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Robert Half International Inc (RHI) Q4 2020 Earnings Call Transcript

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RHI earnings call for the period ending December 31, 2020.

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Robert Half International Inc (RHI -2.19%)
Q4 2020 Earnings Call
Jan 28, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Robert Half Fourth Quarter 2020 Conference Call. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half and Mr. Michael Buckley, Chief Financial Officer.

Mr. Waddell, you may begin.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Thank you. 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 are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are described in today's press release and in our most recent 10-K 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 as as adjusted. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release.

In addition, we would like to remind you that beginning last quarter, we modified our presentation of revenues and the related growth rates for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources to include their inter-segment revenues from services provided to Protiviti in connection with the company's blended staffing and consulting solutions. This is how we measure and manage these divisions internally. The combined amount of divisional intersegment revenues with Protiviti is also separately disclosed. The supplemental schedule just mentioned also include our revenue schedule showing this information back for 2018, 2019, as well as 2020. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website at roberthalf.com.

Fourth-quarter results for both our Protiviti and staffing operations were very strong and exceeded the top end of our guidance range. Protiviti reported its 13th consecutive quarter of year-on-year revenue gains, with particular strength in its technology consulting practice and managed solutions with staffing. Our staffing operations reported broad-based, double-digit, quarter-on-quarter sequential revenue growth on an as-adjusted basis. I could not be more proud of how our teams have managed through this extraordinary year. Over the last several months, they have made significant impacts helping our clients succeed and job candidates find meaningful work.

Companywide revenues were $1.304 billion in the fourth quarter of 2020, down 15% from last year's fourth quarter on a reported basis, and down 16% on an as-adjusted basis. Net income per share in the fourth quarter was $0.84, compared to $0.98 in the fourth quarter one year ago.

Cash flow before financing activities during the quarter was $85 million. In December, we distributed a $0.34 per share cash dividend to our shareholders of record, for a total cash outlay of $39 million. We also acquired 1.1 million Robert Half shares during the quarter for $63 million. We have 9.9 million shares available for repurchase under our Board-approved stock repurchase plan. Return on invested capital for the Company was 31% in the fourth quarter.

Now, I'll turn the call over to our CFO, Mike Buckley.

Michael C. Buckley -- Executive Vice President, Chief Financial Officer

Thank you, Keith. And hello, everyone.

Let's start with revenues. As Keith noted, global revenues were $1.304 billion in the fourth quarter. This is a decrease of 15% from the fourth quarter one year ago on a reported basis and a decrease of 16% on an as-adjusted basis. On an as-adjusted basis, fourth quarter staffing revenues were down 24% year-over-year. US staffing revenues were $723 million, down 25% from the prior year. Non-US staffing revenues were $219 million, down 23% year-over-year on an as-adjusted basis. We have 326 staffing locations worldwide, including 88 locations in 17 countries outside the United States.

In the fourth quarter, there were 61.7 billing days, equal to the number of billing days in the fourth quarter one year ago. The current first quarter has 62.3 billing days, compared to 63.1 billing days in the first quarter one year ago. The billing days for 2021 by quarter, are 62.3 days, 63.4 days, 64.4 days and 61.7 days for a total of 251.8 days, which is approximately one day less than 2020 due to it being a leap year. Currency exchange rate movements during the fourth quarter had the effect of increasing reported year-over-year staffing revenues by $8 million. This increased our year-over-year reported staffing revenue growth rate by 0.7 percentage points. Temporary and consultant bill rates for the quarter increased 2% compared to a year ago, adjusted for changes in the mix of revenues by line of business. This rate for Q3 2020 was 3.1%.

Now, let's take a closer look at results for Protiviti. Global revenues in the fourth quarter were $362 million; $294 million of that is from business within the United States, and $68 million is from operations outside the United States. On an as-adjusted basis, global fourth quarter Protiviti revenues were up 18% versus the year-ago period, with US Protiviti revenues up 23%. Non-US revenues were down 2% on an as-adjusted basis. Exchange rates had the effect of increasing year-over-year Protiviti revenues by $3 million and increasing its year-over-year reported growth rate by 1 percentage point. Protiviti and its independently owned Member Firms serve clients through a network of 86 locations in 28 countries.

Turning to SG&A Presentation. As first noted last quarter, changes in the Company's deferred compensation obligations are now included in SG&A or in the case of Protiviti, direct cost, with offsetting changes in the investment trust assets presented separately below SG&A. As a reminder, our historical discussion of consolidated operating income has been replaced with the non-GAAP measure of combined segment income. This is calculated as consolidated income before income taxes, adjusted for interest income and amortization of intangible assets.

For your convenience, we've added another supplemental schedule to today's earnings release on pages 12 and 13, highlighting the impact of changes in the deferred compensation accounts to the Summary of Operations for the fourth quarter and full year 2020 and 2019. This is a non-GAAP disclosure, so we also show a reconciliation to GAAP.

Turning now to gross margin. In our temporary and consultant staffing operations, fourth quarter gross margin was 38.5% of applicable revenues, compared to 38% of applicable revenues in the fourth quarter one year ago. The year-over-year increase in gross margin percentage is primarily due to lower payroll taxes, insurance and other fringe costs. Our permanent placement revenues in the fourth quarter were 9.7% of consolidated staffing revenues versus 10.3% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin increased 10 basis points compared to the year-ago fourth quarter, to 44.4%.

For Protiviti, gross margin was $96 million in the fourth quarter or 26.5% of Protiviti revenues. This includes $5 million, or 1.5% of Protiviti revenues, of deferred compensation expense related to increases in the underlying trust investment assets. One year ago, gross margin for Protiviti was $90 million or 29.7% of Protiviti revenues, including $2 million of deferred compensation expense or 0.7% of Protiviti revenues, related to investment trust activities.

Companywide selling, general and administrative costs were 32.6% of global revenues in the fourth quarter compared to 32.8% in the same quarter one year ago. Deferred compensation expenses related to increases in underlying trust investments had the impact of increasing SG&A as a percent of revenue by 2.7% in the current third quarter and 1.2% in the same quarter one year ago. Staffing SG&A costs were 39.7% of staffing revenues in the fourth quarter versus 36.7% in the fourth quarter of 2019. Included in staffing SG&A costs was deferred compensation expense related to increases in the underlying trust investment assets of 3.7% and 1.5%, respectively. We ended 2020 with 7,800 full-time internal staff in our staffing divisions, down 32% from the prior year. Fourth-quarter SG&A costs for Protiviti were 14.1% of Protiviti revenues, compared to 17.1% of revenues in the year-ago period. We ended 2020 with 7,300 full-time Protiviti employees and contractors, up 34% from the prior year.

Operating income for the quarter was $89 million. This includes $41 million of deferred compensation expense related to increases in the underlying investment trust assets. Combined segment income was therefore $130 million in the fourth quarter. Combined segment margin was 9.9%. Fourth quarter segment income from our staffing divisions was $79 million with a segment margin of 8.4%. Segment income for Protiviti in the fourth quarter was $51 million with a segment margin of 13.9%.

Our fourth-quarter tax rate was 27% for both the current and prior period years. Accounts Receivable at the end of the fourth quarter, accounts receivable was $714 million, and implied days sales outstanding or DSO was 49.4 days.

Before we move to first-quarter guidance, let's review some of the monthly revenue trends we saw in the fourth quarter of 2020 and so far in January 2021, all adjusted for currency and billing days. Our temporary and consultant staffing divisions exited the fourth quarter with December revenues down 20.8% versus the prior year, compared to a 23.8% decrease for the full quarter. Revenues for the first three weeks of January were down 23% compared to the same period one year ago.

Permanent placement revenues in December were down 25.4% versus December of 2019. This compares to a 28.5% decrease for the full quarter. For the first three weeks of January, permanent placement revenues were down 20% compared to the same period in 2020. We provide this information so that you have an insight into some of the trends we saw during the fourth quarter and into January. 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 first-quarter guidance. Revenues; $1.29 billion to $1.37 billion, income per share; $0.74 to $0.84. The midpoint of our guidance implies a year-over-year revenue decline of 11.7% on an as-adjusted basis, including Protiviti and EPS returning to prior-year levels. The major financial assumptions underlying the midpoint of these assumptions are as follows. Revenue growth on a year-over-year basis, staffing down 19% to 21%, Protiviti, up 23% to 25%, overall, down 11% to 13%. Gross margin percentages; temporary and consultant staffing, 37% to 38%, Protiviti; 25% to 26%, overall; 38% to 39%.

SG&A as percent of revenues, excluding deferred compensation investment impacts: staffing: 35% to 36%, Protiviti: 14% to 15%, overall: 29% to 30%. Segment income, staffing: 8% to 9%, Protiviti: 10% to 12%, overall: 8% to 10%. 2021 capital expenditures and capitalized cloud computing costs for the year: $85 million to $95 million, with $15 million to $20 million in the first quarter. Tax rate: 27% to 28%, shares: 113 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.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Thank you, Mike. We enter 2021 with renewed optimism about Robert Half's positioning for future growth. We have retained our key staff, and they are committed to driving our success as the backbone of the enterprise. Our aggressive go-to-market strategy during the pandemic with clients in the public sector and financial institutions of all sizes has yielded meaningful wins and new relationships.

Our technology investments have facilitated remote working models internally and with our advanced AI- driven capabilities are providing clients with real-time choices of candidates from outside their local market area. Owing to its diversified solution offerings, Protiviti continues its record of multiyear double-digit revenue growth and very positive pipeline. The collaboration between Protiviti and staffing is at an all-time high as evidenced by the 82% year-on-year growth rate this quarter from the unique blend of consulting and staffing solutions. Staffing services provided to our mid-cap clients now approaches one-third of our revenues and growing and this is incremental to our traditional focus on SMB clients and prospects.

With multiple vaccines now rolling out throughout the world and fiscal and monetary policy support expected to continue globally, economists are increasingly expecting GDP growth to follow. GDP driven early cycle growth is traditionally particularly robust for SMB clients that are lean and nimble from the downturn and have pent-up demand to restore and upskill their workforce as they return to growth. More than ever, we believe the strength of our brands, our people, our technology and our professional business model position us for future success in 2021 and beyond.

Now, Mike and I would 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.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from the line of Mark Marcon with Baird. Your line is open.

Mark S. Marcon -- Robert W. Baird & Co. Inc. -- Analyst

Good afternoon and congratulations. Wondering, can you talk about the opportunities that you're seeing across Protiviti. Obviously you're accelerating. It seems like there would be a lot of opportunities in a lot of different areas within IT including cyber security audits, particularly in the wake of SolarWinds, and you did make the acquisition with regards to Identropy. So I was just wondering if you could talk a little bit about the areas of growth that you're seeing there? And kind of what inning you think Protiviti is gaining and then I've got a follow-up for the staffing side.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

So the good news for Protiviti is that its success is broad based. It's led by technology consulting and managed solutions, on the tech side, which we've talked about for a few quarters now; its cloud, its cyber, its privacy, its digital transformation and the managed solutions with staffing, its public sector led by unemployment, housing, education, vaccine. FSI continues to lead with anti-money laundering and consumer lending, regulatory actions leading that way. Internal audits down 8% to 10% year-on-year, some more got delayed, some scopes got produced. There is a little bit of fee pressure. As we've talked about now for a few quarters, Protiviti's pipeline remains very strong as to which inning we're in. It's clearly not a late-inning because not only do we have macro coming back and discretionary spending is that will benefit particularly internal audit. You've also got a new administration in United States that's viewed to be more regulatory friendly, which is a better thing than not as it relates to Protiviti. So we feel great about where they are. We feel great about our prospects and we feel like it's early innings.

Mark S. Marcon -- Robert W. Baird & Co. Inc. -- Analyst

That's terrific. And can you talk a little bit about the fit with the most recent acquisition and the opportunities there? I know it's really small and just 40 people, but it seems like it would be a really good fit in terms of -- but any sort of IT audits that you're doing.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Sure. And identity access management is clearly an important sub-component of cyber security and we've got a team very expert in a certain platform, a leading platform in that space. So we're happy to have part of the family. We feel like we can leverage our existing database, while we also grow theirs and we feel good about that as well.

Mark S. Marcon -- Robert W. Baird & Co. Inc. -- Analyst

Terrific. And then can you talk a little bit about the staffing side. As we come out of this, Keith And Mike, obviously we're just in the early stages of inflecting and nobody knows how long this cycle is going to be. But you're really seeing a nice improvement in terms of productivity. Your headcount was down 32% on the staffing side, revenue down a lot less than that. You've put in place a number of different tools to increase productivity. So how should we think about the productivity over the course of the current cycle as we continue to come out of this? And what I'm wondering is, it looks like you picked up you're hiring, but it's not at a super robust pace yet. So just how should we think about that?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, as we've talked for a few quarters now, we've retained our tenured staff. Their productivity is always greater than the less experienced staff. We feel like we've got additional capacity with that group. We think we can leverage that capacity as we grow without adding in an outsized way to heads. There is a little bit of an offset in that our incentive plans, our graduated rate plans, hockey stick, if you will. So as these more tenured people get further and further up the hockey stick, some of that leverage will go back to them appropriately, so, but we'll still benefit overall and we expect to have some profitability upside as we continue to grow relative to where we were at same revenue points in the past.

Mark S. Marcon -- Robert W. Baird & Co. Inc. -- Analyst

Perfect, thank you.

Operator

Thank you. Our next question comes from Andrew Steinerman with JPMorgan. Your line is open.

Andrew Steinerman -- JPMorgan Chase & Co. -- Analyst

Hi guys. Two questions. The first one is, when thinking about that year ago first quarter of 2020, obviously, the month of March was that COVID affected quarter. I mean, COVID affected months. How did you take into that kind of year-over-year consideration when giving first quarter of '21 staffing and when I say staffing, I mean, both flex and perm revenue guidance. That's my first question.

I am going to give you my second question at the same time. And my second question is, how should we think about the flex staffing revenues sequentially in the first quarter of '21, recalling that our first quarter is a slower, seasonal time for flex staffing.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

So your two questions are related. We effectively took our fourth quarter actual results superimposed a typical sequential progression into the first quarter and that was the basis for our Q1 guidance. And the year-on-year, Andrew, fell out to whatever it was, because we felt like using where we currently are i.e. fourth quarter as the baseline for our forecast rather than a year ago, which did had the impacts of that March month in it. We felt like Q4 was a better baseline and the sequential embedded in our forecast is typical first quarter sequential patterns temp and perm.

Andrew Steinerman -- JPMorgan Chase & Co. -- Analyst

Okay. Yeah. No, that answers my question. Could you just give us a sense of, if you think temp or perm will do better in the first quarter.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

We hope they both do better, and we're just coming off a quarter where they both did a lot better. So we were happy about the momentum that we've had. Our people will tell you, it's one of our best restarts to a new year in a long time. So anecdotally I can assure you the enthusiasm level is very high. That said, we thought it prudent to given the big step up we had in Q4 to confirm that into Q1 with normal patterns, but not be more aggressive than that.

Andrew Steinerman -- JPMorgan Chase & Co. -- Analyst

Well, thank you. Thank you.

Operator

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Thanks so much. Appreciate you guys giving the headcount numbers like you typically do at the end of every year. And I wanted to focus on the internal staff and staffing. It was down pretty substantially. But again, your revenues weren't down as bad, so we saw some productivity there. What do you need to see to start hiring internal staff in your staffing division, when you think that will happen.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, as we've said, because we have a more tenured staff and because they have productivity capacity as we speak, we're going to utilize that capacity before we aggressively add more heads. It's good for them, it's good for their compensation, it's good for us. So we don't think, certainly in the next quarter or two, that will have to add to staff in a meaningful way but can still grow nicely as we just showed we could do with the existing staff. Our staff cutbacks were primarily in the second quarter. And so the increases we saw in the third quarter were without any additional staff and we think there is room to go with who we already have. So I certainly wouldn't take our lack of hiring either as evidenced by our job postings or otherwise as any indication that we're not bullish and we don't think we can grow. Instead, we believe there is significant unused capacity of our current tenured staff.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Okay. That's really helpful. As a follow-up, you pointed out at the end of your prepared remarks about your services to, you know mid-cap clients now about a third of their revenues. Can you talk about that what have you've been doing there differently and what do you think that could be over-time. Thanks.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, I'd say, what we've done differently is a few things. One, we focused on it. We've had success with it. Two, with Protiviti with many of those companies and even larger cap companies, we come through the consulting door rather than the staffing door. And by so doing, it's not margin dilutive that it might otherwise be. So the combination of the focus, the success and the ability to leverage Protiviti and its relationships and its contractual relationships, all plays a part. We continue to believe there is upside there, as you know, traditionally we've been principally SMB. And trust me, we're not walking away from SMB. We're not de-emphasizing SMB to the contrary, we feel like it's the perfect time in the cycle to be SMB the last couple of quarters they've been more impacted than mid cap and beyond. So we've endured the bad side of that, if you will. So now it's time to endure the good side of SMB and we're excited about how well we can leverage our SMB client base as we've demonstrated in the past. That said, we do think mid cap is incremental to that. We've done well. We've done it without any net margin dilution and we continue to invest in that.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Okay. That's really helpful. Thanks so much.

Operator

Thank you. Our next question comes from Hamzah Mazari with Jefferies. Your line is open.

Mario Cortellacci -- Jefferies LLC -- Analyst

Hi, this is Mario Cortellacci filling in for Hamzah. I appreciate the time. Maybe you can just touch on or remind us of your exposure to the travel and leisure industry from a temp staffing perspective and maybe you can talk about outside of that, how do you think the impact of the vaccine will have on your business?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

So we have very little exposure to travel and leisure. Clearly, that industry is most impacted by the shutdowns and restarts and shutdowns. And so just looking at numbers, there's really no correlation between geography shutdowns, because we have so little exposure to travel and leisure. And clearly the impact of the vaccine can be nothing, but positive. While on the one hand, our clients have by and large adjusted to the current environment and have become very virtual. On the other hand, I think everybody is excited about the possibility of not being virtual. And on that score, I thought it was interesting. This week we were recognized as a top 20 company in the Fortune 500 for embracing remote work. So we thought that was pretty cool.

Mario Cortellacci -- Jefferies LLC -- Analyst

Great, thank you. And then on the gross margin, maybe you can help us understand or maybe give us a sense for how we should think about gross margins going forward. Obviously in the quarter, you had some fringe benefits, insurance, things like payroll. But could you give us a sense for some of the puts and takes that you are expecting in 2021.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Okay, let's talk a little bit about gross margin. Because, first of all, if you look at prior downturns, peak to trough, we've lost 300 basis points in gross margin. Happy to report that this time around, we lost a third of that, a 100 basis points. And I'm even further happy to report that we're now back this most recent quarter, we're now back to peak gross margins in our temp businesses. For 2021, given that we are already back while there might be some upside as we move through the year, we certainly had modeled a lot of upside remembering that we have the highest gross margins in the industry by leaps and bounds as it is. But trust me, I think one of the things we're most proud of is how we've managed our gross margins. A, during the pandemic, the height of the pandemic. How we've gotten them back and how we intend to sustain that in to 2021.

Operator

Thank you. Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thanks so much and congratulations. Hey Keith, any sense of how the bill rates have been trending in the quarter versus prior quarter and maybe year-on-year. If you could break that out maybe by segment.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, we said in our prepared remarks that they were up 2% year-on-year adjusted for mix. That was down a little bit from the prior quarter. It all starts with pay rates and with higher unemployment, we aren't paying quite as much, still more than we were a year ago. But the rate of wage inflation has subsided to some degree. But all things considered to still have a little bit of low single digit, wage inflation and then bill rate inflation and protect the margins for the differential is where we are and where we're happy to be.

Kevin McVeigh -- Credit Suisse -- Analyst

I understand. And then just real quick, what's the tax rate assumed in Q1 and then for the full year 2021, if you have that.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Yes, I think it's for 27.5%, Mike.

Michael C. Buckley -- Executive Vice President, Chief Financial Officer

Yeah, and it's going to be the about the same for the full year.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Yeah. So, between 27% and 28%.

Kevin McVeigh -- Credit Suisse -- Analyst

Okay. Thank you so much.

Operator

Thank you. Our next question comes from Gary Bisbee with Bank of America. Your line is open.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Hey, good afternoon. Just wanted to ask another one about Protiviti. So a quarter ago, you told us your expectation was 5% to 7% revenue growth and it did 18%, and obviously you're calling for even further acceleration in Q1. What sort of happened in the last three months and what is -- I understand all the areas of strength you've frankly been discussing for several years now, but like what changed there? What's happening and how maybe durable or sustainable are the drivers of that recent acceleration.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

The thing that changed the most as we had more public sector demand right till the end of the year than we expected. We service that primarily with contractors, which is why when you look at the supplemental schedules where we break out the inter-segment revenues, you see there was a $30 million spike between quarters three and four. And the lion's share of that was public sector related.

As to sustainability, the jury is out. That said, we have relationships, we've never had before. We've certainly got a look into many local, regional, state governments and their business processes and we certainly are excited at the opportunity to improve those processes, be it overpayments, lot in the press about some fraud as it relates to payment of unemployment claims. And so, again, there is no question that there is some spike in that as it relates to elevated unemployment claims that the states are having to process as same for housing assistance, same for remote learning support for school systems. That said, we do believe we're confident and we've got teams put together whose objective is just what you described as far as ensuring the sustainability and leveraging these new relationships that we have never had. Traditionally, our revenues from government-related entities was less than 1% of revenue. So it was almost nothing. So everything we're doing today is virtually incremental.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Thanks. And then is -- do you feel like either through that last discussion you gave or just more broadly, how you've gone to market and leverage the staffing business of Protiviti, like who are you gaining share from? You're outgrowing almost everyone else in any kind of consultative type approach we see. Does it or is there a certain place you're taking that from?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, I think it's somewhat in the -- on the staffing side and it's somewhat on the consulting side, because neither have the full picture. And there are many staffing firms that can provide customer support people, where their client manages them. There are virtually none that do that where we also provide the management and not only is it the management, it's with a view toward constant optimization which has been quite the winner. And so -- but for us, who would have gotten that work, my guess is, some of it would have gone to the consulting firms, the accounting firms. Some of it would have gone to the staffing firms. But none of those players have what we have and it's actually pretty incredible how well it's done. It grew 82%, 82% this quarter, 82%. That's a big number.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

[Indecipherable] for sure. But yeah, no, it was outstanding. Thank you. I appreciate the color.

Operator

Thank you. Our next question comes from Tobey Sommer with Truist Securities. Your line is open.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. Could you tell us what you think the increased exposure to mid cap clients goes to your TAM?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, there's no question that staffing at mid-and large cap companies is many times the size as the opportunity with smaller businesses. Traditionally, we haven't focused there because margin pressures or such that we felt like we were better off -- offering our better candidates to small businesses that would pay us for them. But as I said earlier, it's a whole new world, when we go hand in hand with Protiviti and there is the umbrella of an honest to God consulting arrangement, with honest to God deliverables such that we do think it's a new day and clearly the addressable market is much larger which is why we're investing. Think about just during the pandemic, our exposure to mid-cap has gone from low 20%, today it's 34%. That's huge. That's huge and it is in a small period of time and it was done in a period where we didn't dilute our margins.

Tobey Sommer -- Truist Securities -- Analyst

Right. As my follow-up, I wanted to ask you a question on the cost side of delivering your service. Every call we start with talking about the number of locations that you deliver your services to particularly on the staffing side, but also Protiviti. Are there any meaningful opportunities from the experience in 2020 and now into this year to adjust the cost structure, so as to favorably impact margins over the course of the whole cycle?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, our biggest cost is our internal payroll cost and we've talked earlier about, we think we've got with a large assist with the technology we've developed in the last three to four years, we think our internal staff can inherently be more productive across this entire cycle. Real estate is more nuanced. On the one hand, traditionally, our real estate is very dense. We put a lot of people in our space. There is not a lot of square footage traditionally per person in today's world of distancing even post-pandemic query whether we'll have to relax that somewhat and offset what we would otherwise save if we're on a hybrid model where everybody doesn't come in every day.

So the jury is out on that. I mean, our current thinking is probably more of push than anything, but it's early days and we don't know. We don't know, ultimately how many people are going to want to work remotely versus come in, excuse me, and further we don't know whether the density we've traditionally had which kind of creates an electricity and energy level in an office, which has been helpful. We don't know whether we're going to have to spread people out more for obvious reasons. It's kind of interesting, Australia has some of the fewest number of cases. And so I would argue they're most along post pandemic and they've been surprised how much people want to come in and don't want to work remotely. And in fact, they talk about it is 90% to 95% of the staff want to come back into the office. That surprises me. Whether that's sustainable in Australia itself or whether you can replicate that in other places, I don't know, but that's what they report.

Tobey Sommer -- Truist Securities -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

George Tong -- Goldman Sachs & Co. -- Analyst

Hi, thanks. Good afternoon. Revenue trends in OfficeTeam stepped up pretty meaningfully in the quarter. What were the main drivers of that improvement? And were there any one of new benefits you'd call out in the quarter in that particular business?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

I'd say a couple of things. So first of all, fourth quarter George, OfficeTeam always benefits from e-commerce customer support and they got some fourth quarter lift from that again. They also get open enrollment support lift in the fourth quarter. They got some of that again, traditional. But this public sector work with Protiviti that I've been talking about, a lot of that has been customer service driven, call center driven, and OfficeTeam is the beneficiary of that. OfficeTeam had an incredible couple of three quarters. Who would have believed that OfficeTeam and Protiviti would have gone to market together best at anytime much less during the pandemic.

George Tong -- Goldman Sachs & Co. -- Analyst

Got it. Very helpful. You mentioned that revenues in the first three weeks of January were down 23% year-over-year compared to down 21% in December. In which areas did you see the most moderation in growth, moving from December to January?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, first thing, you need to zoom out from that and consider what January post quarter results mean and what they don't mean. And in fact, if you go back in time and you compare January post quarter to what with hindsight, you learn about the entire quarter. It's one of the least predictive post quarter periods that we have because of the holiday impacts. And so I would tell you that we tend to discount January post quarter more than most. And therefore, the fact that the year-over-year growth rates change by 3 percentage points, we don't ascribe much importance to.

George Tong -- Goldman Sachs & Co. -- Analyst

Got it. Very helpful. Thank you.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

As I said earlier, we're very happy with our restart. The enthusiasm level of our people has never been higher. And we got one more week of data this morning and frankly it was even better yet again.

George Tong -- Goldman Sachs & Co. -- Analyst

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Kevin McVeigh with Credit Suisse. Your line is open.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Hey Keith or Mike, just one follow-up. When you talk about the public sector work, is that primarily COVID related work where you're hoping there'll be some follow through or is there any way to frame maybe how much of it is kind of COVID related that you're looking to extend once things start to normalize and to more normal relationships?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well. And so it's helping states deal with their unemployment claims, customer service, claims processing, claims adjudication, its housing, processing assistance claims, its customer service call centers into that, education, its helping school systems deal with tech support for remote learning, the vaccine, again customer service call center, people calling in wanting to register, its helping with checking in, its helping with the government reporting once it's done. And so it's a whole host of things that clearly are initially related to COVID, if you will. But as I said earlier, it's given us a look into their internal systems and we think it's a target rich environment to do follow-up work, which we are very focused on doing.

Kevin McVeigh -- Credit Suisse -- Analyst

That's helpful. And that's all state and federal or a combination of both?

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

It's more state and local, more state and local.

Kevin McVeigh -- Credit Suisse -- Analyst

Is there any way to maybe frame how much that was in the quarter, like in terms of revenue.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Well, we've disclosed to you the staffing, Protiviti revenue magnitude between the two. So this quarter going back, we've told you there was a $30 million lift and we've told you that a large part of that lift relates to what I just described. So you can kind of use those puzzle pieces and come back to what you're looking for.

Kevin McVeigh -- Credit Suisse -- Analyst

Very helpful. Thank you.

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Okay. Operator, I think that's our last question. Thank you very much everyone for participating on the call.

Operator

This concludes today's teleconference. If you missed any part of the call, it will be archived in audio format in the Investor Center of Robert Half's website at www.roberthalf.com. You also can dial the conference call replay. Dial-in details and the conference ID are contained in the Company's press release issued earlier today.

Duration: 49 minutes

Call participants:

M. Keith Waddell -- Vice Chairman, President and Chief Executive Officer

Michael C. Buckley -- Executive Vice President, Chief Financial Officer

Mark S. Marcon -- Robert W. Baird & Co. Inc. -- Analyst

Andrew Steinerman -- JPMorgan Chase & Co. -- Analyst

Jeffrey Silber -- BMO Capital Markets -- Analyst

Mario Cortellacci -- Jefferies LLC -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

George Tong -- Goldman Sachs & Co. -- Analyst

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