Michael C. Buckley
Executive Vice President, Chief Financial Officer at Robert Half
Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.833 billion in the third quarter. On an as-adjusted basis, third quarter talent solutions revenues were up 12% year-over-year.
US talent solutions revenues were $1.049 billion, up 13% from the prior year. Non-US talent solutions revenues were $273 million, up 10% year-over-year on an as-adjusted basis. We have 316 talent solutions locations worldwide, including 85 locations in 17 countries outside the United States.
In the third quarter, there were 64.3 billing days compared to 64.4 billing days in the same quarter one year ago. The current fourth quarter has 61.2 billing days compared to 61.7 billing days one year ago. For 2023, billing days by quarter will be 63.3, 63.4, 63.1 and 61.1 for a total of 250.9.
Currency exchange rate movements during the third quarter had the effect of decreasing reported year-over-year total revenues by $45 million, $32 million for talent solutions and $13 million for Protiviti. This negatively impacted our year-over-year overall revenue growth rate by 2.6 percentage points, 2.7 percentage points for talent solutions and 2.6 percentage points for Protiviti.
Contract talent solutions bill rates for the quarter increased 9% compared to one year ago, adjusted for changes in mix of revenues by functional specialization, currency and country. This rate for the second quarter was 8.2%.
Now let's take a closer look at results for Protiviti. Global revenues in the third quarter were $511 million, $416 million of that is from business within the United States and $95 million is from operations outside of the United States. On an as-adjusted basis, global third quarter Protiviti revenues were up 5% versus the year ago period, with US Protiviti revenues up 4%. Non-US revenues were up 7% on an as-adjusted basis. Protiviti and its independently owned member firms serve clients through a network of 89 locations in 29 countries.
Companywide third quarter public sector revenues were $89 million, of which $63 million were reported by Protiviti and the balance reported by talent solutions. Currency exchange rates had the effect of decreasing year-over-year public sector revenues by approximately $5 million. We expect fourth quarter 2022 public sector revenues to be $80 million to $90 million, which will result in full year revenues being down approximately 6%, or 2% adjusted for currency.
Turning now to gross margin: In contract talent solutions, third quarter gross margin was 39.4% of applicable revenues compared to 40% of applicable revenues in the third quarter one year ago. Conversion revenues, or contract-to-hire, were 4.1% of revenues in the quarter. Our permanent placement revenues in the third quarter were 13.8% of consolidated talent solutions revenues versus 12.9% of consolidated talent solutions revenues in the same quarter one year ago. When combined with contract talent solutions gross margin, overall talent solutions gross margin was 47.8% compared to 47.7% of applicable revenues in the third quarter one year ago.
For Protiviti, gross margin was 30.5% of Protiviti revenues compared to 29.5% of Protiviti revenues one year ago. Adjusted for deferred compensation-related classification impacts, gross margin for Protiviti was 30% for the quarter just ended compared to 29.4% one year ago.
Moving on to SG&A. Enterprise SG&A costs were 29.9% of global revenues in the third quarter compared to 28.9% in the same quarter one year ago. Adjusted for deferred compensation-related classification impacts, enterprise SG&A costs were 30.6% for the quarter just ended compared to 29% one year ago.
Talent solutions SG&A costs were 35.3% of talent solutions revenues in the third quarter versus 35.9% in the third quarter of 2021. Adjusted for deferred compensation-related classification impacts, talent solutions SG&A were 36.3% for the quarter just ended compared to 36% one year ago. The higher mix of permanent placement revenues this quarter versus one year ago had the effect of adding 0.4 percentage points to the quarter's adjusted SG&A ratio.
Third quarter SG&A costs for Protiviti were 16% of Protiviti revenues compared to 12.1% of revenues in the year-ago period as operating expenditures returned to more normal levels.
Operating income for the quarter was $239 million. Adjusted for deferred compensation-related classification impacts, combined segment income was $224 million in the third quarter. Combined segment margin was 12.2%. Third quarter segment income from our talent solutions divisions was $152 million, with a segment margin of 11.5%. Segment income for Protiviti in the third quarter was $72 million, with a segment margin of 14%.
Our third quarter tax rate was 26%, up from 25% in the same quarter one year ago. At the end of the third quarter, accounts receivable were $1.101 billion, and implied days sales outstanding, or DSO, was 54 days.
Before we move to fourth quarter guidance, let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing days. Contract talent solutions exited the third quarter with September revenues up 6% versus the prior year compared to an 11% increase for the full quarter. Revenues for the first week of October were up 5% compared to the same period one year ago.
Permanent placement revenues in September were up 17% versus September of 2021. This compares to a 20% increase for the full quarter. For the first two weeks of October, permanent placement revenues were up 2% compared to the same period in 2021. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. But as you know, these are very brief time periods. We caution against reading too much into them.
With that in mind, we offer the following fourth quarter guidance: revenues, $1.695 billion to $1.775 billion; income per share: $1.31 to $1.41. Midpoint revenues of $1.735 billion are 1.7% higher than the same period in 2021 on an as-adjusted basis. The major financial assumptions underlying the midpoint of these estimates are as follows:
Revenue growth, year-over-year, on an as-adjusted basis: talent solutions, down 1% to up 4%; Protiviti, up 1% to up 4%; overall, flat to up 4%. Gross margin percentages: contract talent, 38% to 40%; Protiviti, 27% to 29%; overall, 41% to 43%. SG&A as% of revenues, excluding deferred compensation classification impacts: talent solutions, 36% to 38%; Protiviti, 14% to 16%; overall, 30% to 32%.
Segment income: for talent solutions, 10% to 12%; for Protiviti, 13% to 15%; and overall, 11% to 13%. Tax rate, 26% to 27%; and shares, 107 million to 108 million. Fourth quarter capital expenditures and capitalized cloud computing costs: $15 million to $20 million.
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 Keith.