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.

Thank you, Mike. The fears of economic recession have eased as worst-case trade policy concerns have not materialized, and proposed tax changes have now become law. Small business confidence levels have also rebounded modestly from recent lows. The U.S. job market remains resilient, with the overall unemployment at 4.1%. Labor supply constraints remain. Particularly noteworthy is that the unemployment rate for college-educated professionals is holding steady at just 2.5%, with even lower rates prevailing among specialized accounting, finance, and technology roles. Although current hiring and quit rates remain subdued and well below post-COVID highs, job openings continue to be well above historical levels, indicating strong, pent-up hiring demand. As business confidence improves, there is a corresponding acceleration in hiring urgency, project demand, and the reprioritization of previously deferred initiatives. This natural progression typically places increased demands on client resources that are already operating at or near capacity, creating the hiring and consulting environment that has historically driven substantial growth for our business during the early phases of economic expansion cycles. Productivity achieved year-on-year revenue growth for the fourth quarter in a row, though growth rates have moderated as a result of continued economic uncertainty. This has extended conversion timelines from opportunity identification to project start and reduced average project size. Despite the lengthening cycles, Protiviti's prospects, including the quality and diversity of its pipeline, remain very strong across all of its major solution areas. The strategic integration of contract professionals sourced through our talent solutions divisions remains a powerful driver for Tivity's performance, reinforcing our distinctive enterprise-wide competitive advantage. We remain committed to our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to confidently compete and grow. We'd like to thank our employees, who are our greatest asset and what differentiates us in the marketplace, for the significant company recognition we received in the second quarter. We are proud to have ranked number one on Forbes' list of America's best professional recruiting firms. We were also recognized by Forbes as one of America's best temporary staffing firms and one of America's best executive recruiting firms. This is a credit to all of our employees and their incredible drive to deliver outstanding service to our clients and our candidates. Now, Mike and I would be happy to answer your questions. Please ask just one question and a single follow-up is needed. If there's time, we'll come back to you for additional questions.

Thank you. At this time, if you'd like to ask a question, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you would like to withdraw your question, please press star 2 on your touchtone telephone. And your first question will come from the line of Andrew Steinerman with JP Morgan. Hi.

This might be not as timely. It's kind of a long-term trend question. I was curious about the bill rate increases, you know, the 3.8% year over year that is adjusted for Mix. I know it's adjusted for other things like FX as well. But what I'm curious about is if you didn't adjust for Mix, you know, how much is bill rates up? And I really am asking because I feel like there's been kind of a long-term move up the skill sets over many years that sort of like is underappreciated in when you just give the mixed adjusted number.

Right. And so since mixed positively impacts bill rate increases, for reasons you just mentioned, unadjusted, they'd be higher. And so that's been a progression that's been in place for years, and one we're happy to have continue into the future.

Mm-hmm.

But could you just give us a sense of how much your bill rates have increased because of mixed shifts over the years?

I mean, it's not unusual for it to be 1 to 200 basis points difference. I mean, I don't remember the numbers right off the top of my head. But clearly, it's part of our story.

Okay. I appreciate that, Keith. Thank you.

And the next question will come from Mark Marcon with Baird.

Hey, good afternoon, Keith and Michael. Wondering about productivity, you did mention, you know, that there's an extension in terms of conversion timelines and that the project, you know, in terms of the project starts and that there's reduced average project size. Could you dimensionalize that a little bit more? You know, obviously we're going up against a tougher comp here in the third quarter than we had in the second quarter. So you're basically projecting to, you know, a year-over-year revenue decline in productivity. And I'm wondering, like, how much of that seems like it's a temporary function or how long-lasting do you think that trend could end up being?

Well, first of all, it's a slight year-on-year decline. Next, I would say that in the third quarter, there's a small number of very large jobs that completed in the second. And given the overall cautious environment, take a little bit of time to replace. And so that, in addition to or as part of the economic environment trend is impacting quarter three productivity revenues. While it's seeing in quarter three its typical Sarbanes-Oxley compliance lift seasonally than it always does, the other solutions are somewhat lower for this large project phenomenon that I just talked about. up temporary versus longer term, if you look at their pipeline, their pipeline is still up year on year. And I think the thing that they're most excited about is that their new opportunities in the last 30 days are up substantially. And as you look back over the last year, the increase of that last 30 days is substantially higher. both sequentially and year-on-year that they've seen in a long time. So we're very encouraged by that.

Should that, just to stay on this, should that translate to likely growth by the fourth quarter if we have kind of a normal conversion rate?

Again, because we're so close to year-on-year growth, you know, it doesn't take that much revenue to swing it one way or the other. And so clearly with that kind of opportunity growth, new opportunity growth, by the fourth quarter, there's a reasonable chance that we return to growth again. But again, we're talking really, really small negative and or positive growth rates. Generally speaking, productivity has been very resilient. during this more challenged economic period of the last two or three years, and that is expected to continue. And whether they have negative growth of 2% or positive growth of 2%, it is in a huge swing.

Productivity is doing very well.

Great. And then you mentioned with regards to talent solutions, you know, the fears of economic recession of ease. Worst trade, worst case on the trade policy concerns haven't materialized, and we've seen small business confidence rebound. In terms, when we take a look at your talent solutions business, we did see a pickup, particularly with regards to technology solutions. I'm just wondering how you're thinking about tech solutions, you know, progressing, and should that eventually spill over to, you know, finance and accounting as well?

Tech solutions are clearly the strongest part of our practice groups. Tech modernization, ERP upgrades, security privacy, they're all strong. Much of that relates to AI readiness, if you will. And it's been doing very well for multiple quarters now. And we would expect to see some of that trickle into finance and accounting, particularly at our higher management resource levels. And further, it ties in well with Pertivity's technology consulting group, such that together our higher level finance and accounting consulting solutions, our tech solutions, and we've been moving up the skill curve there. and technology at Pertiviti, they all fit very well together.

Great. Thank you.

And your next question will come from the line of Manav Patnaik with Barclays.

Hi, Jorge. This is Ronan Kennedy. I'm from Manav. Thank you for taking my question. I just wanted to clarify some of the statements with regards to macro drivers and demands and the trends. that you've seen out of June in the first three weeks in July. I think you understandably highlighted that elevated global economic uncertainty, consistent with what we're hearing from other companies. But I think they had pointed out that activity slowed once the tariff rhetoric again ramped up approximately a month ago. I think you had indicated revenue levels fell during the first two months and then stabilized in June. But PERM placement revenues in June were down 20%. And I think they were down in contract as well. Just wondering how that kind of all reconciles and if there's any specific drivers there to be mindful of.

Well, part of this is year-on-year versus sequential. And when we're talking current trends, we're talking sequential. And so what we said was the first two months, sequentially we fell modestly, and then sequentially that leveled off. I could also say that for the past few weeks on the talent solution side particularly, the tone of the conversations we've had with clients has improved, and we feel good about that. But the year-on-year comparisons also consider what happened sequentially a year ago and And in times like these, we tend to focus more on sequential than year-on-year, and that's how we describe the trends. And so sequentially on the productivity side, a nice surge in new opportunities last 30 days. Talent solution side, the tone of client conversations has definitely gotten better in the last few weeks. If you take... Our current run rate in talent solutions through mid-July, and you apply that to the full quarter, we're about 2% down sequentially. And our guidance is that we would be down 4% sequentially. So we've added a little conservatism to our guidance relative to where we are at the moment. And again, everything sequentially.

Thank you for the clarification. I appreciate it. And then if I may as a follow-up, can you just talk about the dynamics of margin drivers, the puts and takes to guided margins, whether that's mix, conversion, wage rate, inflation, bill pay spreads, et cetera, for the guided margin, please, for 3Q?

Sure. On the talent solution side, gross margins, pretty consistent. Nothing new there. On the SG&A side, we've pretty much abated the negative operating leverage we've gotten for many quarters in a row, and so there's not much change in Talent Solutions SG&A as a percent of revenue in our Q3 guidance. And as we said in our remarks, on a progression from Q2 to Q3, Talent Solutions will have one of the best quarters it's had at the operating line that it's had in four years. And so we feel good about where we are cost-wise and margin-wise relative to the last three or four years, frankly, on Talent Solutions. In productivity, we get an uptick in gross margin and segment income sequentially. That's largely driven by the seasonal lift they get from Sarbanes-Oxley compliance work, which they anticipate getting again. However, because of the completion of those small number of large projects, they're not going to get as much revenue lift as they typically do in the third quarter, and all of that revenue lift is almost completely segment income or margin, and therefore the gross margin and segment margin lift you typically get in the third quarter, they're not going to get as much of this year. Still be up, but won't be up as much as it has been traditionally. And again, it's principally related to those handful of large projects that

they're having to redeploy for. Thank you very much. Appreciate it.

And the next question comes from Trevor Romeo with William Blair.

Hey, good afternoon, Keith and Mike. Thanks for taking the questions. I had another kind of macro-related question to start. You talked about the conversations improving. So, I guess the question I have is, you know, does it feel like the confidence and the tone of conversations are back to where they were maybe a couple quarters ago? I guess coming into the year, you can see the, you know, the post-election increase in confidence metrics. Are we back there yet? And if not, I guess, what do you think what it would take to get back to those types of levels of confidence?

It's subjective, but I would say we're not back there yet, but we're headed there. And I'll tell you, the last few weeks on the talent solution side particularly, and as represented by the new opportunities in productivity, tone is definitely better. It's not euphoric like it was post-election, but it's certainly going in the right direction. which is a nice change from 90 days ago when we didn't feel this way. I'd say we definitely feel better today than we felt 90 days ago.

Okay, thanks. That makes a lot of sense.

And then I had a follow-up about the entry level, sort of the college grad labor market. I've seen a lot of press lately about some incremental weakness in that area. So just given, I guess, your perspective, would love to hear your thoughts on What's going on in the entry-level white-collar labor market? Is it just economic uncertainty?

Are you seeing any pressure from maybe advancements in AI or anything like that?

Well, first of all, our small business clients typically expect experienced staff when they come to us for contractors. And so we don't really have that many right out of college graduates that we place on the contract side. On AI, we could talk forever.

But let me make a few comments.

First of all, we know definitively that so far AI has had very little impact on our revenues. We did a deep dive. We took all the roles that were identified by the World Economic Forum as most vulnerable. They would include things like data entry, bookkeeping, customer service, the ones you always read about. And our data says that so far they haven't performed any differently than the other roles. Interestingly, the NFIB just did a technology survey of its constituents. 98% reported that AI had no impact to their number of employees. There are other studies that have come out recently, the National Bureau of Economic Research being one of them, that has concluded so far no association between AI and jobs growth, with the possible exception of tech companies that you read a lot about. But part of that, they're selling their own book. At least so far, when you look at the staffing industry and Robert Half specifically, we can say AI has not impacted how we've performed. Now, as to the future, there are opinions all over the lot. We would say that historically the staffing industry has been great about being very fluid and pivoting to where the jobs and the skills are, old and new. We operate in the spot market every day, and you have to go where the jobs and skills are to survive. I'd say further, with every technology cycle, there's a lot of transition work, and we're seeing that as well. We talked already about tech modernization, ELP platform upgrades, data, et cetera, and so that's positive. The other thing I would say is, and this was confirmed in this NFIB survey, that SMBs are always later adopters. And we're 70% SMB. You know, they have less budget. They don't have large volumes of people performing repetitive tasks. There's less structure to the data. They need more proof of ROI. And so they're always later adopters, and they're expected to be later adopters with AI. That said, we at Robert have, we believe in technology, we believe in AI. As you know, we've got award-winning matching and lead scoring engines that are very effective. And if anything, we think if the world gets more AI-centric, more technology-centric, we should be able to take share from our true competitors, which are local and regional staffing firms, They don't have the resources. They don't have the proprietary data at scale to compete. And so whatever you think about AI, we think an offset to what some believe will be a net negative was the fact that we'll take more share because we're much more prepared to take advantage of, which we've already shown, relative to our small and regional competitors.

Thanks a lot. I appreciate it.

And you'll take a question from Toby Summer with Truist.

Thank you. Within Procivity, in your financial services or industry customer set, what's your experience been? Is that part of the business and that customer set performing any differently than the other the business as a whole?

Well, since it's so large a portion of productivity, it's almost half its revenue, between 40 and 50% typically, you can almost correctly assume that any productivity trend is going to be true of its financial services client base. And in this case, that would be true again. And those large projects that completed, FSI is represented there, and so that impacts particularly their Q3 forecast for their revenues. So FSI definitely very cost-conscious, very selective. Decision cycle has been extended. Everything we've said would definitely include FSI clearance.

And what's the internal posture at the company as far as adding internal resources versus sort of being in the the restraining and the cutting of internal resources. You say you feel better than you did 90 days ago, so how is that reflected in your decision-making there?

Well, because we think we have unused capacity, which we've talked about for some time, we've held on to more of our recruiters and salespeople than revenues would dictate. We think we have a nice buffer and that we can participate strongly in the upcycle without adding to current heads. So at the moment, while we always performance manage on an individual basis, other than that, we're holding the line. And we think we have adequate staff to participate. And the fact that we're getting some productivity gains from some of these digital initiatives we have including the lead scoring, we feel even more confident that we have the capacity we'll need to participate nicely.

Thank you, Keith. And our next question comes from Stephanie Moore with Jefferies.

Hi, good afternoon. Thank you. I wanted to, you talked about this a little bit, you know, you talked about investments that you've been making in AI, you know, in particular, and other investments, and maybe your positioning versus your smaller competitors, and we eventually get out of this very sluggish environment. So, could you talk a little bit about how you think you're positioned to win and take share, you know, when we do eventually get out of this, you know, pretty sluggish environment, and maybe, you know, asked another way, given how prolonged this sluggish environment is and do you think that actually puts you in a better position for maybe smaller players that have just struggled to compete and might not have the resources available to take advantage of this recovery?

Thank you.

Well, as I said, for technology reasons alone, I think we'll be better positioned. to take share, in part because at the end of the day, what clients care about is the quality of your candidates, and we can present better candidates because of our AI. By the same token, what candidates care about is the quality of your jobs, and we can present better jobs, more relevant jobs to candidates because of the power of AI neither of which our local and regional competitors can do as well as we can do. And so I feel great in that way. Further, because we've made this commitment to these full-time engagement professionals, the quality of the talent we can provide, even in a very tight, low unemployment market, I think our clients are going to be very happy with, and we can scale that quickly if need be as well. And so the combination of our technology, our brands, which are better known than our local and regional competitors, the fact that we have this bench of full-time engagement professionals that we're willing to commit even more to, I think just adds... And so, frankly, and by the way, the latter is very margin accretive, and so I believe we're positioned to benefit relative to that competitor set better today than we ever have.

And our next question comes from George Tong with Goldman Sachs.

Hi, thanks. Good afternoon. So PERM placement revenues during the quarter and the first few weeks of July declined more than temp staffing revenues. Can you talk a bit about what some of the factors are that may be contributing to this?

So George, PERM has been more volatile than contract forever. And so short-term differences, one versus the other, are normal, frankly, and explanations don't really say much about trends. And I'd say PERM in April didn't see the lift we would typically see in the second quarter, but at that lower level, we leveled out in May and June. And I was talking sequentially again. And so PERM's fine. It's just it's more volatile. It's always been more volatile. It always will be more volatile. As we talked even on the last call, we came out the gate hotter there in PERM. And when you looked at the full quarter, that wasn't very predictive of even one quarter. And so PERM's just more volatile.

Got it. That's helpful. And then your admin and customer support business has been declining faster than finance and accounting now for two quarters in a row. What may be causing this difference in the rate of decline?

There's a fair amount of projects in ACS, and large projects tend to impact that more. The comps have been tougher at times in ACS. But again, there are a couple of percentage points different than finance and accounting. They're not hugely different. If you look at a year ago, you'll find that the comps for ACS are tougher than the comps for accounting. and that somewhat gets reflected in the year-on-year growth rates. I don't think there's a big story there, one way or the other. And by the way, when we did that AI impact study, customer service, administrative staff were definitely included, and they hadn't performed any differently than other roles.

Very helpful. Thank you.

And moving on to Kartik Mehta with North Coast Research.

Keith, I wanted to get your perspective. You know, we've had a couple of starts or a couple of signs this year where it seemed as though the industry was going to be on a positive trend. And unfortunately, for a variety of reasons, it isn't able to hold a momentum. And I'm wondering if there's anything different you're seeing this time around, especially with some of the sequential growth that you've talked about, that you could point to that might say this is going to last?

Well, I think heightened uncertainty is certainly more accepted in the new normal, so I don't think there are as strong of reactions to all the policy changes up and down that seem to happen daily. So it's more settled in that these things are going to happen and that's the new normal and deal with it and get on with it. And so I think with time, clients, particularly SMBs, have gotten a little numbed to that. and therefore it would take more to impact their confidence levels than it has in the last few quarters. The tax law has now been done, so that's behind us. The tariffs, while not settled, The view is, I mean, led today, in fact, by Japan, as you know, that are likely not to be as significant as first feared. Not that it's by any means settled, but it seems to be settling at a lower level.

And then just moving on to the productivity business, any change in the competitive dynamics in that business, especially as, you know, maybe there's just a couple headwinds here than maybe before?

Not, I mean, the competition of the big four. And if anything, as we've talked about in the recent quarters, that's, That competition, particularly as it relates to price, has stabilized. And so I don't think there's a competitive reason that productivity has gone to a small negative year-on-year growth rate. I wouldn't say that's about competitive dynamics at all.

Thank you very much. I appreciate it.

And your next question comes from Jeff Silber with BMO Capital Markets.

Hey, thank you very much. This is Ryan on for Jeff. You mentioned that 70% of the business is S&B. I was just wondering how your larger enterprise customers fared in April and May. Perhaps they were a little bit less sensitive, but I was just curious. Thank you.

Well, we don't typically quantitatively break out the difference, but generally speaking, I would say our enterprise clients have been a bit more resilient than our SMB clients for several quarters. And you see that in productivity's results, where their client base is very different than Talent Solutions, where they're principally enterprise clients.

So enterprise a little better than SMB. Appreciate that. Just for the follow-up on non-U.S.

productivity, the growth there was up quite a bit this quarter. I was wondering if you could break down the drivers there. Thank you.

So first of all, the comps are dramatically different between U.S. and non-U.S. A year ago, U.S. grew 3%, and non-U.S. was down 16%. So the comps are dramatically different, point one. But point two, Protiviti in Germany and in Canada have some very large joint go-to-market projects with Talent Solutions, and they're doing very well. And that's expected to continue. So we feel good about Protiviti's international operations, particularly Europe, particularly Germany. And there's a lot of excitement of all this defense and development infrastructure spending coming. Hadn't happened yet, but we feel good about productivity non-U.S.

Okay, so that was our last question, so thank you very much for joining us.

Thank you. 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 roberthalf.com. You can also log into the conference call replay. Details are contained in the company's press release issued earlier today.