Robert Half Inc.

Hello, and welcome to the Robert Half Fourth 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'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 is 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 fourth quarter of 2025, global enterprise revenues were 1.302 billion, down 6% from last year's fourth quarter on a reported basis, and down 7% on an adjusted basis. We are very pleased to see talent solutions and enterprise revenues return to positive sequential growth on a same-day constant currency basis for the first time in over three years. Weekly revenue trends during the quarter continued to show positive momentum, which extended into the first three weeks of January. Our revenue and earnings exceeded the midpoint of our previous fourth quarter guidance. Net income per share for the quarter was 32 cents compared to 53 cents in the fourth quarter one year ago. We entered 2026 very well positioned to capitalize on emerging opportunities and support our clients' 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 $183 million, the highest quarter this year and an 18% increase over 2024 Q4. In December, we distributed a 59 cent per share cash dividend to our shareholders of record for a total cash outlay of 59 million. Return on invested capital for the company was 10% in the fourth 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 $1.302 billion in the fourth quarter. On an adjusted basis, Fourth quarter talent solutions revenues were down 9% year over year. US talent solutions revenues were $623 million, down 9% from the prior year's fourth quarter. Non-US talent solutions revenues were $200 million, down 8% year over year. We conduct talent solutions operations through offices in the United States and 18 other countries. In the fourth quarter, there were 61.4 billing days compared to 61.6 billing days in the same quarter one year ago. The first quarter of 2026 has 61.9 billing days, as did the first quarter of 2025. Billing days for the remaining three quarters of 2026 will be 63.1, 64.6, and 61.1 for a total of 250.7 billing days in the year which is the same as the full year of 2025. Currency exchange rate movements during the fourth quarter had the effect of increasing reported year-over-year total revenues by $15 million. That was $10 million for Talent Solutions and $5 million for Protivity. Contract Talent Solutions bill rates for the fourth quarter increased 3.2% compared to one year ago, adjusted for the changes in the mix of revenues by functional specialization, currency, and country. This rate for the third quarter was 3.7%. Now let's take a closer look at results for productivity. Global revenues in the fourth quarter were $479 million. $373 million of that is from the United States, and $106 million is from outside of the United States. On an adjusted basis, Global fourth quarter productivity revenues were down 3% versus the year-ago period, with U.S. productivity revenues down 6%, while non-U.S. productivity revenues were up 9% compared to one year ago. Productivity and its independently owned member firms served clients through locations in the United States and 28 other countries. Turning now to gross margin, in contract talent solutions, Gross margin was 39.2% of applicable revenues in the current quarter compared to 39.1% in the fourth quarter one year ago. Conversion or contract to hire revenues were 3.2% of contract revenues in both the current quarter and the fourth quarter of 2024. Our permanent placement revenues were 12.5% of consolidated talent solutions revenues in the current quarter compared to 12.1% in the fourth 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 46.4% in the fourth quarter of 2024. For productivity, gross margin was 21.9% of productivity revenues in the fourth quarter and 24.9% in the fourth quarter one year ago. Adjusted gross margin for productivity was 22.8% for the quarter just ended compared to 25.1% last year. We ended 2025 with 11,200 full-time productivity employees and contractors, up 1.5% from the prior year. Enterprise selling general and administrative costs were 35.9% of global revenues in the fourth quarter compared to 34.1% in the same quarter one year ago. Adjusted enterprise SG&A costs were 34.6% for the quarter just ended compared to 33.8% one year ago. Talent solutions SG&A costs were 47.6% of talent solutions revenues per quarter. versus 44.4% in the fourth quarter of 2024. Adjusted talent solutions, SG&A cost 45.6% for the quarter just ended, compared to 43.9% last year. We ended 2025 with 7,400 full-time internal employees in talent solutions, down 3.2% from the prior year. Fourth quarter SG&A costs for productivity were 15.7% of productivity revenues compared to 15.3% for the same quarter one year ago. Operating income for the fourth quarter was $22 million. Adjusted operating income was $43 million in the quarter, worth 3.3% of revenues. Fourth quarter adjusted operating income from our talent solutions divisions was $9 million, or 1.1% of revenues. adjusted operating income for productivity in the fourth quarter was 34 million or 7.1% of revenues. Our fourth quarter 2025 income statement includes a $21 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 SBA expenses and direct costs. As such, it has no effect on a reported net income. Our fourth quarter tax rate was 32% compared to 28% 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 fourth quarter, accounts receivable were $750 million, and implied sales outstanding, or DSO, was 51.8 days. Before we move to first quarter guidance, let's review some of the monthly revenue trends we saw in the fourth quarter and so far in January, all adjusted for currency and billing dates. Contract Talent Solutions exited the fourth quarter with December revenues down 8.9% versus the prior year, compared to a 9.9% decrease for the full quarter. Revenues for the first two weeks of January were down 6.6%, compared to the same period last year. Permanent placement revenues in December were down 11% versus December 2024. This compares to a 5.9% decrease for the full quarter. For the first three weeks in January, permanent placement revenues were down 9.4%, compared to the same period in 2025. We provide this information so that you have 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, 1.26 billion to 1.36 billion Income per share, 8 to 18 cents. Midpoint revenues of 1.31 billion are 5% lower than the same period in 2025 on an adjusted basis. Our midpoint revenue guidance for the first quarter reflects continued positive adjusted sequential revenue growth for Talent Solutions. Our Q1 midpoint adjusted operating margin guidance declined sequentially by one percentage point, which is consistent with long-term historical trends. This includes productivity's sequential decline of four percentage points. Historically, productivity's Q1 segment margins seasonally declined by mid-single-digit percentage points on a sequential basis. There are two primary drivers. Internal audit revenues are negatively impacted, as clients focused instead on annual financial statements and related external audits. In addition, creativity 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. We estimate our midpoint tax rate for the first quarter to be 56 to 58%. This is much higher than normal for two reasons. As expected, tax charge related to stock compensation and the magnified impact of non-deductible tax items when measured against seasonally low Q1 pre-tax income. A majority of our employees' stock compensation awards vest in the first quarter each year, as the related tax impacts are measured based upon the stock price at that time. With the current stock price below grant values, the tax charge estimated at four and a half million or five cents per share results. For the remainder of 2026, a quarterly tax rate of 33 to 35% is expected. The major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year over year For talent solution, down 4% to 8%. Creativity, flat to down 4%. Overall, down 3% to 6%. Adjusted gross margin percentages for contract talent, 38% to 40%. Creativity, 18% to 21%. Overall, 35% to 38%. Adjusted SG&A has a percentage of revenues for talent solutions, 44 to 46%. For productivity, 15 to 17%. Overall, 33 to 36%. Adjusted operating income has a percentage of revenues for talent solutions, 0 to 3%. Productivity, 2 to 5%. Overall, 1 to 3%. Tax rate, 56 to 58%. Shares, 99 to 100 million. 2026 capital expenditures and capitalized cloud computing costs, 70 to 90 million, with 10 to 20 million in the first quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC . Now I'll turn the call back over to Keith. Thank you, Mike.