Earnings call transcript: Robert Walters sees fee income drop in Q1 2025

Robert Walters, a global recruitment firm, reported a 16% decline in group net fee income for the first quarter of 2025, reflecting ongoing challenges in global hiring markets. The company’s stock price experienced a 3.08% drop, closing at £227, as investors reacted to the earnings call. According to InvestingPro data, the stock is trading near its 52-week low of £18.86, with a significant -35.61% return over the past six months. Despite the decline, the company maintained a robust net cash position of £42 million and has shown resilience in specific markets such as London and Greater China, supported by a strong current ratio of 1.9.

Key Takeaways

• Group net fee income decreased by 16% year-over-year in Q1 2025.
• Fee earner headcount reduced by 28% from its peak in Q1 2023.
• Net cash position remains strong at £42 million.
• London saw a 22% increase in fee income, contrasting with declines elsewhere.
• Stock price fell by 3.08% post-earnings call.

Company Performance

Robert Walters faced significant headwinds in the first quarter of 2025, with a notable 16% drop in net fee income compared to the previous year. This decline is attributed to challenging conditions in global hiring markets, with varied performance across regions. The company has been strategically managing headcount and consolidating its office network to maintain productivity and adapt to market conditions.

Financial Highlights

• Net fee income: Down 16% YoY in Q1 2025
• Fee earner headcount: Reduced by 28% from Q1 2023 peak
• Cash position: £42 million

Market Reaction

The stock price of Robert Walters fell by 3.08%, closing at £227. This decline reflects investor concerns over the company’s performance amid global hiring challenges. The stock remains closer to its 52-week low of £214, indicating ongoing market skepticism.

Outlook & Guidance

The company has provided forward guidance with anticipated EPS of $1.03 for FY2025 and $1.14 for FY2026. Revenue forecasts for these years are $293.99 million and $316.04 million, respectively. Despite limited visibility due to global trade uncertainties, Robert Walters remains focused on strategic initiatives to strengthen its business.

Executive Commentary

CEO Toby Fauston stated, "Global hiring markets remained challenging during the first quarter," emphasizing the company’s strategic focus on strengthening its business. Fauston also highlighted the importance of preserving the company’s balance sheet strength and dividend.

Risks and Challenges

• Global hiring market volatility could further impact fee income.
• Regulatory changes, particularly in the Netherlands, pose operational challenges.
• Economic uncertainties and potential trade tariffs may affect future performance.

Q&A

During the earnings call, analysts inquired about the impact of potential trade tariffs and the company’s strategies for headcount reduction. The management addressed these concerns, emphasizing their focus on strategic headcount management and navigating regulatory challenges in key markets.

Full transcript - Robert Walters (RWA) Q1 2025:

Francois, Conference Operator: Hello, and welcome to the Robert Walters Q1 of twenty twenty five Trading Update Call. Please note this conference is being recorded. And for the duration of the call, your lines will be on listen only. However, you’ll have the opportunity to ask questions. I will now hand you over to your host, David CFO, to begin today’s conference.

Thank you.

David Bauer, Chief Financial Officer, Robert Walters: Thanks, Francois. Good morning, everyone, and thanks for joining our Q1 twenty twenty five trading update. I’m David Bauer, Chief Financial Officer, and joining me this morning is Toby Fauston, Chief Executive. As we begin, I’ll make a few remarks around performance at the group level before Toby touches on trading across our regions as well as the market backdrop. As ever, we’ll then be happy to take any questions you may have.

As usual, all net fee income percentage movements are in constant currency. So as you have seen from this morning’s statement, group net fee income was down by 16% year on year in the first quarter, as trading conditions overall remain challenging across our markets. We saw some pockets of growth in The UK and broadly stable activity levels in Asia Pacific. However, the weaker sentiment observed in Europe in late twenty twenty four continued in the first quarter. Forward activity levels for the Specialist Recruitment business, namely job flow and interviews, followed the typical shape we see in Q1 with activity levels ticking up in March following a quieter January and February.

For our specialist recruitment service line overall, job flow was in line with the first quarter last year. So turning now to consider headcount and productivity. We closed the quarter with group headcount just over 3,200, which was down 3% on the 2024 closing position. Within this, fee earner headcount fell by 4% quarter on quarter, whilst non fee earner headcount was down by 1%. In managing fee earner headcount, we remain highly selective in replacing natural attrition, with fee earner headcount levels now down by 28% against the peak reached in the first quarter of twenty twenty three and down by 16% year on year, in line with the reduction in fees.

Overall productivity for the group, measured by net fee income per Fiorna, remained strong and was up by 2% year on year in constant currency terms. This was underpinned by stable fee rates and positive effects from mix and wage inflation. As you’ll be aware, one of the key drivers for our overall model is volume productivity in our specialist recruitment service line, measured in terms of perm placement per perm fee earner per month. Guided by job flow levels, our strategic approach has been to not let perm fee earner headcount fall wholly proportionately with volumes. And this, along with the market conditions, explains a 7% reduction in volume productivity.

Sitting just below 0.8 perm placements per perm fee earner per month, we continue to have a good deal of headroom compared to a long run average volume productivity of around one perm placement per month, underpinning the opportunity we have to drive operational leverage over the medium term. Looking at the balance sheet, in line with the typical first quarter profile, where we tend to see an outflow driven by fee earnout available pay in respect to the prior year, we closed the quarter with net cash of around £42,000,000 I’ll now hand you over to Toby to take you through trading in our regional segments and the marketing backlog. Thanks, David. Good morning, everyone. Let’s turn first to our Asia Pacific segment.

Here, fee income was down 15% overall. In Specialist Recruitment, fees were down 11%, a few points lower than the fourth quarter. In Japan, the 7% reduction in fees reflected more cautious client behavior in perm, which extended time to hire, but we continue to see positive trends in temp. In Australia, fees were down by 11%, albeit with some pockets of growth in certain markets, and conditions remain more favorable than in New Zealand, where public sector demand for temps is still yet to improve. We continue to see a more resilient performance in Greater China with fees down 1%, led by growth in The Mainland, while Southeast Asia declined by 16%.

Asia Pacific recruitment outsourcing fee income declined by 42%, reflective of a client account not being renewed. Turning now to Europe, where fee income overall and in specialist recruitment was down by 22%. In The Netherlands, where we’re over 70% weighted towards temp, there was increased uncertainty from new legislative enforcement powers regarding self employment, driving the 30% reduction in fee income. We do, however, feel confident in our ability to help clients navigate the regulatory change, particularly given our status as a larger provider and therefore, potentially take share, particularly as the landscape settles. In France and Belgium, where fees were down 1715%, respectively, conditions remain tough.

And in Spain, which is in the early stages of a turnaround with new leadership, fees were down 32%, but have been largely stable sequentially over the prior two quarters. In Germany, where the cornerstone of our offering is in accounting and finance and technology, we saw tougher conditions in perm. However, interim volumes were up year on year. Turning to The UK. Fee income was down 4% overall, a notable improvement from the recent trend.

Specialist recruitment fee income was down by 1%. We saw another quarter of growth in London with fees up 22%, whilst in the regions, the 22% decline in fees is partly a function of the comparative predating the recent office network consolidation. Recruitment outsourcing fee income was down by 8%, driven by lower hiring volumes. In our Rest of World segment, fee income was down by 18% overall. Specialist recruitment fee income was down by 26%.

We saw a slightly more muted performance in The Middle East with fees down 12%, whilst The USA performance, with fees half the prior year level, partly reflects again the office network consolidation during the quarter. It was a more resilient performance in recruitment outsourcing, with fees down 1%. So in summary then, global hiring markets remained challenging during the first quarter. Thinking about our activity levels in specialist recruitment in terms of job flow and interviews, these were stable to slightly up year on year in The U. K.

And Asia Pacific. In Europe, meanwhile, the weaker sentiment seen in late twenty twenty four continued in the first quarter. And more recently, we have, of course, seen increased uncertainty regarding the flow of global trade due to tariffs, and our early interactions with clients and candidates informs our view this is likely to be a further headwind to confidence levels in the near term, limiting visibility on the outlook for the balance of the year at present. Notwithstanding that, we remain highly focused on our strategic initiatives to strengthen the business, and this, combined with the full suite of talent solutions we have to support our clients and the experienced and motivated teams that deliver them, means we will continue to take the right actions to navigate the challenging trading environment. And with that, David and I would be happy to take any of your questions.

Francois, Conference Operator: Thank The first question comes from the line of Thomas Callum from Investec.

Thomas Callum, Analyst, Investec: You’re both well. I’ve got two, please. So just firstly, thinking about, the group’s vertical exposure in the context of U. S. Trade tariff dynamics.

For example, it’s skewed, say, sort of financial services or legal services. To what extent do you think verticals such as these provide the company with a degree of downside risk perception? And then secondly, just on the cost base and noting that 16% year on year fee on a headcount reduction, how should we be thinking about where that headcount base might end up at the end of fiscal twenty twenty five? Has there been any changes to your expectations here versus the prelims? Or is it still that you’re looking to ensure optimal positioning to sort of take advantage of the recovery as and when that materializes?

Thanks.

David Bauer, Chief Financial Officer, Robert Walters: Hi, Todd. So I’ll take the vertical question. David can touch on the fee and headcount. Look, I think in terms of verticals, it’s still clearly very challenging overall. In specialist recruitment, we’ve clearly seen greater year to date resilience anyway in terms of low to mid single digit percentage declines across legal, financial services, particularly more so encouraging in The UK.

Overall, I think supply chain and procurement, we’ve seen a lot of activity in that space and across cyber and AI. I think tariffs, look, it’s just too cool sorry, too early to really have any visibility on that as of yet. With regards to headcount, I’ll pass to David. Yes. So I can’t say.

So in terms of the headcount, as we’ve said, we’ve used sort of very, very selective rehiring of natural attrition to sort of manage the headcount levels down. I think that’s worked and served us as well. If I look at the productivity piece, as I said earlier, we’ve got net fee income for Theona up slightly. We’ve got job flow broadly stable. So those two things combined, plus the natural attrition sort of management, all come together to say that I think we’ve got heads in broadly the right place and the right numbers.

We will look at pockets of success and recruit accordingly. But overall, I think the headcount level we’ve got today is broadly where we would expect to be. So yes, to your question, really unchanged from the prelims view. But we’ll clearly keep it very much under review as we progress through the year.

Francois, Conference Operator: The next question comes from the line of Steve Wolf from Deutsche Bank. Please go ahead.

Thomas Callum, Analyst, Investec: Good morning guys. A couple for me. Just backing to that tariff question inevitably. Have you noticed out there in any sort of particular regions, I’m thinking maybe specific to Asia where the tariffs are highest, any sort of mandates being pulled at this point, put on hold? Any sort of very early sort of rabbit in the headlights kind of activity that you’ve seen?

Secondly, just on The Netherlands and the legislative changes, just what roles there are you being are you exposed to and are being impacted? Thirdly Sorry. Sorry, Tony. If you go ahead, I’ll follow-up.

David Bauer, Chief Financial Officer, Robert Walters: Okay. Hi, Steve. Sorry, Toby here. So just on The Netherlands, The legislation there. So it’s really in that interim space.

So as I mentioned, about 70% just over 70% of our business is non perm in The Netherlands. I mean, I won’t go into all the specifics of what the legislation is around, but essentially, it’s around sort of protecting what might be perceived as people moving some temp to perm. So we are exposed in that interim space. That said, of course, it’s across the whole country. So we’re looking at ways in which we can support our clients.

So we feel we’ve got some solutions which we can come up with. But currently, obviously, it is a challenge. I think in Asia, it’s probably too early to say. China is the obvious one, given that’s still the position that sits right now. We haven’t seen any immediate impact as of yet.

So I think we’ll probably be in a better position once we’ve got some visibility, particularly after the sort of ninety day moratorium, if indeed that’s where it goes. Sure.

Thomas Callum, Analyst, Investec: And the other ones I had were on the headcount reductions, if we’re sort of where largely have they been? I know when speaking to sort of David earlier, there’s obviously the closure of Liverpool and areas like that and some consolidation in The U. S. From a fee earner perspective, where have those other reductions outside of that been? And then finally, just on the cash position, any thoughts on where the shares are now with the likes of a buyback, etcetera?

David Bauer, Chief Financial Officer, Robert Walters: Yes. On headcount question, the headcount, as we’ve said along, we’re trying to look at very surgically and scientifically around job flow, productivity and where we’re activity. Fianos have come off in many and most of the markets. That being said, where you see us talk about having sort of a more resilient performance or even some growth, that’s where potentially heads have gone, have come off less than where we have resilience in performance. We’ve had a lower headcount reduction than where we’ve seen more weakness.

That’s how we manage that from start, and that’s how we’ll continue to look at it. And with regards to the cash, so, yes, share given where the shares are, but equally given where cash currently is, you know, we have our sort of internal view of really wanting to try and maintain a minimum of around about $50,000,000 and that gives us the protection for interim swings, but also the tough times, which we’re clearly in at the moment. But I think for me, the priority is preserving strength of the balance sheet and preserving the dividend. And yes, as soon as we can see through that, then yes, we can look at alternative allocations of capital. But first and foremost, it’s about the balance sheet maintenance and dividend.

Thomas Callum, Analyst, Investec: Perfect. That’s great. Thanks, both.

Francois, Conference Operator: We currently have no questions We have no further questions. So handing back over to you for closing remarks.

David Bauer, Chief Financial Officer, Robert Walters: Thank you very much. Good to speak to everybody, and no doubt we’ll speak soon. Thanks.

Francois, Conference Operator: Thank you for joining today’s call. You may now disconnect your lines.

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