Robert Half International Inc. Q3 FY2025 earnings call

• Global enterprise revenues were $1.354 billion, down 8% from last year's third quarter. Net income per share was $0.43 compared to $0.64 in the prior year's third quarter. - Fourth quarter revenue guidance at midpoint reflects return to sequential growth on a same-day constant currency basis for the first time since the second quarter of 2022. - Cash flow provided by operations during the quarter was $77 million. $0.59 per share cash dividend was distributed, and approximately 550,000 shares were repurchased. - Return on invested capital was 13% in the third quarter. - Talent Solutions and Protiviti performance details including revenues, gross margin, SG&A, and operating income. - Revenue trends in September and October, with contract talent revenues sustaining late second quarter levels and beginning to grow sequentially. - Tax rate was 33% in the third quarter compared to 31% 1 year ago due to increased impact of nondeductible expenses related to lower pretax income.

Global enterprise revenues were $1.354 billion in the third quarter, down 8% from last year. Talent Solutions: Adjusted third quarter revenues were down 11% year-over-year. U.S. Talent Solutions revenues were $649 million, down 11% from prior year's third quarter. Non-U.S. Talent Solutions revenues were $207 million, down 12% year-over-year. 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. Protiviti: Global revenues in the third quarter were $498 million, with adjusted global revenues down 3% versus the year ago period. U.S. Protiviti revenues were down 6%, while non-U.S. Protiviti revenues were up 8% compared to 1 year ago. Protiviti's gross margin was 20.9% of revenues in the third quarter compared to 24.6% in the third quarter 1 year ago.

• Fourth quarter 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 same period in 2024 on as-adjusted basis. - Adjusted revenue growth: Talent Solutions down 8% to 11%, Protiviti flat to down 4%, overall down 5% to 9%. - Adjusted gross margin percentages: Contract Talent 38% to 40%, Protiviti 22% to 24%, overall 36% to 39%. - Adjusted SG&A as percentage of revenues: Talent Solutions 44% to 46%, Protiviti 15% to 17%, overall 33% to 36%. - Adjusted operating income as percentage of revenues: Talent Solutions flat to 2%, Protiviti 6% to 8%, overall 2% to 5%. - Tax rate 30% to 34%. Shares outstanding 99 million to 100 million. - 2025 capital expenditures and capitalized cloud computing costs $75 million to $90 million with $15 million to $25 million in fourth quarter. - Seasonal items impacting Q1 2026: Protiviti's Q1 segment margins seasonally decline, employee stock compensation awards vest, and related tax benefits are affected by stock price.

• Uncertainties affecting forward-looking statements. - Impact of client and job seeker caution subduing hiring activity. - Macroeconomic factors and trade policy volatility. - Minimal impact from government shutdown on public sector business (federal government less than half of 1% of revenue). - Modest impact of AI on industry so far, with minimal impact on Robert Half's business as AI impact is primarily on early career, entry-level roles which are not their focus.

Q: Mark Marcon asked about Protiviti's pipeline, conversion rate, and pricing.

A: Pipeline is growing, winning as expected, replacing large projects with smaller ones with shorter durations, margin compression due to reallocation of resources from contractors to full-time employees.

Q: Andrew Steinerman inquired about the fourth quarter revenue guide being conservative.

A: Guide is conservative as fourth quarter is short with 3 fewer days, leading to levering fixed costs less, but same-day sequential growth is expected with a cushion.

Q: John Ronan Kennedy asked about margin driver dynamics.

A: Fourth quarter is short, fewer days lever fixed costs less; Talent Solutions gross margins have held up remarkably, Protiviti's gross margins impacted by shorter quarter with midpoint down 20-ish basis points but better than year ago.

Q: Trevor Romeo asked about public sector business.

A: Public sector revenues less than mid-single digit of total revenue, federal government less than half of 1% of revenue, no meaningful impact from government shutdown.

Q: George Tong asked about weekly sequential growth in contract talent revenues.

A: September and early October had between 1.5% and 2% sequential growth rate.

Q: Kevin McVeigh asked about Q1 EPS seasonal trends.

A: Sequential EPS impact is meaningful, Q1 is low point due to Protiviti's seasonal circumstances.

Q: Kartik Mehta asked about Protiviti's incremental margins and stock buybacks.

A: Substantial progress toward double-digit operating margin expected in 2026, but dividend commitment leaves smaller residual for repurchases at current prices.

Q: Henry Roberts asked about Protiviti's Financial Services segment and enterprise vs SMB customers.

A: Financial Services impacted by shift to smaller projects, enterprise clients have better results than SMB clients, with enterprise being more resilient currently but SMBs likely to outgrow on upside.