Robert Half Inc.

Hello, and welcome to the Robert Half Third 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 on reported 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 Companies obligations under deferred compensation plans with the changes in the underlying deferred compensation obligations. Since the gains and losses from investments and the changes in the deferred compensation obligations completely offset, there's no impact on a 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 third quarter of 2025, global enterprise revenues were $1.354 billion, down 8% from last year's third quarter on both a reported basis and on an adjusted basis. That income per share in the third quarter was 43 cents compared to 64 cents in the third quarter one year ago. Revenues and earnings were in line with the midpoint of our previous third quarter guidance. Client and job seeker caution continued during the quarter, subduing hiring activity and new project starts. That said, we're encouraged. by the weekly trends in contract talent revenues, which sustained late second quarter levels for most of the third quarter and began to grow sequentially in September and into October. Our fourth quarter revenue guidance, at and above the midpoint, reflects a return to sequential growth on a same-day constant currency basis for the first time since the second quarter of 2022. We remain very well positioned to capitalize on these emerging opportunities and meet our clients' evolving talent and consulting needs. Our industry-leading brand, talented people, advanced technology, and our unique combination of professional staffing and business consulting services continue to set us apart and position us for long-term success. Cash flow provided by operations during the quarter was $77 million. In September, we distributed a $0.59 per share cash dividend to our shareholders of record for a total cash outlay of $59 million. We also acquired approximately 550,000 Robert Half shares during the quarter for $20 million. We have 5.6 million shares available for repurchase under our board-approved stock repurchase plan. Return on invested capital for the company is 13% in the third 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 $1.354 billion in the third quarter. On an adjusted basis, third quarter talent solutions revenues were down 11% year over year. U.S. talent solutions revenues were $649 million. down 11% from the prior year's third quarter. Non-US talent solutions revenues were 207 million, down 12% year over year. We conduct talent solutions operations through offices in the United States and 18 other countries. In the third quarter, there were 64.2 billing days compared to 64.1 billing days in the same quarter one year ago. The fourth quarter of 2025 had 61.4 billing days compared to 61.6 billing days during the fourth quarter of 2024. Currency exchange rate movements during the third quarter had the effect of increasing reported year-over-year total revenues by $9 million, and that was $6 million for Talent Solutions and $3 million for Protivity. Contract Talent Solutions bill rates for the third quarter increased 3.7% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the second quarter was 3.8%. Now let's take a closer look at results for Protivity. Global revenues in the third quarter were $498 million, $398 million, Of this is from the United States, and $100 million is from outside of the United States. On an adjusted basis, global third quarter productivity revenues were down 3% versus the year ago period. U.S. productivity revenues were down 6%, while non-U.S. productivity revenues were up 8% compared to one year ago. Fructivity 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, gross margin was 38.9% of applicable revenues in both the current quarter and the third quarter one year ago. Conversion, or contract to hire, revenues were 3.2% of contract revenues in the current quarter compared to 3.3% in the third quarter of 2024. Our permanent placement revenues were 12.9% of consolidated talent solutions revenues in both the current quarter and the third quarter of 2024. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 46.7% of applicable revenues in the current quarter compared to 46.8% in the third quarter of 2024. For productivity, gross margin was 20.9% of productivity revenues in the third quarter and 24.6% in the third quarter one year ago. Adjusted gross margin for productivity was 23% for the quarter just ended compared to 25.8% last year. Moving on to SG&A. Enterprise SG&A costs were 36.2% of global revenues in the third quarter compared to 34.9% in the same quarter one year ago. Adjusted Enterprise SG&A costs were 33.5% for the quarter just ended compared to 33.3% one year ago. Talent Solutions SG&A costs were 48.3% of Talent Solutions revenues in the third quarter versus 45.2% in the third quarter of 2024. Adjusted talent solutions SG&A costs were 43.9% for the quarter just ended compared to 42.8% last year. Third quarter SG&A costs for productivity were 15.5% of productivity revenues compared to 15.6% of revenues for the quarter one year ago. Operating income for the quarter was $14 million, Adjusted operating income was $61 million in the third quarter, or 4.5 percent of revenue. Third quarter adjusted operating income from our talent solutions divisions was $24 million, or 2.8 percent of revenue. Adjusted operating income for productivity in the third quarter was $37 million, or 7.5 percent of revenue. Our third quarter 2025 income statement includes a $48 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 third quarter tax rate was 33% compared to 31% one year ago. The higher tax rate in the current quarter is due to the increased impact of non-deductible expenses related to lower pre-tax income. At the end of the third quarter, accounts receivable were $838 million, and implied day sales outstanding, or DSO, was 55.8 days. Before we move to fourth quarter guidance, Let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing days. Contract Talent Solutions exited the third quarter with September revenues down 10% versus the prior year, compared to a 10.9% decrease for the full quarter. Revenues for the first two weeks of October were down 9.7% compared to the same period last year. Permanent placement revenues in September were down 12.3% versus September of 2024. This compares to an 11.4% decrease for the full quarter. For the first three weeks of October, permanent placement revenues were down 3.3% 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 third quarter and into October. But as you know, these are very brief time periods. We caution against reading too much into that. With that in mind, we offer the following fourth quarter guidance. Revenues, $1.245 billion to $1.345 billion. Income per share, $0.25 to $0.35. Midpoint revenues of $1.295 billion are 7% lower than the same period in 2024 on an as-adjusted basis. Our midpoint revenue guidance for the fourth quarter reflects a return to positive adjusted sequential growth for the first time in 13 quarters. Our Q4 midpoint adjusted operating margin guidance declined sequentially by 1.3 percentage points which is consistent with long-term historical trends. Viewer billing days because of the holidays result in modest Q4 negative leverage of operating costs. The major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year over year, talent solutions down 8% to 11%, productivity Flat to down 4%. Overall, down 5% to 9%. Adjusted gross margin percentages. Contract talent, 38% to 40%. Productivity, 22% to 24%. Overall, 36% to 39%. Adjusted SG&A as a percentage of revenues. Talent solutions. 44 to 46%. Creativity, 15 to 17%. Overall, 33 to 36%. Adjusted operating income as a percentage of revenues. Talent solutions, flat to 2%. Creativity, 6 to 8%. Overall, 2 to 5%. Tax rate, 30 to 34%. Shares outstanding, 99 to 100 million. The 2025 capital expenditures and capitalized cloud computing costs, 75 million to 90 million, with 15 to 25 million in the fourth quarter. While we do not provide full earnings guidance for two quarters into the future, we would call out the following seasonal items we expect to impact the first quarter of 2026. Historically, Protivity's Q1 segment margins seasonally decline by mid-single-digit percentage points on a sequential basis. There are two primary drivers of this. Internal audit revenues are negatively impacted as clients focus instead on annual financial statement and related external audits. In addition, productivity employees receive annual compensation adjustments effective January 1st, which are recovered through pricing adjustments realized as client contracts are negotiated. Segment margins then improve accordingly. A majority of our employee stock compensation awards vest in the first quarter each year, and the related tax benefits are measured based upon the stock price at that time. With the current stock price below grant values, we expect an unfavorable Q1 tax charge of $4 million, or approximately 4 cents per share. 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.