Robert Half Inc.

Hello, and welcome to the Robert Half First Quarter 2026 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 are 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 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 refer to certain non-GAAP financial measures as adjusted. Adjusted revenue growth excludes the impact of billing day variations and foreign currency exchange rates. Adjusted gross margin, SG&A, and operating income reflect the combining of investment gains and losses related to employee deferred compensation plans with correspondent changes in those obligations. These items have no impact on reported net income. Reconciliations and additional information are included in the supplemental schedules to our earnings release. For your convenience, our prepared remarks for today's call are available in the investor center of our website, roberthalf.com. For the first quarter of 2026, global enterprise revenues were $1.3 billion, down 4% from last year's first quarter on a reported basis and down 6% on an adjusted basis. We're very pleased that Talent Solutions delivered a second consecutive quarter of positive sequential growth on a same-day constant currency basis with revenue trends strengthening as the quarter progressed and into early April. Overall, we believe market conditions are becoming increasingly conducive to our business, and our unique combination of award-winning high-tech capabilities and high-touch expertise positions us well to deliver meaningful value for clients in navigating a dynamic business environment. That income per share in the first quarter was 14 cents compared to 17 cents in the first quarter a year ago. As Mike will discuss, first quarter EPS was impacted by a seasonally elevated tax rate tied to stock-based compensation, which we expect to normalize as the year progresses. We remain very well positioned to capitalize on emerging opportunities and support our clients' talent and consulting needs through the strength of our industry-leading brand, people, technology, and unique business model that includes both professional staffing and business consulting services. Cash flow used in operations during the first quarter was $112 million. Cash outflows are seasonally elevated each year in the first quarter due to the annual payment cycle for bonuses and SAS subscription renewals, among others. In March, we distributed a $0.59 per share cash dividend to our shareholders of record for a total cash outlay of $62 million. Return on invested capital for the company was 4% in the first quarter. Now I'll turn the call back over to our CFO, Mike Buckley.

Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.3 billion in the first quarter. On an adjusted basis, First quarter talent solutions revenues were down 7% year over year. U.S. talent solutions revenues were $626 million, down 7% from the prior year's first quarter. Non-U.S. talent solutions revenues were $208 million, down 3% year over year. We conduct talent solutions operations throughout offices in the United States and 18 other countries. In the first quarter of 2026, there were 61.9 billing days, the same as the first quarter one year ago. The second quarter of 2026 has 63.1 billing days compared to 63.2 billing days in the second quarter of last year. Currency exchange rate movements during the first quarter had the effect of increasing reported year-over-year total revenues by $24 million. $16 million for talent solutions and $18 million for productivity. Contract talent solutions bill rates for the first quarter increased 2.6% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the fourth quarter was 3.2%. Now let's take a closer look at the results for productivity. Global revenues in the first quarter were $466 million. $362 million of that is from the United States, and $104 million is from outside of the United States. On an adjusted basis, global first quarter productivity revenues were down 4% 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. Protivity and its independently owned member firms serve clients through locations in the United States and 27 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 first quarter one year ago. Conversion, or contract to hire, revenues were 3.1% of contract revenues in the current quarter compared to 3.2% in the first quarter of 2025. Our permanent placement revenues were 13.1% of consolidated talent solutions revenues in the current quarter compared to 12.8% in the first quarter of 2025. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 46.8% of applicable revenues in the current quarter compared to 46.7% in the first quarter of 2025. For productivity, gross margin was 19.2% of productivity revenues in the first quarter and 18.9% in the first quarter one year ago. Adjusted gross margin for productivity was 18.8% for the quarter just ended compared to 18.1% last year. Enterprise selling general and administrative costs were 34.1% of global revenues in the first quarter compared to 34.0% in the same quarter one year ago. Adjusted enterprise SG&A costs were 34.6% for the quarter just ended compared to 35.2% one year ago. Talent solutions SG&A costs were 44.2% of talent solutions revenues in the in the first quarter versus 43.7% in the first quarter of 2025. Adjusted talent solutions SG&A costs were 45% for the quarter just ended compared to 45.5% last year. First quarter SG&A costs for productivity were 15.9% of productivity revenues compared to 16.3% for the same quarter one year ago. Operating income for the first quarter was $37 million. Adjusted operating income was $29 million in the quarter, or 2.2% of revenues. First quarter adjusted operating income from Talent Solutions was $16 million, or 1.8% of revenues. Adjusted operating income for productivity in the first quarter was $13 million, or 2.9% of revenues. Our first quarter 2026 income statement includes an $8 million loss from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of lower employee deferred compensation costs, which are reflected in SG&A expense and direct costs. As such, it has no effect on our reported net income. Our first quarter tax rate was 56%, compared to 22% one year ago. This elevated tax rate is primarily the result of a tax charge related to our employee stock-based compensation grants, the majority of which vest in the first quarter, and the magnified impact of non-deductible tax items when measured against seasonally low Q1 pre-tax income. At the end of the first quarter, accounts receivable were $776 million, and applied day sales outstanding, or DSO, was 53.8 days. Before we move to second quarter guidance, let's review some of the monthly revenue trends we saw in the first quarter and so far in April, all adjusted for currency and billing days. Contract talent solutions exited the first quarter with March revenues down 5% versus the prior year, compared to a 7% decrease for the full quarter. Revenues for the first two weeks of April were down 1% compared to the same period last year. Permanent placement revenues in March were down 6% versus March 2025. This compares to a 5% decrease for the full quarter. For the first three weeks of April, permanent placement revenues were down 7% compared to the same period in 2025. We provide this information so you have insight into some of the trends we saw during the first quarter and into April. 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 second quarter guidance. Revenue, $1.275 billion to $1.375 billion. Income per share, $0.20 to $0.30. income per share excluding the $0.03 one-time severance charge, which I'll discuss in a moment, $0.23 to $0.33. Midpoint revenues of $1.325 billion are 4% lower than the same period in 2025 on an adjusted basis. Our midpoint revenue guidance for the second quarter reflects continued positive adjusted sequential revenue growth for talent solutions. Our Q2 revenue guidance for productivity reflects ongoing shifts in the U.S. financial services regulatory environment, which Keith will address in just a moment. As a result, cost actions are planned that impacted our Q2 midpoint adjusted gross margin guidance by $5 million in expected severance costs, or $0.03 per share. We expect these actions will be fully completed by the beginning of the third quarter. Major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year-over-year for talent solutions, flat to down 4%, creativity down 4% to 8%, overall down 1% to 5%. Adjusted gross margin percentage, contract talent, 38% to 40%, Crutivity, 19 to 21%. Overall, 36 to 39%. Adjusted SG&A as a percentage of revenue. Talent Solutions, 43 to 45%. Crutivity, 16 to 18%. Overall, 34 to 36%. Adjusted Operating Income as a percentage of revenues. Talent Solutions, 2% to 4%. Productivity, 2% to 4%. Overall, 2% to 4%. Tax rate, 34% to 36%. Shares outstanding, $100 million to $101 million. 2026 capital expenditures in capitalized cloud computing costs, $70 million to $90 million, with $15 to $25 million in the second quarter. For the third quarter, we offer the following general observations. For talent solutions, typical Q3 seasonal trends show relatively flat sequential revenues due to summer holiday effects, especially in Europe. That said, current trends would result in Q3 year-on-year adjusted revenue growth of 1% to 3%, marking a return to positive growth for the first time since 2022. For Protivity, Q3 revenues typically increase sequentially tied to seasonally higher internal audit work related to clients' annual internal control certifications. This typically drives higher staff utilization rates and elevated incremental margins, and we expect a similar pattern this year. In addition, Q3 for productivity will benefit from the absence of Q2 severance costs and lower Q3 staff costs following the Q2 cost actions previously referenced. We estimate Q3 productivity sequential revenue gains of 0% to 3% and, combined with the new or low cost structure, Q3 adjusted segment margins of 7% to 9%. a substantial improvement over Q2 margins, and comparable to margins from last year. We estimate that both talent solutions and productivity will deliver positive year-over-year segment income growth in Q3, driving Q3 consolidated net income and EPS growth of 8% to 12% year-over-year. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC pilot. Now I'll turn the call back over to Keith.