Jan 29, 2008
Executives
Harold M. Messmer, Jr.
- Chairman and CEO M. Keith Waddell - Vice Chairman, President and CFO
Analysts
Andrew Steinerman - Bear Stearns Timothy McHugh - William Blair & Company Kelly Flynn - Credit Suisse Mark Marcon - Robert W. Baird Brandt Sakakeeny - Deutsche Bank Jeffrey Silber - BMO Capital Markets Andrew Fones - UBS Securities Tobey Sommer - SunTrust Robinson Humphrey Gary Bisbee - Lehman Brothers T.C.
Robillard - Banc of America Securities James Janesky - Stifel Nicolaus Michel Morin - Merrill Lynch David Feinberg - Goldman Sachs
Operator
Welcome to the Robert Half International Conference Call to discuss Fourth Quarter 2007 Financial Results. Your hosts for today's call are Mr.
Max Messmer, Chairman and CEO of Robert Half International, and Mr. Keith Waddell, Vice Chairman, President and Chief Financial Officer.
Mr. Messmer, you may begin.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
Thank you and good afternoon everyone. Thank you for joining us.
We would like to begin by reminding everyone that comments on this call contain predictions, estimates and other forward-looking statements. These statements represent our current judgment of what the future holds, and they include words such as forecast, estimate, project, expect, believe, guidance, and similar expressions.
We believe these remarks to be reasonable but 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 filings with the SEC.
We assume no obligation to update the statements made in this conference call. Now let's review the fourth quarter.
Revenues for the fourth quarter were $1.22 billion, an increase of 15% from the first quarter of 2006. Income per share was $0.50 compared with $0.45 in the fourth quarter of 2006.
This is an 11% increase over the prior year. Cash flow from operations during the quarter was $101 million, and capital expenditures were $20 million.
We also paid a quarterly dividend to stockholders of $0.10 per share or $16 million in total. Last October, our Board of Directors authorized the repurchase of up to an additional 10 million shares of RHI common stock.
And during the fourth quarter, we repurchased 3 million RHI shares at a cost of $82 million. We have approximately 9.2 million shares remaining for repurchase under the Board approved stock repurchase plan.
The fourth of 2007 saw a continuation of the double-digit year-over-year revenue growth we have seen for 16 consecutive quarters. Our international operations reported particularly impressive financial results.
Despite mixed economic reports, we continued to see strong demand for our services during the quarter. 2007 capped a very successful 5-year period for RHI as indicated by the following statistics.
Revenues grew from $2 billion to $4.6 billion, a compound annual growth rate of 20%. Nearly all of this growth was organic.
Return on equity averaged 22% per year with 2007 at 29%. Cash flow from operations was $1.4 billion, which funded $1.2 billion on RHI stock repurchases and $200 million in dividends paid during this five-year period.
Our balance sheet at the end of 2007 contained $1.5 billion in assets with virtually no long-term debt and $310 million of cash. At this time, I'll turn the call over to Keith for a more detailed look at our fourth quarter financial results.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Thank you, Max. Excuse me.
Let's look first at our companywide revenues. Fourth quarter revenues were $1.22 billion, an increase of 15% from the fourth quarter of last year and an increase of 3% sequentially.
There were 61 billing days in the fourth quarter of 2007, the same as the fourth quarter of last year and down 2 days sequentially from the third quarter of 2007. Accountemps revenues were $453 million.
This is up 16% from the fourth quarter of last year and up 5% sequentially on a same-day basis. Accountemps is our largest staffing division with 367 offices worldwide.
It accounts for 37% of company revenues. OfficeTeam, our high-end administrative staffing division, had revenues of $222 million in the fourth quarter.
This is an increase of 10% from the fourth quarter of last year, and an increase of 6% sequentially on a same-day basis. OfficeTeam has 315 locations worldwide and represents 18% of company revenues.
This division was introduced in 1991. Fourth quarter revenues for Robert Half Management Resources were $165 million, up 21% from the fourth quarter of 2006 and up 8% sequentially on a same day basis.
This division was introduced in 1997 and places senior level accounting and finance professionals on a project basis. It has 145 locations worldwide and makes up 14% of company revenues.
Revenues for Robert Half Technology were $111 million in the fourth quarter, up 17% from the fourth quarter of last year and up 3% sequentially on a same day basis. Robert Half Technology was introduced in 1994 and places information technology professionals on a consulting and full time basis.
This business operates in 112 locations worldwide and accounts for 9% of company revenues. Robert Half Finance & Accounting, our permanent placement division, had revenues of $118 million in the fourth quarter.
Revenues were up 36% from the fourth quarter of 2006 and up 7% on a sequential same day basis. This business was established in 1948 and operates in 367 locations worldwide.
It accounts for 10% of companywide revenues. Fourth quarter revenues for our international staffing operations were $282 million, up 43% from the fourth quarter of 2006 and up 13% sequentially on a same day basis.
On a constant currency basis, these growth rates were 27% compared to the fourth quarter of last year and 8% sequentially. We have staffing operations in 102 locations in 18 countries outside the U.S.
International staffing operations represent 26% of total staffing revenues. Protiviti revenues were $151 million in the fourth quarter, down 1% from one year ago, but up 7% sequentially.
Protiviti continued to transition from Sarbanes-Oxley related services to internal audit and other consulting services. Notable areas of success during the quarter included consulting engagements and IT asset management, forensic investigations and finance function effectiveness.
Protiviti has 60 locations in 15 countries, established in May of 2002 and accounts for 12% of total RHI revenues. Protiviti's international operations represent 27% of total Protiviti revenues.
Now let's review gross margin. Fourth quarter gross margin in our temporary and consulting staffing operations was $357 million or 37.6% of applicable revenues.
This compares with 37.2% of revenues for the fourth quarter of last year and 37.3% of revenues for the third quarter of 2007. The fourth quarter increase is primarily the result of lower workers' compensation accruals which were adjusted pursuant to an independent actuarial review.
Overall staffing gross margin was $475 million for the fourth quarter or 44.4% of staffing revenues. This compares to 43.2% of revenues in Q4 last year and 44.1% of revenues in Q3 2007.
The fourth quarter improvement is due to the higher, temporary and consulting gross margins just noted. Fourth quarter gross margin for Protiviti was $49 million or 32.2% of Protiviti revenues.
This compares to 38.8% of revenues in Q4 2006 and 30.2% of revenues in the third quarter of 2007. The fourth quarter sequential increase is due primarily to higher utilization rates both in the United States and aboard.
Turning to selling, general and administrative costs; staffing SG&A costs for the fourth quarter were $354 million or 33.1% of staffing revenues. This compares to 32.3% of revenues for the fourth quarter of last year and 33.0% of revenues for the third quarter of 2007.
The year-over-year increase relates primarily to higher staff compensation costs. We ended the year with 12,100 full time employees, and our staffing divisions up 14% from last year.
Fourth quarter SG&A costs for Protiviti were $40 million or 26.3% of revenues. This compares to $38 million or 27.4% of revenues in the third quarter of 2007.
The lower SG&A percentage results from the leveraging of fixed operating costs. We ended the year with 3,300 full time Protiviti employees, up 16% compared to last year.
Operating income from our staffing divisions was $121 million during the fourth quarter or 11.3% of staffing revenues. Temporary and consulting divisions contributed $99 million of this amount or 10.4% of applicable revenues.
Fourth quarter operating income for our permanent placement division was $22 million or 18.6% of applicable revenues. Operating income for Protiviti was $9 million in the fourth quarter or 5.9% of revenues.
This compares to $4 million in the third quarter of 2007 or 2.8% of revenues. Turning into accounts receivable; at the end of the fourth quarter, accounts receivable were $593 million with implied days outstanding or DSO of 44.2 days compared to 48.5 days at the end of the third quarter.
The improvement follows the typical seasonal pattern of prior years. Now, let's turn to guidance.
We saw the following the business trends during the fourth quarter and the first weeks of January. On a same day sequential basis, temporary and consulting revenues were up in October, up in November and down in December.
On a same day sequential basis permanent placement revenues were down in October, up in November and down in December. For the first three weeks of January, revenues from our temporary and consulting businesses were up 13% compared to the same period last year.
For the first four weeks of January, revenues from our permanent placement division were also up 13% compared to the same period last year. As we have said before, perm trends are hard to measure over such short periods of time, especially the holiday impacted weeks in January.
Taking this information into account, we offer the following first quarter guidance: revenues $1.210 billion to $1.250 billion; earnings per share $0.44 to $0.47. As you know, these estimates are subject to the risks mentioned in today's press release.
We limit our guidance to one quarter. At this time I'll turn the call back over to Max.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
Thank you, Keith. We finished the year with another solid quarter for our staffing operations and for Protiviti.
Looking specifically at our staffing operations we saw a continued year-over-year and sequential growth in all lines of business, particularly accounting and finance. As Keith noted, our permanent placement operations were up 36% year-over-year and up 7% from the third quarter.
We also were pleased with Protiviti's results particularly the sequential growth. We continue to extend our range of services for Protiviti.
We believe our international footprint is largely built out and our focus now will be primarily on expanding within our existing framework. We are certainly aware that there has been turbulence in the financial markets recently.
Like you we read the various economic reports which have been mixed. As we have said many times before our business supports us with limited visibility in the future business trends.
Therefore, it is too early to judge what current economic trends may or may not portend [ph]. If the hiring environment becomes more cautious as some are predicting, we do believe we are well positioned to minimize the effects of any slowdown.
The business turned 60 this year, and we have managed though 11 recessions during that time. We have emerged from each one a stronger company.
We are in excellent financial condition with strong cash flow capability and an outstanding long-term track record. We have the industry's best balance sheet, strong rate of internal growth and what we believe are the most respected brand names in our industry.
We also have an experienced field management team that has successfully managed through many economic cycles. We feel we have opportunities to grow market share domestically and internationally.
There are many businesses both in North America and abroad that have still never used a professional level temporary, and we have a chance to educated them on the benefits of using highly skilled interim professionals. We are also optimistic about the opportunities for Protiviti to expand its service offerings and its reach.
At this time, Keith and I will be happy to answer questions. We would ask as usual, but you please limit yourself to one question and a single follow-up as needed.
If you have additional questions we will certainly try to return to you later in the call. Question And Answer
Operator
[Operator Instructions]. First question comes from of Andrew Steinerman with Bear Stearns.
Go ahead please.
Andrew Steinerman - Bear Stearns
Hi there gentlemen. When you look at the operating margin for perm in the fourth quarter, obviously there has been some improvement but it's surely below its potential.
What's going on there? Is it just that you've hired some of the people and they're not efficient yet?
Or you've hired some of the people and it's made for kind of a larger base of business or perhaps perm searches are taking a longer period of time?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
So Andrew, the two principal reasons that margins weren't higher are, one, our comp plans in the perm side pay on a graduated scale. And therefore later in the year they are more likely to get paid a higher payout.
Further the international non-U.S. perm placement operations were particularly strong, and they are not quite as profitable as we are in the United States.
Andrew Steinerman - Bear Stearns
Okay. And just to finish here up the point and search trends how long it's taking to complete a search.
How's that going?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Search trends, we would say clearly just looking at the numbers, we had a very solid fourth quarter. The start...
we had the first part of the January, we would describe as a slow start. That said we would remind everyone that if you look just one year ago we also had a very slow start in January.
A year ago we had grown 43% in the fourth quarter. Coming out of the gate in January the first three or four weeks we grew 15%.
But for the full first quarter we grew 31%. So no question we have another slow start coming out of holidays.
Like I said it's not like that hasn't happened before. That said, our field people would tell you that clients are taking a little longer to make a decision.
They are being a little more selective with the candidates that they are offering. That said demand still remains very solid.
It clearly hasn't fallen off a cliff, and it's nowhere near what it would feel like if a recession were imminent.
Andrew Steinerman - Bear Stearns
Excellent. Thanks for that color.
Operator
Thank you. Our next question comes from Tim McHugh with William Blair & Company.
Go ahead please.
Timothy McHugh - William Blair & Company
Yes, I wanted to ask about International growth. You said it was particularly strong in perm.
Was that isolated to perm or was it pretty consistent across perm and temp as well as by region internationally?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It was consistent perm and temp, continental Europe was the strongest, the UK was solid. But places like Germany, Belgium, France, The Netherlands all had particularly good quarters perm and temp.
Timothy McHugh - William Blair & Company
Okay. And then on Protiviti, I want to ask about the outlook for as we look out to 2008 for that business.
You mentioned some forensic accounting in the quarter. As you diversify that business, I know you have expanded into restructuring and now with forensic accounting.
Do you see opportunities there that are sufficient to offset the decline in SarbOx work such that we could see a renewed growth in that business in 2008?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Well clearly the last few quarters the success we have had in the non-SOX area has been masked as Sarbanes-Oxley trailed off. And good news about the first quarter of '08, is that it's the first time you anniversary the quarters where we had challenges in SOX.
So with a little luck we will have a positive year-over-year growth with Protiviti in the first quarter of '08. Now, keep in mind it's still a seasonally slow quarter for Protiviti.
A year ago we were down 11% or 12% sequentially, a year before that we were down roughly half of that. And so our hope is that this year we won't be down as much as we were last year and somewhere and maybe in between where we were last year and where we were the year before.
So again still a seasonally slower period, but as we diversify away from SOX clearly these other businesses don't have the seasonal patterns as to internal audit and SOX. And during the quarter, we had some success with financial restatement reconciliation investigations, order management and invoicing process improvement, IT asset management.
We had a couple of nice litigation support projects, application controls particularly regarding SAP. So again those are all very different things than SOX or peer internal audit.
Timothy McHugh - William Blair & Company
Okay. Thank you very much.
Operator
Thank you. Our next question comes from Kelly Flynn with Credit Suisse.
Go ahead please.
Kelly Flynn - Credit Suisse
Thanks. Question...
I know you guys aren't economists, and I know you say that every time. But the perm was so strong this quarter it accelerated so nicely.
Do you have any insights on what was driving that perhaps and also what you are seeing or hearing from your clients that could diverge so blatantly from kind of what economic prognosticators are saying? Any insights there bothin U.S.
and Europe?
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
Kelly, I'm usually the one who comments that we're not macroeconomists and I purposely did not say that this time. It's perfectly evident.
Again because we aren't macroeconomists and because we don't think we have the special insight into the economy, I am not sure we can answer your question totally. I've said in prior calls, and I guess I would repeat now that I do still think there is something of a disconnect between the problems on Wall Street and what's going on main street.
Our typical client as you know was a small to mid sized firm even though we do business with a lot of larger firm. Both of our clients are small to mid size.
And they have still had a lot of demand as our numbers represent. And so I am not quite sure what to make of that.
It certainly doesn't feel like other downturns in the economy. But as I've noted in my earlier remarks, we don't have the great visibility into the future.
And so we watch all these economic reports with concern but so far so good.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
And then the icing on the cake as I talked about earlier was how well we did internationally. And as we said on prior calls, perm placement and management resources have a larger non-U.S.
mix than the other divisions. So if overall, non-U.S.
is 26% of revenues or even higher than that as it relates to management resources and perm and clearly those economies are doing better as we speak.
Kelly Flynn - Credit Suisse
Actually anymore qualitative color on Europe because again folks there are seeming to get more concerned about Europe. Now your trend suggests something else is going on.
Are you picking up any on the margin caution from clients in Europe relative to the economy?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We actually just spent last week with our top eight or ten leaders from Europe and to a person, they were optimistic. Clearly we are doing better on the continent as I said earlier than we are in the U.K., but in the U.K.
we are doing very well.
Kelly Flynn - Credit Suisse
Great. And then just the follow up on, you alluded to it a second ago but can you tell us now what percentage of international is perm?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
I see total revenues 26% is international as I said earlier. If...
even more than that is perm and MR but it's still less than half.
Kelly Flynn - Credit Suisse
Alright, great.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
At least that brackets it for you.
Kelly Flynn - Credit Suisse
Absolutely thanks a lot.
Operator
Thank you our next question comes from Mark Marcon with R.W. Baird, go ahead please.
Mark Marcon - Robert W. Baird
Good afternoon and congratulations on the great results for the quarter and the year. I was wondering if...
with regards to the gross margins on the temp side, can you give us a feel for what happened with regards to pay rates and bill rates during the quarter?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Sure. Year-over-year pay and bill rates were up about 8% sequentially about 2% that's up a tick on a year-over-year basis from last quarter.
So again we would point to that as yet another indication that the labor markets particularly as it relates to accounting finance remain quite strong.
Mark Marcon - Robert W. Baird
And they were both up about 8%?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
That's correct,
Mark Marcon - Robert W. Baird
Great. And then one question I keep getting from a lot of clients, and just there's some concern out there obviously in terms of what's going on in the financial services vertical.
Can you give us any sense of quantification in terms of what your exposure is to that vertical?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Remember that on the staffing side, our typical client is a small to middle sized business. For that reason our exposure into financial services is a low single digit number.
It's frankly a non-event.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
If you think about it Mark, anybody with an accounting department or operation of any size is a potential client of ours. I think because we are the dominant player in accounting and finance, that people assume that somehow the financial services industry is a much bigger client than it is.
But as Keith noted, our typical client is small to mid size. We don't have any one client as we have said many times that amounts to significant percentage of our work.
As a matter of fact they're less than 1% or less than a fraction of a percent. So I would say we are very broad based and that's one of the things we have always liked about the business.
Mark Marcon - Robert W. Baird
Does that hold true for perm as well?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
I would further say Protiviti has much more exposure to financial services as does staffing. But I am happy to report even in Protiviti we had both year-over-year and sequential growth in financial services.
And here again a lot of our work relates to internal audit. It relates to things they have to do due to regulatory drivers, and those aren't necessarily discretionary projects that they cut in these kind of times.
So year-over-year and sequential growth in financial services even in Protiviti.
Mark Marcon - Robert W. Baird
Okay. But last question, you mentioned in your prepared remarks that you're not economists we don't know.
There is a lot of uncertainty in terms of the economic environment. But you also mentioned if we do go into a downturn that you would plan to minimize the impact of that downturn.
Can you give us a feel for how you think that could play out, vis-à-vis the last downturn? My sense is that if we go into a downturn it's not going to be as bad for you as the last one was from an earnings perspective.
But I would love to hear your perspective on that.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Yes, a few comments. First of all, our people would definitely tell you that clients have been more disciplined in their hiring in this up-cycle than they were in the last.
And by no means have the labor markets overheated in the way they did last time. Logic would tell you therefore that they shouldn't fall off as much but that said we don't know any better than anybody else.
The other thing that strikes us that's fairly different. Back in 2000, 11% of our revenues came outside the U.S.
Today that number is 26%. The most cyclical part of the business is perm and as we just described that's even a larger portion of our business outside the U.S.
than it was been. So the point is we are fairly significantly more geographically diversified today than we were in 2000 and then further we have Protiviti today with critical mass that we were only beginning with in 2002.
Mark Marcon - Robert W. Baird
Perfect, thank you.
Operator
Thank you. Our next question comes from Brandt Sakakeeny with Deutsche Bank, go ahead please.
Brandt Sakakeeny - Deutsche Bank
Thanks. Hi Keith, if I just sort of eyeball the revenue guidance from the earnings guidance.
It looks like you are expecting margins to slip. Is that just a conservatism of the perm assumption based on the first couple of weeks?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Wellso a few things, first of all as we reported we had a workers' comp accrual adjustment pursuant to an actuarial review. So you had a little over a penny per share in the quarter from that, so you take that out so that won't repeat.
Brandt Sakakeeny - Deutsche Bank
But doesn't that... isn't that a perm and adjustment on the --
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
That's the starter, that clearly doesn't explain the whole difference. Second of all, Protiviti seasonally is softer in the first quarter, last year we were down double digits at the revenue line and even more at the operating margin line in Protiviti.
We expect to be down at the revenue line and operating margin line, but hopefully not to the same degree that we were last year. And so again let's Protiviti, we've clearly been more conservative with perm.
Those two things even on same revenue dollars because there is more operating leverage in perm and Protiviti, let's say you would have less earnings. I would remind everybody that a year ago between the fourth quarter and the first quarter sequentially we were down three pennies.
The high-end of our guidance we just gave versus what we reported is around the same three pennies. So it's not that unusual relative to the past.
Brandt Sakakeeny - Deutsche Bank
Yes. Is there one to your billing day in this first quarter relative to last year?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Relative to last year... relative to the quarter we are just in, we have one and a half more billing days.
Relative to last year it's actually seven-tenths of a day which I guess rounds up to a day fewer, year-over-year.
Brandt Sakakeeny - Deutsche Bank
Great. And just one technical question.
Do you have the quarter ended share count?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It is 157 million, the repurchases we did during the quarter 2 million didn't show up in the quarter average. So you've got a 2 million share cushion going into the first quarter.
Brandt Sakakeeny - Deutsche Bank
Great. If I recall you had 2.2 million maybe shares remaining on the authorization, is that right?
Brandt Sakakeeny - Deutsche Bank
No --
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
No, it's over 9 million.
Brandt Sakakeeny - Deutsche Bank
I am sorry, okay.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
It was 9.2 if I remember the number.
Brandt Sakakeeny - Deutsche Bank
Okay. So that's still plenty of room on that.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
That's correct.
Brandt Sakakeeny - Deutsche Bank
Perfect. Great.
Thank you.
Operator
Thank you. Our next question comes from Jeff Silber with BMO Capital Markets.
Go ahead, please.
Jeffrey Silber - BMO Capital Markets
Thanks so much. You both gave a little bit of color about the financial services vertical.
I was wondering if I can get a little bit more color on any specific vertical that were either stronger than expected or weaker than expected?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
And again Jeff, because in staffing we are so diverse, there are certainly no vertical that screams at you positively or negatively. In the first quarter, that were coming into as we speak tax typically drives a fair amount of demand but again that's a seasonal thing.
Jeffrey Silber - BMO Capital Markets
All right, and then just a couple of number of questions for follow-up. You mentioned the workers' comp accrual about a penny per share.
What was the impact on gross margins roughly in terms of basis points?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
More and let's see I'd need to convert it, it was 30 basis points.
Jeffrey Silber - BMO Capital Markets
Okay. That's fine.
I just need a rough estimate and what was stock based comp in the quarter?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Stock based comp was $1.8 million. $1.5 million of which was temp and 300,000 of which was perm.
Jeffrey Silber - BMO Capital Markets
All right and then what kind of tax rate are you using for your first quarter guidance?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
40%.
Jeffrey Silber - BMO Capital Markets
All right, one more quick one, I know I should only have two but from a capital spending perspective what are you guys budgeting for next year?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Somewhere between $80 million and $90 million. We actually spent $83 or $84 this year which was less than we forecast.
We've dragged our feet a little bit on our people soft upgrade as to which modules we do, how we are going to do it, etcetera. So we are trying to stretch that as long as we can but sometime we are going to have to do it.
And that probably means sometime starting in 2008.
Jeffrey Silber - BMO Capital Markets
Okay, appreciate the color, thanks.
Operator
Thank you. Our next question comes from Andrew Fones with UBS Securities.
Go ahead please.
Andrew Fones - UBS Securities
Yes, hi, thanks. I was wondering if you could help me understand the headcount growth, that you guys...
I think you said you added 1500 staffing employees and 500 Protiviti. What locations were they?
Perhaps the breakout between the U.S. and international if you could?
Thanks.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Yeah we don't give that level of U.S., we don't give that level of detail where I can certainly say that the non-U.S. growth was significantly greater than U.S.
growth which is consistent with the revenue trends. That's particularly true in Protiviti but staffing and Protiviti most of the headcount growth came outside the U.S.
Andrew Fones - UBS Securities
Okay, thanks and then kind of given the guidance and perhaps a little bit of a cautious start to January of the first quarter but as you know you saw things pickup last year. How are you looking at hiring trends for the quarter and then perhaps your thought given me macro environment as well?
Thanks.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
So our plan is to continue to add the staff maybe in a little more measured way given that there is productivity upside from the people we already have. I'd say to some degree will being less patient with underperformers, and that helps our overall comp ratios.
We will continue to be the most aggressive outside the United States but the net, net continuing to hire just not quite as a robust pace as we have in other quarters.
Andrew Fones - UBS Securities
Okay thanks.
Operator
Thank you. Our next question comes from Tobey Sommer with SunTrust Robinson Humphrey, go ahead please.
Tobey Sommer - SunTrust Robinson Humphrey
Thank you very much. I was wondering if you could comment specifically on Robert Half Technology and what areas are kind of driving the demand and the skill sets that are seeing the most demand recently?
Thank you.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
As we called out the prior quarter of the year the help desk network support, those types of positions seem to be the most in demand. As we also talked about last quarter we have allocated a little bit disproportionably, our internal headcount to technology, and so we are getting some return from that as well.
Tobey Sommer - SunTrust Robinson Humphrey
Is there any difference or anyway you could parse out what the exposure in demand is look like from financial services for technology to the extent you have data on that?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We don't have that on the top of our tongues here but here again our technology practice is focused on middle market clients as is the rest of our practice. Therefore our exposure in technology to financial services is not very large.
Tobey Sommer - SunTrust Robinson Humphrey
Right. And one last detail question I think you mentioned that FTEs were 12,100 and you gave a growth rate.
Could you repeat that for me?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It's14%.
Tobey Sommer - SunTrust Robinson Humphrey
Thank you so much.
Operator
Thank you. Our next question comes from Gary Bisbee with Lehman Brothers.
Go ahead please.
Gary Bisbee - Lehman Brothers
Hi guys good afternoon. I wondered if you could tell us what the currency benefit was to both revenues and profits in the quarter.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
As we said on the call we gave the growth rates both on a reported and constant currency basis. So let me find that here.
I'll see the nominal growth was 43% year-over-year and 13% sequentially. And on a constant currency basis it was 27% year-on-year and 8% sequentially.
I believe for the quarter sequentially there was $12 million in revenues from currency.
Gary Bisbee - Lehman Brothers
Okay, great. And any sense as what the profit impact was?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It's certainly given that we are not as profitable in United States as we are in the States, it's not a significant number, you mean internationally.
Gary Bisbee - Lehman Brothers
And then the Protiviti international revenue if you just look at the trend you know I guess in dollars over the last year the growth rate was actually down slightly this quarter and I think it decelerated pretty dramatically is there anything going on there I know you said last quarter that you lost a couple of clients that got taken private but is there anything else going on with the Protiviti international business? And is there any sense that might given what you are hearing from clients about demand ramped back up at some point in '08?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Clearly as we talked about last quarter we were particularly challenged with some SOX clients that dropped off. There was also a big financial services client we had where we were on the wrong side of a merger.
We did better this quarter than last internationally, and in Europe we did particularly better in Asia where we have been traditionally pretty strong. But we've got challenges in Europe, we told everybody we had challenges last quarter.
I am happy to report we did make some progress during this quarter, and we are forecasting to make further and significant progress the next two quarters. But clearly that's impacting the non-US Protiviti growth rates as you described.
Gary Bisbee - Lehman Brothers
Okay and then just lastly any update on the JSOX initiative where that's at, how you are positioned?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We are positioning well with the JSOX. I think the only semi disappointing news from our regulatory standpoint is that there appears to be more tolerance in Japan for your outside audit firm to do some of a top SOX testing work than there was in the United States where that was viewed as being a conflict.
So, the demand has been moderated a little bit, not significantly in Japan for that reason alone. But for that JSOX is rolling along and it's doing fine.
And the issue in Japan is more availability of people than it is demand quite frankly.
Gary Bisbee - Lehman Brothers
Thank you.
Operator
Thank you. Our next question comes from T.C.
Robillard with Banc of America Securities. Go ahead please.
T.C. Robillard - Banc of America Securities
Thank you. Good afternoon.
Just wanted to follow back on a earlier question about the shares outstanding at the end of the quarter. Keith, did I hear you correctly, you said 2 million of the 3 million that you bought weren't done in the quarter?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Well it didn't show up in the average. So when we computed average shares for the quarter only one of the 3 million we bought back actually impacted the average.
So that says there is 2 million that we bought that haven't yet been reflected and become a cushion for this quarter we are now in.
T.C. Robillard - Banc of America Securities
But those 2 million, I'm assuming they were bought very late December.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
That's correct. We did in the quarter.
T.C. Robillard - Banc of America Securities
Okay.And have you guys bought any stock year-to-date?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We have a quite period that starts January 1st and runs through two days from today during which we can't and don't buy.
T.C. Robillard - Banc of America Securities
Okay. Thank you.
And then I just wanted to talk a little bit on the Protiviti sequential margin improvement. You had made the comment that there you guys saw strong fixed cost leverage.
Based on the fixed cost base that you have right now can you get gross margins back to levels that we saw last year without making any more incremental investments? Or have you scaled back some of the fixed costs there as the revenue was challenging through '07?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Well when you say last year, that implies 2007.
T.C. Robillard - Banc of America Securities
I am sorry, I meant '06.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
Resoundingyes to that, I presume you meant 2006.
T.C. Robillard - Banc of America Securities
That's correct.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We're talking 36% gross margins and again that's certainly possible. I have more concern about that with respect to the international impact on the total than I do whether U.S.
can get back to those margins. Clearly Protiviti has significantly more capacity from a headcount standpoint from a pyramid from a planned capacity standpoint than they have revenues.
So incremental revenues ought to be significantly more profitable, and you saw some of that in this quarter. The issue we have as we spoke to earlier is that seasonally quarter's one and quarter two are usually lighter.
T.C. Robillard - Banc of America Securities
I understood, Keith that was very helpful. Thank you.
Operator
Thank you. Our next question comes from Jim Janesky with Stifel Nicolaus.
Go ahead please.
James Janesky - Stifel Nicolaus
Thank you. You provided some color around what with the field is telling you in the perm segment.
That the sales process might be taking a little bit longer and more selective and then you provided some color also in the technology. Can you go through the trends that you are hearing within Accountemps, OfficeTeam and Management Resources?
Is there any type of caution or is there still pretty expectations for pretty strong growth as you move throughout the quarter?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
And so for Accountemps and Management Resources that are right in the middle of companies closing their books, right in the middle of individual tax fees and seasonally it's a very strong period. And the expectations are that it will continue strong this quarter.
And Robert Half Technology, typically a lot of those assignments in naturally and with the end of the calendar year typically is somewhat challenging getting those restarted and the following calendar year, so the first quarter is never a strong quarter for technology at least on a sequential basis. And OfficeTeam is typically somewhere in the middle.
But generally speaking first quarter seasonally isn't a great quarter for OfficeTeam. But in accounting finance be it perm or temp if you talk to our field people they would say a little tougher, a little harder maybe a little slowing but certainly hasn't fallen off a cliff and demand remains solid.
James Janesky - Stifel Nicolaus
Okay. Within international perm which as you indicated is very strong and its stronger than the U.S.
Can you give us an idea what is driving that growth? Is it that you have introduced a product there fairly recently and it's starting to take hold?
Does it have to do with the supply demand in balance of accounting and finance professional similar to on the trends in the U.S. if you could us give us some idea of what's driving that growth so much stronger than the U.S.
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We made a conscious decision 12 to 18 months ago that to get our international margins closer to the United States, we needed more permanent place for the mix and therefore beginning about 80 months ago. We've hired internally disproportionately to perm that we have to temp.
And so those internal investments have paid off with the backdrop of very robust economies as we have talked earlier. So the combination of the two we have been very successful in perm outside the U.S.
which clearly shows itself in the fourth quarter which typically is a weaker quarter seasonally for perm. But this fourth quarter we did quite well.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
I will just add Jim that we sent a couple of our what, who we consider to be top operating people in the perm side of the business to Europe. And I think they have had an impact as well on the training and hiring and so forth.
So the people overall are doing a very good job.
James Janesky - Stifel Nicolaus
Okay.And just to clear it up would you say that the seasonally it was the strength in the U.S. surprise you as well as Europe or international or was it mostly Europe and the U.S.
was a little bit weaker?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
U.S. I would say it was a little bit stronger than we would have expected.
December held up better in the United States than it has many Decembers. But clearly the driver was the non-US perm growth.
James Janesky - Stifel Nicolaus
Okay, thank you.
Operator
Thank you. Our next question comes from Michel Morin with Merrill Lynch.
Go ahead please.
Michel Morin - Merrill Lynch
: Hi guys good afternoon. Just on Protiviti I was wondering if you can talk the bill rates, what's happening there.
And then specifically again on Protiviti gross margins you are down about 500 basis points in 2007. How hopeful are you that you're going to be able to climb back some of that in '08?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
The gross margin point as we just described, clearly we have got more planned capacity with our current staff levels than out current level of revenues. So we are confident that each incremental revenue dollar will add to the gross margin percentage nicely.
What was the other part of his question?
Michel Morin - Merrill Lynch
It was the bill rates. What's happening at the Protiviti--
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It's a little noisier to figure out because of mix shifts, so you've got this migration away from SOX into consulting. When you bundle everything together our bill rates are up mid-single digits in part reflecting the somewhat softening in the SOX market.
But they are still up but they are not up as dramatically as we are in staffing principally due to the SOX impact.
Michel Morin - Merrill Lynch
Okay, and has that been, when you say up mid single-digits has that been pretty consistent throughout the year? Or has it picked up at all during the year?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
It's been fairly consistent, there is nothing dramatic in there. Again with SOX rates, with SOX revenues trending down which they continued this quarter you replace those larger projects, more leveraged projects with the consulting projects which has a bill rate impact.
Michel Morin - Merrill Lynch
Alright okay. And then Max you mentioned in your opening remarks that the company just turned 60 and you faced 11 recessions.
We have only seen data on two of those. Is there anything that you would observe from some of the prior recessions that might be applicable to the current environment that you might care to share with us?
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
Well first just by way of information, you've heard to eleven, we are going all the way back to the original franchisee days and we had all the franchisee records. Obviously we have been around since 1986, so we weren't here for all 11 of those but we have been around for the ones you are referring to.
As I said earlier Michel we are not macroeconomists, we don't have great visibility into the future as you know. And so all we can tell you is that where we sit today, it doesn't feel like the prior recessions we've been through.
That doesn't mean there isn't one coming and we certainly see on the news reports, but frankly, the attitude and the feel the levels of activity and of course the results to the last quarter obviously certainly don't remind us very much of prior downturns. We do have play books we've used in the past for downturns, and we realize we have to be in the nature of surgeons to watch the business very carefully if in fact a downturn looks like it's setting in.
But you just heard Keith saying that we continue to hire, we continue to look forward to more growth. We are very oriented operationally right now to gaining market share, because frankly every time there has been turbulence in the past a lot of our smaller and regional competitors run into difficulties.
This is an easy business to get into and not a very easy business to manage in the downturn. So, we would like to take advantage of that, as we feel we have in the past.
So, again other than comment of that nature there's not a lot I can say in response to your question. We feel pretty good about where we are right now.
We watch the future with cautious optimism, but again we are tuned on the market just like you are and why we feel good about things because I said we don't have great visibility. So we just have to watch it very carefully.
Michel Morin - Merrill Lynch
Great, thanks very much.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
Thank you.
Operator
Thank you. Our final question comes from David Feinberg with Goldman Sachs.
Go ahead please.
David Feinberg - Goldman Sachs
Good afternoon gentlemen. Question following up on one of the comments earlier with regard to how your businesses perform during a recession.
You mentioned that perm placement is your most sensitive, but also that during the last downturn Protiviti was really just starting to get off the ground. Should '08 prove to be a recession?
What's your impression in terms of the book of business of Protiviti, and what would prove to be the most economically sensitive?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
The view of our Protiviti team would be... the good news is that internal audit continues that SOX compliance doesn't go away.
But more than likely clients will choose to do more that in house than they have done recently. Some clients will have across the board cost saving programs for which Protiviti would be included.
So on the one hand, the view is the demand won't dry up. On the other hand, the view is there might be some pricing pressure.
Those projects that are probably most at risk would be the discretionary consulting projects, the proactive, the process reengineering. Whether it's good or bad to date we don't have a huge exposure to that.
I mean frankly we are trying to get more, but we don't have a large exposure to that today. So, the thought is there would be some impact from a downturn but that impact would be muted because the nature of the services that Protiviti provides for the most part would still be required.
David Feinberg - Goldman Sachs
And to go back to some of the earlier comments about acting more like a surgeon. You've invested in this business, and you've continued to hire.
Is it safe to assume that should we go into a recession you would have to cut here as well with few other more traditional staffing businesses?
M. Keith Waddell - Vice Chairman, President and Chief Financial Officer
We would certainly looking at it market-by-market and product line-by-product line but we wouldn't do it with our heads in the sand. I mean, clearly we'll look at our staffing levels, our pyramid shapes and do what's right.
But I think it's reasonable to expect if there were a significant top line impact at Protiviti we would rethink our staffing levels to some degree.
David Feinberg - Goldman Sachs
Great, thank you very much.
Harold M. Messmer, Jr. - Chairman and Chief Executive Officer
That's all we have time for today. I do want to thank everyone again for your time.
Operator
This concludes today teleconference. A tape recording of this call will be available for replay later this evening, thorough 8 p.m.
Eastern on February 5. The dial-in number for the replay is 800-283-4641 or outside the United States 1-402-220-0851.
This conference call also will be archived in audio format in the investor center at www.rhi.com. We appreciate your participation and have a great day.