Robert Half Inc.

Hello, and welcome to the Robert Half Second Quarter 2025 Conference Call. Today's conference call is being recorded. If you'd like to ask a question during the Q&A portion of the call, please press star and the number one on your telephone keypad. 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.

Hello, everyone. We appreciate your time today. Before we get started, I'd like to remind you that the comments made on today's call contain forward-looking statements, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds. However, they're subject to the 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 adjusted, specifically We present adjusted revenue growth rates, which remove the impacts of unreported revenues from the changes in the number of billing days and foreign currency exchange rates. Additionally, we present adjusted gross margin, adjusted selling general administrative expenses, and adjusted operating income by combining the gains and losses on investments held to fund the company's obligations under employee deferred compensation plans with the changes in the underlying deferred compensation obligations. Since the gains and losses from investments and the changes in deferred compensation obligations completely offset, there's no impact on our reported net income. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, roberthalf.com. For the second quarter of 2025, global enterprise revenues were $1.37 billion, down 7% from last year's second quarter on both a reported basis and on an adjusted basis. Net income per share of the second quarter was $0.41 compared to $0.66 in the second quarter one year ago. Revenues and earnings were in line with the midpoint of our previous second quarter guidance. Elevated global economic uncertainty persisted throughout the quarter, extending client and job seeker caution, elongating decision cycles, and subduing hiring activity and new project starts. Revenue levels fell modestly during the first two months of the quarter, then stabilized at lower levels in June. which continued post-quarter into July. We're very well positioned to capitalize on emerging opportunities and support our clients' future talent and consulting needs through the strength of our industry-leading brand, our people, our technology, and our unique business model that includes both professional staffing and business consulting services. Cash flow provided by operations during the quarter was $119 million, In June, we distributed a $0.59 per share cash dividend to our shareholders of record for a total cash outlay of $59 million. Our per share dividend has grown an average of 11.5% annually since its inception in 2004. The June 2025 dividend was 11.3% higher than in the prior year. We also acquired approximately 450,000 Robert Half shares during the quarter, for 20 million. We have 6.2 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company was 12% in the second quarter. Now I'll turn the call over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were 1.37 billion in the second quarter. On an adjusted basis, Second quarter talent solutions revenues were down 11% year over year. U.S. talent solutions revenues were $668 million, down 11% from the prior year's second quarter. Non-U.S. talent solutions revenues were $207 million, down 13% year over year. We conduct talent solutions operations through offices in the United States and 18 other countries. In the second quarter, there were 63.2 billing days compared to 63.5 billing days in the same quarter one year ago. The third quarter of 2025 has 64.2 billing days compared to 64.1 billing days during the third quarter of 2024. Currency exchange rate movements during the second quarter had the effect of increasing reported year-over-year total revenues by $8 million. $4 million for both Talent Solutions and Protivity. Contract Talent Solutions bill rates for the second quarter increased 3.8% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the first quarter was 4.2%. Now let's take a closer look at results for Protivity. Global revenues in the second quarter were $495 million. $396 million of that is from the United States, and $99 million is from outside of the United States. On an adjusted basis, global second quarter productivity revenues were up 2% versus the year-ago period. U.S. productivity revenues were down 1%, while non-U.S. productivity revenues were up 11% compared to one year ago. Fruitivity and its independently owned member firms serve clients through locations in the United States and 28 other countries. Turning now to gross margin, in contract talent solutions, second quarter gross margin was 39.1% of applicable revenues versus 39.3% in the second quarter one year ago. Conversion, or contract to hire, revenues were 3.4% of contract revenues in both the current quarter and the second quarter of 2024. Our permanent placement revenues were 13.1% of consolidated talent solutions revenues in the current quarter and 13.3% in the second quarter of 2024. When compared with contract talent solutions gross margin, overall gross margin for talent solutions was 47.1% compared to 47.4% of applicable revenues in the second quarter one year ago. For productivity, gross margin was 19.7% of productivity revenues in the second quarter and 22.5% in the second quarter one year ago. Adjusted gross margin for productivity was 22.3% for the quarter just ended compared to 23.2% last year. Enterprise SG&A costs were 37.1% of global revenues in the second quarter compared to 34% in the same quarter one year ago. Adjusted SG&A costs were 33.8% for the quarter just ended compared to 33.2% a year ago. Talent Solutions SG&A costs were 49.2% of Talent Solutions revenues in the second quarter versus 43.1% in the second quarter of 2024. Adjusted talent solutions SG&A costs were 44.1% for the quarter just ended compared to 41.9% last year. Second quarter SG&A costs for productivity were 15.7% of productivity revenues compared to 15.6% of revenues for the same quarter one year ago. Operating income for the quarter was $2 million. Adjusted operating income was $59 million in the second quarter, or 4.3% of revenue. Second quarter adjusted operating income for our town solutions divisions was $27 million, or 3.1% of revenue. Adjusted operating income for productivity in the second quarter was $32 million, or 6.6% of revenue. Income from investments held in employee deferred compensation trusts. Our second quarter income statement includes a $58 million gain from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of higher employee deferred compensation costs, which are reflected in SG&A expenses and direct costs. As such, it has no effect on our reported net income. Our second quarter tax rate was 33% compared to 29% one year ago. The higher tax rate in the current quarter is due to the increased impact of non-deductible expenses relative to lower pre-tax income. At the end of the second quarter, accounts receivable were $827 million and implied day sales outstanding, or DSO, was 54.4 days. Before we move to third quarter guidance, let's review some of the monthly revenue trends we saw in the second quarter and so far in July, all adjusted for currency and billing days. Contract talent solutions exited the second quarter with June revenues down 11% versus the prior year, compared to an 11% increase for the full quarter. Revenues for the first two weeks of July were down 10% compared to the same period last year. Permanent placement revenues in June were down 20% versus June of 2024. This compares to a 13% decrease for the full quarter. For the first three weeks in July, permanent placement revenues were down 14% compared to the same period in 2024. We provide this information so that you have insight into some of the trends we saw during the second quarter and into July. But as you know, These are very brief time periods. We caution reading too much into them. With that in mind, we offer the following third quarter guidance. Revenue, $1.31 billion to $1.41 billion. Income per share, $0.37 to $0.47. Midpoint revenues of $1.36 billion are 8% lower than the same period in 2024 on an as-adjusted basis. On a sequential basis, midpoint estimated Q3 revenues are down 3%. For the most recent six-week period ended July 11th, weekly sequential revenues have remained essentially flat. Midpoint adjusted operating income dollars are expected to increase sequentially from Q2 the first sequential Q3 increase since 2021. The major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year-over-year for talent solutions down 9% to 13%. Creativity flat to down 4%. Overall, down 6% to 10%. Adjusted gross margin percentage, For contract talent, 38% to 40%. For productivity, 22% to 24%. Overall, 37% to 40%. Adjusted SG&A as a percentage of revenue, talent solutions, 43% to 45%. Productivity, 15% to 17%. Overall, 33% to 35%. Adjusted operating income as a percentage of revenue. Talent solutions, 2 to 4%. Productivity, 6 to 8%. Overall, 3 to 6%. Tax rate, 31 to 35%. Shares, 100 to 101 million. 2025 capital expenditures and capitalized cloud computing costs, 75 million to 90 million. with $15 to $25 million in the third 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 we'll turn the call back over to Keith.