

Speaker 1

Demand environment and job order flow Remains very strong. It's all about getting the talent. And as I explained earlier, We've got experienced recruiters, sourcing talent. We've got our technology. We have access to remote candidates that we've never had access to that broadens the pool.

Speaker 1

And as we've also talked about on prior calls, we have these full time engagement professionals That we engage on a full time basis and that we then put them out on contracts with clients. It gives us access to a larger pool of people, I. E, the already fully employed, and it also allows us to provide As a full time engagement professional for Robert Half, it's effectively taking Protiviti's Bench model, if you will, and applying it to talent solutions, which we've done so very successfully.

Speaker 5

Thank you very much for the color. Thank you.

Operator

Your next question will come from Kevin McVeigh with Credit Suisse.

Speaker 6

Great. Thanks so much. You've been pretty clear on this. I just want to make sure like the delta in the Protiviti margins in Q1 and Q2, Is that the timing of that contract or is that increased capacity in anticipation of demand that's coming? Because I know there's always a little bit of a timing mismatch between When people are on boarded, is there any way to think about what utilization is?

Speaker 6

I know you typically don't give that, but maybe productivity utilization, just so we can get a sense The flexibility in terms of delivery?

Speaker 1

Well, so there will be some of both. And so clearly, With the enormous addition to heads in the Q1, we have a group of interns that come in Later in the summer, so we haven't completely stopped hiring in Protiviti either. And so there's some margin dilution But the impact in Q2 shouldn't be as great as it was in Q1. And by the way, just to kind of frame the impact of that large Client, if that large client would have been flat in Q2 versus a year ago, The top line growth would have been 5 to 8 points higher. So it's meaningful.

Speaker 6

Okay. For sure. Any I mean, it seems like the client shifted pretty abruptly. Any thoughts as to what drove that decision? I mean, it seems like they literally went 180 on you.

Speaker 6

Was it funding or

Speaker 1

just No, no, no. So it's a project that's been going on for 3 or 4 years. It's not been a recent thing. It was a remediation project. Clearly, as you remediate, The client gets in better condition and there's less remediation work to do.

Speaker 1

Also, they decided to bring the compliance function in house Rather than use rather than outsource it or co source it, and it was that latter decision on their For financial savings reasons, that accelerated the wind down of the project. But we're still in very good standing with the client. And as I said earlier, there are various work We're still proposing on and we're quite optimistic. But it's just part of the consulting business That your project portfolio changes and sometimes your large projects end and you have to replace them, but that's ordinary course That's something they always had to deal with. And as I said, if it were going to happen, it couldn't happen at a better time given the underlying demand environment.

Speaker 6

Understood. Makes sense. Thank you.

Operator

Star 1 on your telephone.

Speaker 1

And so let me just say one thing about public sector that were typically asked That hasn't yet been asked, but let me pre empt that. And so Q1 did exceed our expectations. Public sector grew 34% On an enterprise basis, our Q2 guide is only 3% below last year, which is a quarter where sequentially it was up 45%. So from a public sector standpoint, Q2 It's the toughest comp of the year. We had many business as usual contract wins.

Speaker 1

As we said in our script, you've got state and local governments and educational institutions dealing with the same great reshuffle That commercial clients are, which has given rise to a lot of requirements that are right in our wheelhouse. It's blocking and tackling for us. And so frankly, we're doing a lot better from an enterprise point of view with Public sector than we expected to even 90 days ago. The project pipeline that we've talked about in the past Does continue to build housing assistance, IT and accounting modernization, project management, The pipeline builds, the win rates are good. Putting that all together And also as we talked about last quarter, the work is becoming more talent centric Talent solution centric, because if you look at the risk profile, if you look at the sourcing credit, if you look at the specific contract requirements, All of that tends toward talent solutions.

Speaker 1

We focus on enterprise wide because keep in mind, No matter which entity reports it, the vast majority of the work is done by contractors from Talend Solutions. So to some degree, there's some arbitrariness between the 2. So we're very pleased at how we've leveraged these new relationships and there's another dimension that makes it even better. And so during the quarter, we had $11,000,000 in revenues on the contract side, not Talend Solutions, Where when people rolled off those public sector assignments, We almost immediately put them on, redeployed them on commercial talent solutions engagements. And so not only did we do better looking just at public sector from an enterprise Point of view, if you also credit that we had candidates That we placed on talent solutions that we wouldn't have had, but for public sector, it's even better.

Speaker 1

So net net, long winded, We're extremely pleased with how public sector is playing out. We talked last time where we thought for the full year, We would be up same or up, we would grow. We're even more convicted to that than ever. So that was my question to myself.

Operator

Thank you. And your next question will come from Tobey Sommer from Trulis Securities. Your line is open.

Speaker 2

Thanks. I was hoping to get your comments on bill rate growth, wage inflation. Where do you see that going? It's pretty strong, high single digit. Are we close to a peak and then just going to be at Strong rates.

Speaker 2

How do you see that evolving in the coming quarters?

Speaker 1

Well, as you say, I mean, Being up over 9% year on year is high versus historical standards. Usually, it's up 4% to 6% For an extended period of time, how long it lasts, I don't know. There are 11,300,000 job openings in this country And fewer than half of that in unemployed people. So the labor market remains very tight. To what extent rising rates slow down the economy, which impacts that I can't speak to.

Speaker 1

I would say that our margin expansion has come more from Contract to hire conversion growth, we talked about it went from 3.1% to 4% during the quarter. Our margin expansion came more from adding these Full time engagement professionals where we get a higher margin than we get from our core contractor base. So we're getting more margin expansion there than we are on the pay bill spread because when wages are up Yes, 7%, 8%. It's harder to put margin on top of that than if wages are up 4% or 5% and putting margin on that. We're not being diluted, don't get me wrong.

Speaker 1

We're slightly expanding pay bill spreads, But the big margin expansion is more about conversions and full time engagement professionals.

Speaker 2

Thanks. I appreciate that. As my follow-up, I wanted to see if you could comment on your European exposure. We get questions about the impact on

Speaker 1

the war, any kind of

Speaker 2

soft on there, small representation, but

Speaker 1

So we're 78% U. S. 22 percent international, Continental Europe is 10%. And of that 10 It's Germany 4%, Belgium 4%, France 1, another 1. I would say at least to date, there certainly hasn't been an impact.

Speaker 1

And Germany arguably potentially would be the most impacted, but Germany had a very good quarter. In fact, probably had the best quarter of any of our non U. S. Countries in the Q1. And their outlook for Q2 is good.

Speaker 2

Okay. Thank you very much.

Operator

Your next question will come from Jeff Silber with BMO Capital Markets. Your line is open.

Speaker 1

Thanks so much. I know, I'll just ask one. In looking at your technology revenues within Talent Solutions year over year growth accelerated compared to the prior quarter. Can you talk about what drove that and how execution, I think it went from 21% to 24%. The comps were pretty similar In the 2 quarters, but, technology talent solutions have been a focus For some time, again, the candidate is king.

Speaker 1

We've focused a lot of the other initiatives, Candidates based initiatives that I talked about earlier also extend to technology and We've had good results and we're optimistic as we go forward. Okay. Well, I believe that is our last question. So we appreciate everyone joining the call today. Thank you very much.

Operator

This concludes today's teleconference. If you've missed any part of the call, It will be archived in audio format in the Investor Center of Robert Half's website at www.roberthhalf.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. Thank you for participating.

Operator

You may now disconnect.

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