Robert Half Inc. (RHI) Q4 2025 Earnings Call Transcript
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Overview
The earnings call presents a mixed outlook. While there are signs of market recovery and optimism for future growth, the guidance for Q4 indicates a revenue decline, and Protiviti's Q1 segment margins are expected to fall. The company shows strong cash flow and confidence in dividend sustainability, but uncertainties around AI and vague management responses on certain issues temper the overall sentiment. Given these factors, the stock price reaction is likely to remain stable within a neutral range over the next two weeks.
Key Financial Performance
Global enterprise revenues $1.302 billion, down 6% from last year's fourth quarter on a reported basis and down 7% on an adjusted basis. The decline was attributed to changes in billing days and foreign currency exchange rates.
Net income per share $0.32 compared to $0.53 in the fourth quarter 1 year ago. The decrease reflects lower revenues and higher costs.
Cash flow provided by operations $183 million, an 18% increase over 2024 Q4. This was the highest quarter this year, attributed to operational efficiencies.
Return on invested capital 10% in the fourth quarter, reflecting efficient use of capital.
U.S. talent solutions revenues $623 million, down 9% from the prior year's fourth quarter. The decline was due to market conditions and reduced demand.
Non-U.S. talent solutions revenues $200 million, down 8% year-over-year, impacted by global market conditions.
Contract talent solutions bill rates Increased 3.2% compared to 1 year ago, adjusted for changes in mix of revenues by specialization, currency, and country.
Protiviti global revenues $479 million, down 3% year-over-year on an adjusted basis. U.S. revenues were down 6%, while non-U.S. revenues were up 9%.
Gross margin for contract talent solutions 39.2% of applicable revenues in the current quarter compared to 39.1% in the fourth quarter 1 year ago, showing slight improvement.
Overall gross margin for talent solutions 46.7% of applicable revenues in the current quarter compared to 46.4% in the fourth quarter of 2024, reflecting a slight increase.
Protiviti gross margin 21.9% of revenues in the fourth quarter compared to 24.9% in the fourth quarter 1 year ago. Adjusted gross margin was 22.8% compared to 25.1% last year, showing a decline.
Enterprise SG&A costs 35.9% of global revenues in the fourth quarter compared to 34.1% in the same quarter 1 year ago, indicating higher costs.
Adjusted enterprise SG&A costs 34.6% for the quarter just ended compared to 33.8% 1 year ago, reflecting an increase.
Talent solutions SG&A costs 47.6% of talent solutions revenues for the fourth quarter versus 44.4% in the fourth quarter of 2024, showing an increase.
Protiviti SG&A costs 15.7% of revenues compared to 15.3% for the same quarter 1 year ago, indicating a slight increase.
Operating income $22 million. Adjusted operating income was $43 million or 3.3% of revenues, reflecting operational performance.
Adjusted operating income for talent solutions $9 million or 1.1% of revenues, showing lower profitability.
Adjusted operating income for Protiviti $34 million or 7.1% of revenues, reflecting better performance compared to talent solutions.
Tax rate 32% compared to 28% 1 year ago, attributed to increased impact of nondeductible expenses relative to lower pretax income.
Accounts receivable $748 million, with implied days sales outstanding (DSO) of 51.8 days, reflecting operational efficiency.
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Operating Highlights
AI and generative AI impact: The company noted that AI has not significantly impacted employment in their areas of focus, particularly among small businesses. They highlighted that AI is reshaping work and skill requirements, and clients are increasingly relying on their services to navigate these changes.
Global enterprise revenues: Global enterprise revenues were $1.302 billion in Q4 2025, down 6% year-over-year on a reported basis and 7% on an adjusted basis. However, talent solutions and enterprise revenues returned to positive sequential growth for the first time in over three years.
Protiviti revenues: Protiviti's global revenues were $479 million in Q4 2025, with U.S. revenues down 6% and non-U.S. revenues up 9% year-over-year. The pipeline remains strong across major solution areas.
Cash flow and dividends: Cash flow from operations was $183 million in Q4 2025, an 18% increase year-over-year. A $0.59 per share cash dividend was distributed, totaling $59 million.
Gross margin: Contract talent solutions gross margin was 39.2%, slightly up from 39.1% a year ago. Protiviti's gross margin declined to 21.9% from 24.9% in the prior year.
Market positioning and client engagement: The company is well-positioned to capitalize on emerging opportunities, supported by easing economic concerns, low unemployment, and demand for skilled professionals. They are also leveraging their expertise to help clients adapt to AI-driven changes and navigate hiring challenges.
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Risk or Challenges
Decline in Global Revenues: Global enterprise revenues decreased by 6% year-over-year on a reported basis and 7% on an adjusted basis, indicating challenges in maintaining revenue growth.
Decreased Talent Solutions Revenues: U.S. talent solutions revenues fell by 9%, and non-U.S. talent solutions revenues dropped by 8% year-over-year, reflecting reduced demand for these services.
Protiviti Revenue Decline: Protiviti's global revenues decreased by 3% year-over-year, with U.S. revenues down 6%, signaling challenges in maintaining growth in consulting services.
Higher SG&A Costs: Selling, general, and administrative (SG&A) costs increased as a percentage of revenues across both talent solutions and Protiviti, potentially impacting profitability.
Lower Operating Income: Operating income for the fourth quarter was $22 million, significantly lower than previous periods, indicating reduced profitability.
Higher Tax Rate: The fourth quarter tax rate increased to 32% from 28% a year ago, driven by nondeductible expenses and lower pretax income, which could further pressure net income.
Seasonal Decline in Protiviti Margins: Protiviti's Q1 segment margins are expected to decline sequentially by 4 percentage points due to seasonal factors, potentially impacting profitability in the short term.
Economic Uncertainty: Concerns about economic downturns, though moderated, still pose risks to client hiring and project activity, which could affect demand for the company's services.
AI-Driven Challenges: The growing use of generative AI by job seekers complicates candidate evaluation, increasing the difficulty for clients to authenticate qualifications and potentially impacting service delivery.
Longer Sales Cycles for Protiviti: Protiviti faces longer sales cycles and smaller-sized new engagements, which could hinder revenue growth and operational efficiency.
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Guidance & Outlook
Revenue Guidance for Q1 2026: Revenues are projected to be between $1.26 billion and $1.36 billion, with a midpoint of $1.31 billion, reflecting a 5% decline compared to Q1 2025 on an adjusted basis.
Income Per Share Guidance for Q1 2026: Expected to range between $0.08 and $0.18.
Adjusted Revenue Growth Projections for 2026: Talent solutions are expected to decline by 4% to 8%, Protiviti by 0% to 4%, and overall revenues by 3% to 6%.
Adjusted Gross Margin Projections for 2026: Contract talent solutions gross margin is expected to range between 38% and 40%, Protiviti between 18% and 21%, and overall gross margin between 35% and 38%.
Adjusted SG&A as a Percentage of Revenues for 2026: Talent solutions SG&A is projected to range between 44% and 46%, Protiviti between 15% and 17%, and overall SG&A between 33% and 36%.
Adjusted Operating Income as a Percentage of Revenues for 2026: Talent solutions are expected to range between 0% and 3%, Protiviti between 2% and 5%, and overall between 1% and 3%.
Tax Rate Projections for 2026: Q1 tax rate is expected to be between 56% and 58%, with the remainder of 2026 expected to range between 33% and 35%.
Capital Expenditures for 2026: Projected to be between $70 million and $90 million, with $10 million to $20 million in Q1.
Protiviti Growth Expectations: Protiviti's growth rates are expected to improve in Q1 2026, with a strong pipeline across all major solution areas.
Market Trends and Client Engagement: Clients are revisiting postponed initiatives and discussing hiring tied to business-critical priorities. Demand for specialized expertise remains strong due to limited internal capacity at small businesses and the need for flexible resources.
AI and Labor Market Impact: AI is not expected to significantly impact employment in the near term, particularly among small businesses. Clients are increasingly relying on Robert Half to navigate changes and implement new technologies.
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Shareholder Return Plan
Cash Dividend: In December, a $0.59 per share cash dividend was distributed to shareholders of record, amounting to a total cash outlay of $59 million.
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Key Q&A
Q:How is the company planning to achieve top-line growth in a modest economic environment?
A:The company expects to return to positive year-over-year growth in the third quarter across talent solutions, Protiviti, and enterprise. They have retained their best producers to ramp up quickly and are leveraging AI for matching and ranking prospects to capture additional revenue.
Q:What is the outlook for the permanent (perm) market?
A:The perm market is stronger than headlines suggest. Candidates are conservative about changing jobs, and demand for additional roles is limited. SMB clients have normalized their headcounts and remain lean, which differentiates them from larger enterprises.
Q:What is the impact of AI on flexible workers and hiring trends?
A:AI has created uncertainty, leading clients to prefer contract help over full-time hires. However, there is no significant current demand for full-time roles being held off due to AI. SMBs are not significantly impacted by AI yet.
Q:What are the headcount growth plans for Protiviti, and how much revenue upside can be captured without adding significant headcount?
A:Protiviti has underutilized full-time staff and contractor capacity, which provides hidden capacity to scale up quickly without adding significant headcount. They are confident in their ability to support revenue growth with existing resources.
Q:What are the typical seasonal trends for Q2 revenue and earnings?
A:In Q2, contract revenue is typically modestly down on a same-day basis, full-time revenue is seasonally up, and Protiviti begins to recover from its seasonal low in Q1. Overall profitability improves in Q2 compared to Q1.
Q:What is the company's optimism about achieving positive growth in the third quarter?
A:The company is optimistic due to encouraging weekly results and discussions with clients. They monitor various external indicators, but no single indicator has a high correlation. The staffing industry is trending upward, and the company expects positive year-on-year growth in Q3.
Q:What is the current assessment of capital allocation and dividend sustainability?
A:The company had strong free cash flow in Q4, covering the dividend and adding $100 million to the cash balance. They expect free cash flow in 2026 to cover the dividend, with the balance sheet available for stock buybacks.
Q:What is the performance of Protiviti in the U.S. versus international markets?
A:Protiviti's international performance is stronger due to a stricter regulatory environment and fewer large projects winding down compared to the U.S. However, technology consulting is strong in the U.S., driven by platform modernization.
Q:What is the outlook for Protiviti pricing and the impact of AI on pricing strategies?
A:Protiviti and the consulting industry are exploring innovative pricing models beyond hourly rates, considering outcome-based or unit-based pricing. AI's impact on pricing is still in early stages.
Q:What is the confidence level in the rebound of the ACS (Admin and Customer Support) business line?
A:The company is confident in the ACS rebound. Customer service, including call centers, performed better than the rest of ACS, and AI has not significantly impacted this segment.
Q:What are the internal headcount plans for talent solutions in 2026?
A:The company has retained more staff than revenue declines would dictate, leaving 15%-30% unused capacity. They can grow in talent solutions without adding headcount.
Q:What are the growth trends in talent solutions internationally versus the U.S.?
A:Growth rates in talent solutions are similar between the U.S. and international markets. Germany, the U.K., Canada, and Brazil are performing well.
Q:Were there any special charges or rightsizing actions taken to improve margins for 2026?
A:No special charges were taken in Q4. Margin improvements are expected through efficiency gains and better management of Protiviti's staff pyramid and contractor mix.
Q:What are the incremental margins expected in a recovery?
A:The company expects to retrace the path of deleveraging on the way down, with cost efficiencies in corporate services and field management contributing to margin improvements.
Q:What are the industry verticals contributing to Protiviti's growth?
A:Financial services is Protiviti's largest industry group, but regulatory changes in the U.S. have created modest headwinds. Technology consulting, particularly in platform modernization and data optimization, is driving growth.
Q:What are the expectations for EBITA margins and revenue growth to achieve pre-pandemic levels?
A:Achieving pre-pandemic EBITA margins of 10% will require offsetting cumulative inflation since then. Revenue growth and efficiency improvements are key to reaching these levels.
Q:What is the impact of AI on hiring and the company's services?
A:AI makes hiring harder for clients by enabling mass applications and tailored resumes, which can include fictitious work histories. This increases the value of the company's vetting services, which rely on performance ratings from prior assignments.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact revenue growth needed to achieve pre-pandemic EBITA margins, citing cumulative inflation as a factor. They also used vague language regarding the potential impact of AI on pricing strategies and the timeline for implementing innovative pricing models in Protiviti.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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Contract talent
Enterprise selling
Mr presentation
Officer Mr
President
Protiviti Contract
Protiviti SGA
Protiviti decline
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Protiviti margin
Protiviti member
Protiviti revenue
Protiviti segment
Protiviti tax
SGA Protiviti
SGA employee
Segment midpoint
addition Protiviti
adjustment
audit
basis Protiviti
basis talent
change compensation
compensation obligation
day currency
enterprise revenue
gain loss
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margin Protiviti
percentage point
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revenue Protiviti
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solution Protiviti
solution SGA
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RHI Transcript
Robert Half Inc. (RHI) Q4 2025 Earnings Call Transcript
Unknown1-29
The earnings call presents a mixed outlook. While there are signs of market recovery and optimism for future growth, the guidance for Q4 indicates a revenue decline, and Protiviti's Q1 segment margins are expected to fall. The company shows strong cash flow and confidence in dividend sustainability, but uncertainties around AI and vague management responses on certain issues temper the overall sentiment. Given these factors, the stock price reaction is likely to remain stable within a neutral range over the next two weeks.
Robert Half Inc. (RHI) Q3 2025 Earnings Call Transcript
Unknown10-22
The earnings call summary indicates declining revenue and income projections, with specific concerns over Protiviti's margin compression and a conservative Q4 guidance. The Q&A section reveals competitive pricing pressures, inefficient project transitions, and minimal short-term AI impact. Although the company is committed to dividends, its cautious capital allocation reflects uncertainty. The lack of positive catalysts, alongside negative financial trends and cautious guidance, suggests a negative sentiment, predicting a stock price decline of -2% to -8% over the next two weeks.
Robert Half Inc. (RHI) Q2 2025 Earnings Call Transcript
Unknown7-23
The earnings call reveals a mixed outlook: while there is a slight revenue decline and cautious guidance, the company shows potential for growth with an increased pipeline and strong technology solutions. However, challenges such as macroeconomic uncertainties and inconsistent margin improvements temper the optimism. The Q&A session highlights an improving tone in client conversations and a strategic focus on AI, but also notes some management vagueness and conservative guidance. Overall, these factors suggest a neutral stock price movement in the short term.
Earnings call transcript: Robert Half Q4 2024 misses forecasts, stock dips
Unknown1-29
The earnings report shows a mixed performance with declining revenues and net income, but positive indicators like dividend growth and share repurchases. The Q&A suggests a cautious optimism, with a strong pipeline for Protiviti and improving client engagement. However, concerns about revenue deceleration and unclear guidance on client engagement remain. These factors balance each other out, resulting in a neutral sentiment.
RHI Report
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