Robert Half Q4 2025 Robert Half International Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Robert Half International Inc Earnings Call
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Operator: Please stand by. Hello, and welcome to the Robert Half Q4 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 1 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.
Operator: Please stand by. Hello, and welcome to the Robert Half Q4 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 1 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, 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 todays call.
All 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, their subs.
Keith Waddell: 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.
Keith Waddell: 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.
Q4 2025 Robert Half International Inc Earnings Call
Due 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 S E C.
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 removes the impacts on reported revenues from the changes in the number of billing days and foreign currency exchange rates.
Keith Waddell: Additionally, we present adjusted gross margin, adjusted selling, general, and 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 Q4 of 2025, global enterprise revenues were $1.302 billion, down 6% from last year's Q4 on a reported basis and down 7% on an adjusted basis.
Additionally, we present adjusted gross margin, adjusted selling, general, and 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 Q4 of 2025, global enterprise revenues were $1.302 billion, down 6% from last year's Q4 on a reported basis and down 7% on an adjusted basis.
Additionally, we present adjusted gross margin adjusted selling general and 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, coupled with the offset there is no impact on our reported net income reconciliation.
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For your convenience our prepared remarks for today's call are available in the Investor Center of our website Robert half Dot com for.
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 returned to positive success.
Keith Waddell: We are very pleased to see Talent Solutions and enterprise revenues return to positive sequential growth on the 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 Q4 guidance. Net income per share for the quarter was $0.32, compared to $0.53 in the Q4 one year ago. We entered 2026, very well positioned to capitalize on emerging, 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.
We are very pleased to see Talent Solutions and enterprise revenues return to positive sequential growth on the 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 Q4 guidance. Net income per share for the quarter was $0.32, compared to $0.53 in the Q4 one year ago.
And show growth on a same day constant currency basis.
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.
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, 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 $0.59 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.
We entered 2026, very well positioned to capitalize on the emerging emerging opportunities and support our clients talent and consulting needs sort of as a strength of our industry, leading brand our people our technology and our unique business model that includes both professional staffing and business consulting.
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Keith Waddell: 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 $0.59 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.
Cash flow provided by operations during the quarter was $183 million.
Highest quarter this year and an 18% increase over 'twenty 'twenty 'twenty for Q4.
In December we distributed a 59 cents per share cash dividend to our shareholders of record for a total cash outlay of $59 million.
Turn 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.
Michael Buckley: ... Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.302 billion in Q4. On an adjusted basis, Q4 Talent Solutions revenues were down 9% year-over-year. US Talent Solutions revenues were $623 million, down 9% from the prior year's Q4. 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 eighteen other countries. In Q4, there were 61.4 billing days, compared to 61.6 billing days in the same quarter one year ago. Q1 2026 has 61.9 billing days, as did Q1 2025.
Michael Buckley: ... Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.302 billion in Q4. On an adjusted basis, Q4 Talent Solutions revenues were down 9% year-over-year. US Talent Solutions revenues were $623 million, down 9% from the prior year's Q4. 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 eighteen other countries. In Q4, there were 61.4 billing days, compared to 61.6 billing days in the same quarter one year ago. Q1 2026 has 61.9 billing days, as did Q1 2025.
On an adjusted basis fourth quarter talent solutions revenues were down 9% year over year.
U S talent solutions revenues were $623 million down 9% from the prior year's fourth quarter.
Non U S talent solutions revenues were $200 million down 8% year over year.
Conduct talent solutions operations through offices in the United States and 18 other countries.
In the fourth quarter, there were 61, four billing days compared to $61 six billing days in the same quarter one year ago.
The first quarter of 2026 has 61 nine billing days as did the first quarter of 2025.
Michael Buckley: 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 Protiviti. 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, 3.7%. Now, let's take a closer look at results for Protiviti.
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 Protiviti. 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, 3.7%. Now, let's take a closer look at results for Protiviti.
Billing days for the remaining three quarters of 2026 will be 63.1, 64.6, and 61.1 for a total of 257 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 Protiviti.
Contract talent solutions Bill rates for the fourth quarter increased three 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 three 7%.
Now, let's take a closer look at results for Protiviti.
Michael Buckley: Global revenues in Q4 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 Q4 Protiviti revenues were down 3% versus the year ago period, with US Protiviti revenues down 6%, while non-US Protiviti revenues were up 9% compared to one year ago. Protiviti 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 39.2% of applicable revenues in the current quarter, compared to 39.1% in Q4 one year ago.
Global revenues in Q4 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 Q4 Protiviti revenues were down 3% versus the year ago period, with US Protiviti revenues down 6%, while non-US Protiviti revenues were up 9% compared to one year ago. Protiviti 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 39.2% of applicable revenues in the current quarter, compared to 39.1% in Q4 one year ago.
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, Protiviti revenues were down 3% versus the year ago period.
With U S protiviti revenues down 6%, while non U S. Protiviti revenues were up 9% compared to one year ago.
Protiviti and its independently owned member firms serve clients' communications in the United States and 28 other countries.
Turning now to gross margin.
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.
Michael Buckley: Conversion or contract-to-hire revenues were 3.2% of contract revenues in both the current quarter and Q4 2024. Our permanent placement revenues were 12.5% of consolidated Talent Solutions revenues in the current quarter, compared to 12.1% in Q4 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 Q4 2024. For Protiviti, gross margin was 21.9% of Protiviti revenues in the fourth quarter and 24.9% in Q4 one year ago. Adjusted gross margin for Protiviti was 22.8% for the quarter just ended, compared to 25.1% last year.
Conversion or contract-to-hire revenues were 3.2% of contract revenues in both the current quarter and Q4 2024. Our permanent placement revenues were 12.5% of consolidated Talent Solutions revenues in the current quarter, compared to 12.1% in Q4 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 Q4 2024. For Protiviti, gross margin was 21.9% of Protiviti revenues in the fourth quarter and 24.9% in Q4 one year ago. Adjusted gross margin for Protiviti was 22.8% for the quarter just ended, compared to 25.1% last year.
Conversion or contract a higher revenues were three 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 Protiviti gross margin was 21, 9% of Protiviti revenues in the fourth quarter and 24, 9% in the fourth quarter one year ago.
Adjusted gross margin for Protiviti was 22, 8% for the quarter just ended compared to 25, 1% last year.
Michael Buckley: We ended 2025 with 11,200 full-time Protiviti 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 in the fourth quarter, versus 44.4% in the fourth quarter of 2024. Adjusted Talent Solutions SG&A costs were 45.6% for the quarter just ended, compared to 43.9% last year.
We ended 2025 with 11,200 full-time Protiviti 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 in the fourth quarter, versus 44.4% in the fourth quarter of 2024. Adjusted Talent Solutions SG&A costs were 45.6% for the quarter just ended, compared to 43.9% last year.
We ended 2025 with 11200 full time, Protiviti employees and contractors up one 5% from the prior year.
Yeah.
Enterprise selling general administrative 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.
Quarter.
Versus 44, 4% in the fourth quarter of 2024.
Adjusted talent solutions SG&A costs were down five 6% for the quarter just ended compared to 43, 9% last year.
Michael Buckley: 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 Protiviti were 15.7% of Protiviti 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, or 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 Protiviti 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.
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 Protiviti were 15.7% of Protiviti 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, or 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 Protiviti 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.
We ended 2025 with 7400 full time.
Internal employees and talent solutions.
Down three 2% from the prior year.
Fourth quarter SG&A costs for Protiviti were 15, 7% of Protiviti 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 were three 3% of revenues.
Fourth quarter adjusted operating income from our talent solutions divisions was $9 million or one 1% of revenues adjusted.
Operating income for Protiviti in the fourth quarter was $34 million or 17, 1% of revenues.
Our fourth quarter 2025 income statement, which 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 SG&A expenses indirect costs.
Michael Buckley: 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 reported net income. Our Q4 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 nondeductible expenses relative to lower pre-tax income. At the end of Q4, accounts receivable were $758 million, and implied days sales outstanding, or DSO, was 51.8 days. Before we move to Q1 guidance, let's review some of the monthly revenue trends we saw in Q4 and so far in January, all adjusted for currency and billing days.
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 reported net income. Our Q4 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 nondeductible expenses relative to lower pre-tax income. At the end of Q4, accounts receivable were $758 million, and implied days sales outstanding, or DSO, was 51.8 days. Before we move to Q1 guidance, let's review some of the monthly revenue trends we saw in Q4 and so far in January, all adjusted for currency and billing days.
As such it has no effect on our 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 pretax income.
At the end of the fourth quarter accounts receivable were $700 million and implied days sales outstanding or DSO was 51 eight 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 days.
Michael Buckley: Contract Talent Solutions exited the Q4 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 Q4 and into January. But as you know, these are very brief time periods. We caution against reading too much into them.
Contract Talent Solutions exited the Q4 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 Q4 and into January. But as you know, these are very brief time periods. We caution against reading too much into them.
Contract talent solutions exited the fourth quarter with December revenues down eight 9% versus the prior year.
Paired to a nine 9% decrease for the full court.
Revenues for the first two weeks of January were down six 6% compared to the same period last year.
Permanent placement revenues in December were down 11% versus December 2024. This compares to a five 9% decrease for the full quarter for.
For the first three weeks in January permanent placement revenues were down nine 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 that.
Michael Buckley: With that in mind, we offer the following first quarter guidance. Revenues, $1.26 to 1.36 billion. Income per share, $0.08 to $0.18. 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 1 percentage point, which is consistent with long-term historical trends. This includes Protiviti's sequential decline of 4 percentage points. Historically, Protiviti'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 focus instead on annual financial statements and related external audits.
With that in mind, we offer the following first quarter guidance. Revenues, $1.26 to 1.36 billion. Income per share, $0.08 to $0.18. 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 1 percentage point, which is consistent with long-term historical trends. This includes Protiviti's sequential decline of 4 percentage points. Historically, Protiviti'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 focus instead on annual financial statements and related external audits.
With that in mind, we offer the following first quarter guidance revenues, one $2 6 billion to $1 $3 6 billion.
Income per share eight to 18.
Midpoint revenues of 131 billion or 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 mid point adjusted operating margin guidance declined sequentially by one percentage point.
Which is consistent with long term historical trends.
This includes productivity sequential decline of four percentage points.
Historically Protiviti is Q1 segment margins seasonally seasonally declined by mid single digit percentage points on a sequential basis.
Our two primary drivers.
Turn a lot of revenues are negatively impacted as clients focused instead on annual financial statements and related external audits.
Michael Buckley: In addition, Protiviti employees receive annual compensation adjustments effective January 1, which are recovered through pricing adjustments realized as client contracts are negotiated. Segment margins then improve accordingly. We estimate our midpoint tax rate for Q1 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 nondeductible tax items when measured against seasonally low Q1 pre-tax income. A majority of our employees' stock compensation awards vest in Q1 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, a tax charge estimated at $4.5 million, or $0.05 per share, results.
In addition, Protiviti employees receive annual compensation adjustments effective January 1, which are recovered through pricing adjustments realized as client contracts are negotiated. Segment margins then improve accordingly. We estimate our midpoint tax rate for Q1 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 nondeductible tax items when measured against seasonally low Q1 pre-tax income. A majority of our employees' stock compensation awards vest in Q1 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, a tax charge estimated at $4.5 million, or $0.05 per share, results.
In addition, protiviti employees receive annual compensation adjustments effective January one.
Which are recovered through pricing adjustments realized.
As client contracts are negotiated segment margins then improve accordingly.
We estimate our mid point tax rate for the first quarter to be 56% to 58%.
This is much higher than normal for two reasons.
As expected tax.
As expected tax charge related to stock compensation.
The magnified impact of non deductible tax items when measured against seasonally low Q1 pretax income.
A majority of our employee 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.
<unk> charge estimated at $4 5 million or five or <unk> <unk> per share results for.
Michael Buckley: 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 Solutions, down 4% to 8%. Protiviti, flat to down 4%. Overall, down 3% to 6%. Adjusted gross margin percentages for Contract Talent, 38% to 40%. Protiviti, 18% to 21%. Overall, 35% to 38%. Adjusted SG&A as a percentage of revenues for Talent Solutions, 44% to 46%. For Protiviti, 15% to 17%. Overall, 33% to 36%. Adjusted operating income as a percentage of revenues for Talent Solutions, 0% to 3%. Protiviti, 2% to 5%. Overall, 1% to 3%. Tax rate, 56% to 58%. Shares, 99 to 100 million.
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 Solutions, down 4% to 8%. Protiviti, flat to down 4%. Overall, down 3% to 6%. Adjusted gross margin percentages for Contract Talent, 38% to 40%. Protiviti, 18% to 21%. Overall, 35% to 38%. Adjusted SG&A as a percentage of revenues for Talent Solutions, 44% to 46%. For Protiviti, 15% to 17%.
For the remainder of 2026, a quarterly tax rate of 33% to 35% as expected.
The major financial assumptions underlying the midpoint of these estimates are as follows.
Adjusted revenue growth year over year.
For talent solutions down 4% to 8%.
Protiviti flat to down 4%.
Overall down 3% to 6%.
Adjusted gross margin percentages for contract talent, 38% to 40%.
Protiviti, 18% to 21%.
Overall 35, 38%.
Adjusted SG&A as a percentage of revenues for talent solutions, 44% to 46%.
For Protiviti, 15% to 17%.
Overall, 33% to 36%. Adjusted operating income as a percentage of revenues for Talent Solutions, 0% to 3%. Protiviti, 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 Q1. All estimates we provide on this call are subject to the risks mentioned in today's press release, and in our SEC filing. Now, I'll turn the call back over to Keith.
Overall, 33% to 36%.
Adjusted operating income as a percentage of revenues for talent solutions zero to 3% <unk>.
Protiviti, 2% to 5% overall, 1% to 3%.
Tax rate, 56% to 58% shares $99 million to $100 million.
2026 capital expenditures and capitalized cloud computing costs $70 million to $90 million with $10 million to $20 million in the first quarter.
Michael Buckley: 2026 capital expenditures and capitalized cloud computing costs, $70 to 90 million, with $10 to 20 million in Q1. All estimates we provide on this call are subject to the risks mentioned in today's press release, and in our SEC filing. Now, I'll turn the call back over to Keith.
All estimates we provide on this call are subject to the risks mentioned into the east in today's press release and in our SEC.
Now I will turn the call back over to Keith.
Keith Waddell: Thank you, Mike. Our Q4 results reflect a return to sequential growth on a same-day, constant currency basis for the first time since early 2022. Concerns around a near-term economic downturn have moderated, supported by a more conducive macro environment. Continued progress in the rate cutting cycle, easing inflation, less regulation, and relatively more clarity on trade policy all contribute.... The NFIB Small Business Optimism Index has continued to trend higher, with hiring plans holding steady and labor availability remaining a key constraint. At the same time, the Uncertainty Index declined meaningfully last month, falling to its lowest level since June of 2024. Although hiring and quit rates remain subdued, job openings continued to run well above historical averages, underscoring significant pent-up demand for skilled professionals.
Keith Waddell: Thank you, Mike. Our Q4 results reflect a return to sequential growth on a same-day, constant currency basis for the first time since early 2022. Concerns around a near-term economic downturn have moderated, supported by a more conducive macro environment. Continued progress in the rate cutting cycle, easing inflation, less regulation, and relatively more clarity on trade policy all contribute.... The NFIB Small Business Optimism Index has continued to trend higher, with hiring plans holding steady and labor availability remaining a key constraint. At the same time, the Uncertainty Index declined meaningfully last month, falling to its lowest level since June of 2024. Although hiring and quit rates remain subdued, job openings continued to run well above historical averages, underscoring significant pent-up demand for skilled professionals.
Mike.
Our fourth quarter results reflect a return to sequential growth on a same day constant currency basis for the first time since early 2022.
Concerns around a near term economic downturn have moderated supported by a more conducive macro environment continued progress in a rate cutting cycle easing inflation less regulation and relatively more clarity on trade policy all contribute.
The NFIB small business optimism index has continued to trend higher with hiring plans holding steady and labor availability remaining a key constraint at the same time. He uncertainty index declined meaningfully last month falling to its lowest level.
<unk> since June of 2024.
Although hiring and quit rates remained subdued job openings continue to wrong, well above historical averages underscoring significant pent up demand for skilled professionals decision.
Keith Waddell: Decision timelines are beginning to shorten, and we're seeing increased client engagement as clients revisit postponed initiatives and discuss hiring tied to business critical, critical but priorities. Internal resource levels at small businesses remain particularly lean, as these companies have focused on cost containment for much of the last four years. Employment data from the ADP National Employment Report indicates that between January 2022 and December 2025, companies with fewer than 500 employees have grown their employee counts by only 1.1% annually, while below the 2.8% annual growth rate seen among companies with over 500 employees. As project activity begins to pick up, this places additional strain on already limited internal capacity.
Decision timelines are beginning to shorten, and we're seeing increased client engagement as clients revisit postponed initiatives and discuss hiring tied to business critical, critical but priorities. Internal resource levels at small businesses remain particularly lean, as these companies have focused on cost containment for much of the last four years. Employment data from the ADP National Employment Report indicates that between January 2022 and December 2025, companies with fewer than 500 employees have grown their employee counts by only 1.1% annually, while below the 2.8% annual growth rate seen among companies with over 500 employees. As project activity begins to pick up, this places additional strain on already limited internal capacity.
Decision timelines are beginning to shorten and we're seeing increased client engagement as clients revisit postponed initiatives and discussed hiring tied to business critical critical priorities.
Internal resource levels at small businesses remain particularly lean as these companies have focused on cost containment for much of the last four years.
<unk> data from the ADP National Employment report indicates that between January of 'twenty. Two in December of 2025 companies with fewer than 500 employees have grown very employee counts by only one 1% annually while below the two 8%.
Annual growth rate seen among companies with over 500 employees.
As project activity begins to pick up this places additional strain on already limited internal capacity.
Keith Waddell: Against this backdrop, unemployment remaining low and skilled talent in short supply, clients increasingly require specialized expertise to help fill open roles and execute critical work, supporting demand for both our Talent Solutions and consulting services. While perspectives on medium- to long-term structural impact of AI on the labor market vary greatly, most of the evidence suggests a negligible impact so far on our areas of employment, particularly among small businesses. For example, a very recent study by Oxford Economics concludes that, quote, "Firms don't appear to be replacing workers with AI on a significant scale, and we doubt that unemployment rates will be pushed up heavily by AI over the next few years," end quote. Also, feedback from our SMB clients indicates that potential future labor savings from AI are not a material factor in their current headcount decisions.
Against this backdrop, unemployment remaining low and skilled talent in short supply, clients increasingly require specialized expertise to help fill open roles and execute critical work, supporting demand for both our Talent Solutions and consulting services. While perspectives on medium- to long-term structural impact of AI on the labor market vary greatly, most of the evidence suggests a negligible impact so far on our areas of employment, particularly among small businesses. For example, a very recent study by Oxford Economics concludes that, quote, "Firms don't appear to be replacing workers with AI on a significant scale, and we doubt that unemployment rates will be pushed up heavily by AI over the next few years," end quote. Also, feedback from our SMB clients indicates that potential future labor savings from AI are not a material factor in their current headcount decisions.
This backdrop unemployment remaining low and scale talent and short supply clients increasingly require specialized expertise to help fill open roles and execute critical work supporting demand for both our talent solutions and consulting services.
While perspectives on medium to long term structural impact of AI on the labor market vary greatly.
Most 70 evidence suggest.
<unk> impact so far on our areas of employment, particularly among small businesses. For example, a very recent study by Oxford Economics concludes that quote firms don't appear to be replacing workers with AI on a significant scale and we doubt that unemployment rates will.
Be pushed up heavily by AI over the next few years and quote.
Also feedback from our SMB clients indicates that potential future labor savings from AI are not a material factor and their current head count decisions that said, it's AI reshaped how work gets done and the skills required for many roles evolve client.
Keith Waddell: That said, as AI reshapes how work gets done and the skills required for many roles evolve, clients are increasingly relying on us to help them navigate change, deploy talent quickly, and support the implementation of new technologies, including the requisite data requirements. At the same time, the fast-growing use of generative AI by job seekers, particularly to tailor their resumes to client opportunities, has made it more difficult for clients to distinguish among candidates and authenticate their qualifications. This further reinforces the value of our services, including our proprietary data on actual candidate performance. As expected, Protiviti's year-over-year growth rate showed improvement in the quarter, although it continued to be impacted by tougher prior comparables from large project builds and by longer sales cycles and smaller-sized new engagements.
That said, as AI reshapes how work gets done and the skills required for many roles evolve, clients are increasingly relying on us to help them navigate change, deploy talent quickly, and support the implementation of new technologies, including the requisite data requirements. At the same time, the fast-growing use of generative AI by job seekers, particularly to tailor their resumes to client opportunities, has made it more difficult for clients to distinguish among candidates and authenticate their qualifications. This further reinforces the value of our services, including our proprietary data on actual candidate performance. As expected, Protiviti's year-over-year growth rate showed improvement in the quarter, although it continued to be impacted by tougher prior comparables from large project builds and by longer sales cycles and smaller-sized new engagements.
Are increasingly relying on us to help them navigate change deploy talent quickly and support the implementation of new technologies, including the requisite data requirements at.
At the same time.
The fast growing use of generative AI by job seekers, particularly to tailor their resumes to client opportunities has made it more difficult for clients to distinguish them on candidates and authenticate their qualifications.
Further reinforces the value of our services, including our proprietary data on actual Canada performance.
As expected the activities year over year growth rate showed improvement in the quarter. Although it continued to be impacted by tougher prior year Comparables from large project builds.
And by longer sales cycles, and smaller sized new engagements <unk> pipeline remains strong across all its major solution areas and at the midpoint of our Q1 revenue guidance. It's growth rates are expected to continue to improve.
Keith Waddell: Protiviti's pipeline remains strong across all its major solution areas, and at the midpoint of our Q1 revenue guidance, its growth rates are expected to continue to improve. Our strategic engagement of contract professionals via our Talent Solutions divisions plays an essential role in Protiviti's success and further amplifies our unique enterprise-wide competitive advantage. Protiviti was recently recognized on Glassdoor's Best Places to Work for a third consecutive year. We began 2026 energized by our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to confidently compete and grow. We've weathered many economic cycles in the past, each time emerging to achieve higher peaks. Aging workforce demographics and clients' desire for flexible resources with variable costs are structural tailwinds that are expected to propel us forward in the years to come.
Protiviti's pipeline remains strong across all its major solution areas, and at the midpoint of our Q1 revenue guidance, its growth rates are expected to continue to improve. Our strategic engagement of contract professionals via our Talent Solutions divisions plays an essential role in Protiviti's success and further amplifies our unique enterprise-wide competitive advantage. Protiviti was recently recognized on Glassdoor's Best Places to Work for a third consecutive year. We began 2026 energized by our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to confidently compete and grow. We've weathered many economic cycles in the past, each time emerging to achieve higher peaks. Aging workforce demographics and clients' desire for flexible resources with variable costs are structural tailwinds that are expected to propel us forward in the years to come.
Our strategic engagement of contract professionals via our talent solutions divisions plays an essential role in Protiviti success, and further amplifies our unique enterprise wide competitive advantage for.
<unk> was recently recognized on glass doors best places to work for a third consecutive year.
We began 2026 <unk> by our time tested corporate purpose to connect people to meaningful and exciting or can provide clients with a talent and consulting expertise they need to constantly compete and grow.
Weathered many economic cycles in the past each time emerging to achieve higher peaks.
<unk> workforce demographics, and clients' desire for flexible resources with variable costs are structural tailwind that are expected to propel us forward in the years to come.
Finally, we'd like to thank our global workforce for their continued dedication and their efforts once again, Robert half recognition by fortune as one of the world's most admired companies for the 29th consecutive year.
Keith Waddell: Finally, we'd like to thank our global workforce for their continued dedication. Their efforts once again earned Robert Half recognition by Fortune as one of the world's most admired companies for the 29th consecutive year. We're proud of our unique position as the only company in our industry to be awarded this distinction for nearly three decades. We were also recognized as one of Forbes' world's top companies for women, and chosen by Newsweek as one of America's most responsible companies. Now, Mike and I'd be happy to answer your questions. Please just ask one question, a single follow-up as needed, and if there's time, we'll come back to you for additional questions.
Finally, we'd like to thank our global workforce for their continued dedication. Their efforts once again earned Robert Half recognition by Fortune as one of the world's most admired companies for the 29th consecutive year. We're proud of our unique position as the only company in our industry to be awarded this distinction for nearly three decades. We were also recognized as one of Forbes' world's top companies for women, and chosen by Newsweek as one of America's most responsible companies. Now, Mike and I'd be happy to answer your questions. Please just ask one question, a single follow-up as needed, and if there's time, we'll come back to you for additional questions.
Proud of our unique position as the only company in our industry to be awarded this distinction for nearly three decades. We were also recognized as one of forbes' world's top companies for women and chosen by Newsweek as one of America's most responsible companies.
Mike and I'd be happy to answer your questions. Please just ask one question and a single follow up as needed.
Tom will come back to you for additional questions.
Thank you.
Operator: Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you would like to withdraw your question, please press star two on your touchtone telephone. Again, that is star one if you would like to signal with questions. Your first question will come from Andrew Steinerman with J.P. Morgan.... Again, Andrew Steinerman, your line is open. Please go ahead with your question. Okay, hearing no response from that line, we'll take our next question from Mark Marcon with Baird.
Operator: Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you would like to withdraw your question, please press star two on your touchtone telephone. Again, that is star one if you would like to signal with questions. Your first question will come from Andrew Steinerman with J.P. Morgan.... Again, Andrew Steinerman, your line is open. Please go ahead with your question. Okay, hearing no response from that line, we'll take our next question from Mark Marcon with Baird.
We'd like to signal with questions. Please press star one on your Touchtone telephone if you join us today using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
I would like to withdraw your question. Please press star two on your Touchtone telephone.
Again, Thats Star one if you would like to signal with questions. Your first question will come from Andrew Steinman with J P. Morgan.
Okay.
Yeah.
Yes.
Again, Andrew Steinman. Your line is open. Please go ahead with your question.
Hearing no response from that line, we will take our next question from Mark Mark Hahn with Baird.
Hey, good afternoon.
Mark Marcon: Hey, good afternoon. Keith and Mike, you know, it looks like, you know, first of all, it's good to see that you're returning to sequential growth here. And, you know, when we take a look at the guide as it relates to, you know, 2026, we're still looking at a year-over-year decline, but you're expecting margins on the whole to improve, primarily because of Protiviti. And so what I'm wondering about is, it's great to see the projection for the margins to improve. I'm wondering how you're thinking about, you know, the top line potentially inflecting in a, you know, kind of a modest economic environment. Obviously, there's still a lot of discussion with regards to, you know, the impact of AI, and a lot of it's unknown, and a lot of it is changing rapidly.
Mark Marcon: Hey, good afternoon. Keith and Mike, you know, it looks like, you know, first of all, it's good to see that you're returning to sequential growth here. And, you know, when we take a look at the guide as it relates to, you know, 2026, we're still looking at a year-over-year decline, but you're expecting margins on the whole to improve, primarily because of Protiviti. And so what I'm wondering about is, it's great to see the projection for the margins to improve. I'm wondering how you're thinking about, you know, the top line potentially inflecting in a, you know, kind of a modest economic environment. Obviously, there's still a lot of discussion with regards to, you know, the impact of AI, and a lot of it's unknown, and a lot of it is changing rapidly.
Yeah.
Steve and Mike.
Looks like.
First of all it's good to see that you're returning to sequential.
Growth here.
When we take a look at the guide as it relates to two.
2026, we're still looking at a year over year decline, but youre expecting margins on the whole to improve primarily because of productivity and so what I'm wondering about is it's great to see the projections for the margins to improve.
Im wondering how youre thinking about that.
Top line potentially inflect in.
Kind of a modest economic.
Environment, obviously, there is still a lot of discussion with regards to the impact of a lot of it's unknown. If a lot of it is changing rapidly film wondering.
Mark Marcon: So I'm wondering, you know, how are you thinking about the top line from a longer-term perspective? And, and also, you know, if we end up having just a very moderate sort of improvement in terms of the top line, what are some of the steps that you've taken to increase the efficiency of the operations, which it seems like we're seeing in, in the first quarter? But just when we think about it from a longer-term perspective, in order to be able to get back to, you know, halfway back, and then ultimately all the way back to, you know, prior margins.
So I'm wondering, you know, how are you thinking about the top line from a longer-term perspective? And, and also, you know, if we end up having just a very moderate sort of improvement in terms of the top line, what are some of the steps that you've taken to increase the efficiency of the operations, which it seems like we're seeing in, in the first quarter? But just when we think about it from a longer-term perspective, in order to be able to get back to, you know, halfway back, and then ultimately all the way back to, you know, prior margins.
How are you thinking about the topline from a longer term perspective.
And also.
We ended up having just a very moderate sort of improvement in terms of the top line. What are some of the steps that you've taken to increase the efficiency of the operations, which it seems like we're seeing in the first quarter, but this when we think about it from a longer term perspective.
In order to be able to get back to halfway back and then ultimately all the way back to.
Prior margins.
And so mark on the top line. So if you take our current trend line from a sequential revenue point of view.
Keith Waddell: And so, Mark, on the top line, so if you take our current trend line from a sequential revenue point of view, we would return to positive year-over-year growth in Q3, and that would be both Talent Solutions, Protiviti, and Enterprise. As to steps for efficiency, I'd say, as you know, we've held on to our best producers throughout this downturn, and we would expect that they would ramp more quickly than what we'd otherwise ramp, and there's some positive leverage from that. We continue to get traction from our own use of AI, both in terms of how we match and in terms of rank ordering the prospects that we pursue as we try to capture that additional revenue, as it becomes available.
Keith Waddell: And so, Mark, on the top line, so if you take our current trend line from a sequential revenue point of view, we would return to positive year-over-year growth in Q3, and that would be both Talent Solutions, Protiviti, and Enterprise. As to steps for efficiency, I'd say, as you know, we've held on to our best producers throughout this downturn, and we would expect that they would ramp more quickly than what we'd otherwise ramp, and there's some positive leverage from that. We continue to get traction from our own use of AI, both in terms of how we match and in terms of rank ordering the prospects that we pursue as we try to capture that additional revenue, as it becomes available. And so we've said for some time, we certainly expect we can retrace, in a positive way, the negative leverage we've had to deal with over the last 4 years.
We would return to positive year over year growth in the third quarter and that would be both talent solutions Protiviti and enterprise.
As two steps for efficiency.
Jay.
As you know we've held onto our best producers throughout this downturn.
And we would expect that they would ramp more quickly than what we had otherwise ramp and there are some positive leverage from that.
We get continue to get traction from our own use of AI. Both in terms of how we match and in terms of.
Rank ordering the prospects that we pursue as we tried to capture that additional revenue as it becomes available and so we've said for some time, we certainly expect we can reach race in a positive way the negative leverage we've had to deal with over the last.
Keith Waddell: And so we've said for some time, we certainly expect we can retrace, in a positive way, the negative leverage we've had to deal with over the last 4 years.
Four years.
That's great and then within.
Mark Marcon: That's great. And then within Talent Solutions, just how are you thinking about the perm market? Just given, you know, relatively flat, you know, no hire, no fire, kind of an environment thus far. Do you think that that ends up being some sort of change, and what sort of impact as we start getting to peak 65 could we end up seeing?
Mark Marcon: That's great. And then within Talent Solutions, just how are you thinking about the perm market? Just given, you know, relatively flat, you know, no hire, no fire, kind of an environment thus far. Do you think that that ends up being some sort of change, and what sort of impact as we start getting to peak 65 could we end up seeing?
Within talent solutions, just how are you thinking about the perm market just given.
Given.
Relatively flat.
<unk>.
No higher no fire kind of an environment. Thus far do you think that that ends up.
Being some sort of change in what sort of what sort of impact as we start getting to peak 65 could we end up seeing.
Yeah, I'd say that.
Keith Waddell: Yeah, I'd, I'd say that perm is stronger than the headlines would lead you to believe. As we talked last quarter, we have just as much difficulty getting candidates to change jobs as we do getting clients having demand for additional roles and positions. And so given that the market remains tight, given that candidates remain conservative in their willingness to entertain new roles, I'd say the perm outlook is solid. And again, I understand the no hire, no fire overall environment, but our SMB clients are in a different place. As we talked about, they've added significantly fewer people the last four years. They've been in cost mode for quite some time.
Keith Waddell: Yeah, I'd, I'd say that perm is stronger than the headlines would lead you to believe. As we talked last quarter, we have just as much difficulty getting candidates to change jobs as we do getting clients having demand for additional roles and positions. And so given that the market remains tight, given that candidates remain conservative in their willingness to entertain new roles, I'd say the perm outlook is solid. And again, I understand the no hire, no fire overall environment, but our SMB clients are in a different place. As we talked about, they've added significantly fewer people the last four years. They've been in cost mode for quite some time.They've largely normalized their headcounts for that over that extended period of time, and they're left very lean, not only from a full-time standpoint, but contractors as well. I would just say SMB is in a very different place.
Perm is stronger than.
The headlines would lead you to believe as we talked last quarter.
We have just as much difficulty getting candidates to change jobs.
As we do getting clients.
Having demand for additional roles and positions and so given that the market remains tight given that candidates remain conservative in there.
Or willingness to entertain new roles I'd say, the Perm outlook is solid and again I understand the no higher no fire overall environment, but our SMB clients are in a different place as we talked about they've added significantly to our people.
Last four years, they've been in cost mode for quite some time.
Keith Waddell: They've largely normalized their headcounts for that over that extended period of time, and they're left very lean, not only from a full-time standpoint, but contractors as well. I would just say SMB is in a very different place.
They have largely normalized their head counts for that over that extended period of time and there are left very lean not only from a full time standpoint, but point contractors as well.
Just say smbs at a very different place.
That's great. Thank you.
Mark Marcon: That's great. Thank you.
Mark Marcon: That's great. Thank you.
And the next question will come from Andrew Steinman with J P. Morgan.
Operator: The next question will come from Andrew Steinerman with J.P. Morgan.
Operator: The next question will come from Andrew Steinerman with J.P. Morgan.
Hi, Keith its Andrew I wanted to ask you about what I've been hearing really kind of industry staffing industry executives talking about the current labor Sharon a question of AI driving more interest in flexible workers.
Andrew Steinerman: Hi, Keith, it's Andrew. I wanted to ask you, about what I've been hearing with really kind of industry, staffing industry executives talking about the current labor uncertainty because of AI driving more interest in flexible workers, as the, you know, labor recovery takes hold. What do you think of this thesis, and have you seen any evidence that flex might kind of gain share even in a moderate labor hiring environment?
Andrew Steinerman: Hi, Keith, it's Andrew. I wanted to ask you, about what I've been hearing with really kind of industry, staffing industry executives talking about the current labor uncertainty because of AI driving more interest in flexible workers, as the, you know, labor recovery takes hold. What do you think of this thesis, and have you seen any evidence that flex might kind of gain share even in a moderate labor hiring environment?
As the labor recovery takes hold.
What do you think of the thesis and have you seen any evidence that flex my kind of gain share even in a moderate labor hiring environment.
Well I think anytime.
Keith Waddell: Well, I think anytime uncertainty declines, clients are more willing to add resources, that early on, they're conservative of adding those resources full time and are more receptive to contract help. I think in addition, now we've got this uncertainty around, well, if I hire full-time now, I might need to adjust that later because of AI is gonna make everyone more productive. I think it certainly adds to that potential, but as I said in my prepared remarks earlier, we're not seeing a lot of current demand on the full-time side by clients saying they're holding off on their own internal hiring because of AI. I think they're basically saying, particularly SMB, again, that they're not being impacted by for the potential of what AI might become.
Keith Waddell: Well, I think anytime uncertainty declines, clients are more willing to add resources, that early on, they're conservative of adding those resources full time and are more receptive to contract help. I think in addition, now we've got this uncertainty around, well, if I hire full-time now, I might need to adjust that later because of AI is gonna make everyone more productive. I think it certainly adds to that potential, but as I said in my prepared remarks earlier, we're not seeing a lot of current demand on the full-time side by clients saying they're holding off on their own internal hiring because of AI. I think they're basically saying, particularly SMB, again, that they're not being impacted by for the potential of what AI might become.
Uncertainty declines clients are more willing to add resources.
That early on they're conservative of adding those resources full time and our.
More receptive contract Hill I think in addition, now we've got this uncertainty around well if I hire full time now.
I might need to adjust that later because of AI.
<unk> is going to make everyone more productive I think it certainly adds to that potential.
<unk>.
As I said in my prepared remarks earlier, we're not seeing a lot of current demand on the full time side by clients, saying, they're they're holding off on their own internal hiring because of AI I think they are basically saying, particularly SMB again.
That they're not being impacted.
The potential of what AI might become.
And the next question will come from Trevor Romeo with William Blair.
Operator: The next question will come from Trevor Romeo with William Blair.
Operator: The next question will come from Trevor Romeo with William Blair.
Hey, good afternoon. Thank you very much for taking the questions I had one on productivity I think you disclosed the head count numbers talked about I think one 5% growth for protiviti, including contractors last year, while revenue I think it was flat. So I think some rough math their productivity is revenue per head.
Trevor Romeo: Good afternoon. Thank you very much for taking the questions. I had one on Protiviti. I think you disclosed the headcount numbers, talked about a 1.5% growth for Protiviti, including contractors last year, while revenue, I think, was flat. So I think some rough math there, Protiviti's revenue per head, you know, well below what it was several years ago. So at this point, you know, what are your headcount growth plans for 2026 there for Protiviti? And how much revenue upside do you think you could capture in that segment without adding meaningful headcount from where you are now?
Trevor Romeo: Good afternoon. Thank you very much for taking the questions. I had one on Protiviti. I think you disclosed the headcount numbers, talked about a 1.5% growth for Protiviti, including contractors last year, while revenue, I think, was flat. So I think some rough math there, Protiviti's revenue per head, you know, well below what it was several years ago. So at this point, you know, what are your headcount growth plans for 2026 there for Protiviti? And how much revenue upside do you think you could capture in that segment without adding meaningful headcount from where you are now?
Well below what it was several years ago. So at this point.
What are your head count growth plans for 2026, there for productivity and how much revenue upside do you think you could capture in that segment without adding meaningful head count from where you are now.
Well the other dining.
Keith Waddell: Well, the other dynamic in Protiviti's headcount is their use of contractors, which flexes with their revenue and their revenue expectations. And so clearly, their full-time staff is underutilized relative to what it could and arguably should be. Further, as we've talked about before, some of their full-time staff is underutilized, in that they've been reassigned to roles typically performed by contractors at much lower rates. And so there's hidden capacity, if you will, there, as that converts to what they're typically working on. And so I'd say there's full-time capacity. There's also contractor capacity relative to what it's been in the past. So I don't think Protiviti is concerned about having the resources to scale up quickly and appropriately as the revenues support.
Keith Waddell: Well, the other dynamic in Protiviti's headcount is their use of contractors, which flexes with their revenue and their revenue expectations. And so clearly, their full-time staff is underutilized relative to what it could and arguably should be. Further, as we've talked about before, some of their full-time staff is underutilized, in that they've been reassigned to roles typically performed by contractors at much lower rates. And so there's hidden capacity, if you will, there, as that converts to what they're typically working on. And so I'd say there's full-time capacity. There's also contractor capacity relative to what it's been in the past. So I don't think Protiviti is concerned about having the resources to scale up quickly and appropriately as the revenues support.
<unk> can protiviti is head count is that our use of contractors, which.
Flexes with their revenue and their revenue expectations and so clearly they are full time staff is underutilized relative to what it could arguably should be.
Further as we've talked about before some of their full time staff is underutilized in that they've been reassigned to roles typically performed by contractors at much lower rates and so there's there's hidden capacity. If you will there is that converts to what theyre typically working on and so I would say.
There is a full time capacity Theres also contractor capacity relative to what it's been in the past so I don't think protiviti.
As concerned about having the resources to scale up quickly and appropriately as the revenue support.
Okay. Thank you helpful. Helpful. There and then just sort of a I guess a modeling question last quarter. I think you were kind enough to call out the typical seasonal trends for two quarters ahead. I was wondering if you might be able to do that again for Q2, what you've kind of historically seen for revenue and earnings just so we're all.
Trevor Romeo: Okay. Thank you. Helpful, helpful there. And then just sort of a, I guess, a modeling question. You know, last quarter, I think you were kind enough to call out the typical seasonal trends for two quarters ahead. I was wondering if you might be able to do that again for Q2, what you've kind of historically seen for revenue and earnings, just so we're, we're all on the same page heading into next quarter.
Trevor Romeo: Okay. Thank you. Helpful, helpful there. And then just sort of a, I guess, a modeling question. You know, last quarter, I think you were kind enough to call out the typical seasonal trends for two quarters ahead. I was wondering if you might be able to do that again for Q2, what you've kind of historically seen for revenue and earnings, just so we're, we're all on the same page heading into next quarter.
On the same page heading into next quarter.
Keith Waddell: Well, there's certainly nothing near as dramatic as is the case for the first quarter because of Protiviti's seasonal impacts. But typically, in the second quarter, on the contract side, it's modestly down on a same-day basis. For full time, it's typically up seasonally, relative to the first quarter. Protiviti, they began to recover from their seasonal low Q1, and overall, we certainly have more profitability in Q2 than we do Q1, but the seasonal impacts are nowhere near in Q2 what they are in Q1.
Keith Waddell: Well, there's certainly nothing near as dramatic as is the case for the first quarter because of Protiviti's seasonal impacts. But typically, in the second quarter, on the contract side, it's modestly down on a same-day basis. For full time, it's typically up seasonally, relative to the first quarter. Protiviti, they began to recover from their seasonal low Q1, and overall, we certainly have more profitability in Q2 than we do Q1, but the seasonal impacts are nowhere near in Q2 what they are in Q1.
While there is certainly nothing near as dramatic as is the case for the first quarter because of Protiviti seasonal impacts, but typically in the second quarter on the contract side.
<unk> modestly down on a same day basis.
For full time, it's typically up seasonally.
Relative to the first quarter.
Protiviti they.
They began to recover from their seasonal low Q1.
And.
Overall, we certainly have more profitability in Q2 than we do Q1, but the seasonal impacts are nowhere near in Q2, what they are in Q1.
Okay. That's helpful. Thank you.
Trevor Romeo: Okay, that is helpful. Thank you.
Trevor Romeo: Okay, that is helpful. Thank you.
And by the way the tax rate that's been jumping all over the place as we talked about it normalizes back to 33, 34% in Q2 and beyond versus the much higher number that was the case in Q1.
Keith Waddell: And by the way, the tax rate that's been jumping all over the place, as we talked about, it normalizes back to 33, 34% in Q2 and beyond versus the much higher number that was the case in Q1.
Keith Waddell: And by the way, the tax rate that's been jumping all over the place, as we talked about, it normalizes back to 33, 34% in Q2 and beyond versus the much higher number that was the case in Q1.
And the next question will come.
Operator: The next question will come from Manav Patnaik with Barclays.
Operator: The next question will come from Manav Patnaik with Barclays.
And the next question will come from Manav Patnaik with Barclays.
Hi, Good afternoon. This is roni <unk> Kennedy on for them at all and thank you for taking my question Keith you talked.
John Ronan Kennedy: Hi, good afternoon. This is Ronan Kennedy on for Manav. Thank you for taking my question. Keith, you talked in your response to Mark's question on the first positive same-day CC sequential growth, that if the momentum or if the trend sequentially continues, you would see positive growth in the third quarter. Could we just get a sense of your optimism on that, and what you would need to see in the February, March weekly trends to confirm it will be a potential multi-quarter recovery? You know, if it's anything beyond weekly revenue, such as time to fill, the rec, conversion, pipeline, anything else? And then you also referenced some external leading indicators. What can you place trust in at this stage, whether it's ADP, NFIB, JOLTS, ASA, SIA? Curious, you know, as to your thoughts there and your overall optimism.
Ronan Kennedy: Hi, good afternoon. This is Ronan Kennedy on for Manav. Thank you for taking my question. Keith, you talked in your response to Mark's question on the first positive same-day CC sequential growth, that if the momentum or if the trend sequentially continues, you would see positive growth in the third quarter. Could we just get a sense of your optimism on that, and what you would need to see in the February, March weekly trends to confirm it will be a potential multi-quarter recovery? You know, if it's anything beyond weekly revenue, such as time to fill, the rec, conversion, pipeline, anything else? And then you also referenced some external leading indicators. What can you place trust in at this stage, whether it's ADP, NFIB, JOLTS, ASA, SIA? Curious, you know, as to your thoughts there and your overall optimism.
In your response to Mark's question on the first positive same day <unk> sequential growth that its momentum.
The trend sequentially continues you would see positive growth in the third quarter can we just get a sense of your optimism on that.
And what you would need to see in the February March weekly trends to confirm it will be a potential multi quarter recovery.
It's anything beyond weekly revenues, such as time to fill the rack conversion.
Pipeline anything else and then.
You also referenced some external leading indicators what can you place trust in at this stage, whether it's ADP NFIB Joel J S. A S AI.
Curious as to your thoughts there and your overall optimism.
Well I'd say, our overall optimism is a reflection of.
Keith Waddell: Well, I'd say our overall optimism is a reflection of, A, discussions with clients, B, weekly results. I'm very happy to report that as of this morning, and we get weekly results every Thursday, but as of this morning, they were very encouraging and better than they had been, been even for the first three weeks, which were good themselves. And so we sit here feeling very good about very short-term trends. As to external indicators and sources, there's no magic bullet there. We look at everything. We look at ASA, we look at SIA, we look at NFIB, we look at PMIs. I mean, we look at everything, but nothing has a high correlation factor in and of itself. But altogether, I mean, it certainly tells a trend story, and generally speaking, the entire staffing industry is trending upward.
Keith Waddell: Well, I'd say our overall optimism is a reflection of, A, discussions with clients, B, weekly results. I'm very happy to report that as of this morning, and we get weekly results every Thursday, but as of this morning, they were very encouraging and better than they had been, been even for the first three weeks, which were good themselves. And so we sit here feeling very good about very short-term trends. As to external indicators and sources, there's no magic bullet there. We look at everything. We look at ASA, we look at SIA, we look at NFIB, we look at PMIs. I mean, we look at everything, but nothing has a high correlation factor in and of itself. But altogether, I mean, it certainly tells a trend story, and generally speaking, the entire staffing industry is trending upward.
A discussions with clients be weekly results.
I'm very happy to report that as of this morning, and we get weekly results every Thursday, but as of this morning, they were very encouraging and better than they had been they've been even for the first three weeks, which were good themselves and so we sit here feeling very good.
What about very short term trends.
As to external indicators and sources there is no magic bullet there we look at everything we look at as we look at S. I E.
When you look at NFIB, we looked at <unk> P. M is I mean, when you look at everything but nothing has a high correlation factor in and of itself, but all together. It certainly tells a trend story and generally speaking the entire staffing industry.
He is trending upward.
Keith Waddell: Most are close to, if not at, positive year-over-year revenue growth. And I would say the differential there with us is most of them are larger, mid- and large-cap enterprise serving staffing firms. We're mostly SMB. Enterprise typically leads SMB, even ourselves. We're 70% SMB, 30% midcap. That midcap is doing better than SMB as we speak, so it's not a surprise that we're lagging a little. But like I said earlier, at current trends, which we're feeling even better about, as of today, at those current trends, we'd be positive year-over-year, Q3. That's a great thing.
Most are close to, if not at, positive year-over-year revenue growth. And I would say the differential there with us is most of them are larger, mid- and large-cap enterprise serving staffing firms. We're mostly SMB. Enterprise typically leads SMB, even ourselves. We're 70% SMB, 30% midcap. That midcap is doing better than SMB as we speak, so it's not a surprise that we're lagging a little. But like I said earlier, at current trends, which we're feeling even better about, as of today, at those current trends, we'd be positive year-over-year, Q3. That's a great thing.
Most are close to if not at a positive year on year revenue growth and I would say the differential there with us as most of them are larger mid and large cap enterprise.
Serving staffing firms were mostly SMB enterprise typically leads SMB, even ourselves where 70% SMB, 30% mid cap that mid cap is doing better than SMB as we speak so it's not a surprise that we're lagging a little but like I said earlier.
Current trends, which we're feeling even better about as of today.
Yes, those current trends, we'd be positive year on year third quarter.
Great thing.
Understood. Thank you I appreciate it and math for your current assessment of capital allocation and sustainability of the dividend.
John Ronan Kennedy: Understood. Thank you. Appreciate it. And may I ask for your current assessment of capital allocation and sustainability of the dividend?
Ronan Kennedy: Understood. Thank you. Appreciate it. And may I ask for your current assessment of capital allocation and sustainability of the dividend?
Okay.
So the really good news is our cash.
Keith Waddell: So the really good news is our cash flow, our free cash flow, operating cash flow for the fourth quarter was really strong. And in fact, we added $100 million to our cash balance after paying for the dividend. And so for all of 2025, for the full year, our free cash flow covered the dividend, and we reached into the balance sheet for about $100 million to buy stock. And so given those trends, if you extrapolate them, that we just talked about, that would say that we would have enough free cash flow in 2026 to cover the dividend, and then we would have, we could then look to our balance sheet, to the extent we wanted, to buy stock. And so excellent, excellent Q4 free cash flow quarter, the highest of the year.
Keith Waddell: So the really good news is our cash flow, our free cash flow, operating cash flow for the fourth quarter was really strong. And in fact, we added $100 million to our cash balance after paying for the dividend. And so for all of 2025, for the full year, our free cash flow covered the dividend, and we reached into the balance sheet for about $100 million to buy stock. And so given those trends, if you extrapolate them, that we just talked about, that would say that we would have enough free cash flow in 2026 to cover the dividend, and then we would have, we could then look to our balance sheet, to the extent we wanted, to buy stock.
Cash flow, our free cash flow operating cash flow for the first for the fourth quarter was really strong and in fact, we added a $100 million to our cash balance after paying for the dividend and so far all of 2025 for the full year, our free cash flow covered the dividend.
And we reached into the balance sheet for about $100 million to buy stock.
And so given those trends if you extrapolate them that we just talked about that would say that we would have enough free cash flow in 2026 to cover the dividend and then we would have we could then look to our balance sheet to the extent, we wanted to buy stock.
And so excellent, excellent Q4 free cash flow quarter, the highest of the year. We did a very nice job of managing our working capital on both the receivables and the liability side, and we also got a $20 million benefit from the new tax act, from expensing what would otherwise be capital cost. But even without that, it would have been our highest quarter of the year, by a long shot, which is a great thing.
Excellent excellent Q4 free cash flow quarter, the highest of the year, we did a very nice job of managing our working capital on both the receivables and the liability side and we also got a $20 million benefit from the new tax Act from expensing.
Keith Waddell: We did a very nice job of managing our working capital on both the receivables and the liability side, and we also got a $20 million benefit from the new tax act, from expensing what would otherwise be capital cost. But even without that, it would have been our highest quarter of the year, by a long shot, which is a great thing.
Otherwise be capital cost, but.
Even without that it would've been our highest quarter of the year.
By a long shot which is a great thing.
Thank you I appreciate it.
John Ronan Kennedy: Thank you. Appreciate it.
Ronan Kennedy: Thank you. Appreciate it.
And the next question comes from Stephanie Moore with Jefferies.
Operator: The next question comes from Stephanie Moore with Jefferies.
Operator: The next question comes from Stephanie Moore with Jefferies.
This is Joe on for Stephanie.
Harold Lanto: This is Harold Lanto on for Stephanie Moore. I guess just on Protiviti, it seems as though, like, the revenue growth performance globally was a little bit different in the US versus international. So wanted to know if you guys could discuss, you know, what you're seeing in the Protiviti business in the US versus internationally, and just any comments you could give on what you're seeing on the pricing side of that business. Thank you.
Harold Antor: This is Harold Lanto on for Stephanie Moore. I guess just on Protiviti, it seems as though, like, the revenue growth performance globally was a little bit different in the US versus international. So wanted to know if you guys could discuss, you know, what you're seeing in the Protiviti business in the US versus internationally, and just any comments you could give on what you're seeing on the pricing side of that business. Thank you.
I guess just on Protiviti, it seems as though Mike.
The revenue growth performance.
Globally was a little bit different in the U S versus international so.
I wanted to know if you guys could discuss what you're seeing.
<unk> business in the U S versus internationally and just any comments you could give on what youre seeing on the pricing side of that business. Thank you.
And so U S versus international Protiviti.
Keith Waddell: And so US versus international, Protiviti, Protiviti International is stronger for a couple of reasons. One, the regulatory environment with financial institutions internationally is stronger. That is, that is the case in the non-US. The regulatory environment in the US is more benign. Examiners are more accommodating. That allows clients to use more of their internal resources for things they might otherwise have used outside partners for. So that's a modest headwind for US Protiviti, not the case for Europe Protiviti, if you will. Further, US Protiviti has these larger projects that you're just beginning to anniversary that impact their growth rates. The international locations didn't have the same extent of those larger projects, and to the extent they've had them, they haven't wound down. And so, that would put international Protiviti a bit stronger.
Keith Waddell: And so US versus international, Protiviti, Protiviti International is stronger for a couple of reasons. One, the regulatory environment with financial institutions internationally is stronger. That is, that is the case in the non-US. The regulatory environment in the US is more benign. Examiners are more accommodating. That allows clients to use more of their internal resources for things they might otherwise have used outside partners for. So that's a modest headwind for US Protiviti, not the case for Europe Protiviti, if you will. Further, US Protiviti has these larger projects that you're just beginning to anniversary that impact their growth rates. The international locations didn't have the same extent of those larger projects, and to the extent they've had them, they haven't wound down. And so, that would put international Protiviti a bit stronger.
Protiviti International is stronger for a couple of reasons one the regulatory environment for financial institutions internationally is stronger that is that is the case in the U S.
The regulatory environment in the U S is more benign examiners are more accommodating.
That allows clients to use more of their internal resources for things that they might otherwise have used outside partners for.
So that's a modest headwind for U S protiviti.
Not the case for.
Europe Protiviti, if you will further.
U S. Protiviti as these larger projects that you are just beginning to anniversary that impact their growth rates international locations.
It didn't have the same extent of those larger projects and to the extent that you've had them they haven't wound down and so.
That would put international protiviti a bit stronger the other thing that I would say offsetting.
Keith Waddell: The other thing that I would say, offsetting what I just said about US, technology consulting in Protiviti, US included, is very strong. It's actually leading as we speak. It's Protiviti's largest solution area, particularly in the United States. Platform modernization is a big demand driver. Protiviti is participating nicely there, and so we feel good about Protiviti globally, US and non-US. Pricing environment for some time has been very competitive with the Big Four. That, that continues, not really worse, not really better.
The other thing that I would say, offsetting what I just said about US, technology consulting in Protiviti, US included, is very strong. It's actually leading as we speak. It's Protiviti's largest solution area, particularly in the United States. Platform modernization is a big demand driver. Protiviti is participating nicely there, and so we feel good about Protiviti globally, US and non-US. Pricing environment for some time has been very competitive with the Big Four. That, that continues, not really worse, not really better.
What I, just said about U S technology consulting and Protiviti U S. Included is very strong it's actually leaving as we speak is <unk> largest solution area, particularly in the United States.
Platform moderate modernization is a big demand driver.
<unk> is participating nicely there and so we feel good about protiviti globally U S and non U S pricing environment for some time has been very competitive with the big four that that continues.
Not really worse not really better.
Got it thank you.
Harold Lanto: Got it. Thank you. I guess, when you think of pricing going forward, as AI is implemented, do you see risk as if customers were to share in that benefit? And I guess, my other question is, just on ACS, on admin and customer support, I guess, to what degree of confidence do you have that that business line rebalance in line with historical levels? You know, in the quarter, it seems to remain fairly weak and, given implementation of AI, there's, you know, there are comments out there that say that this business line could be one of the most at risk. So just any comments on that would be super helpful. And that's all for me. Thank you.
Harold Antor: Got it. Thank you. I guess, when you think of pricing going forward, as AI is implemented, do you see risk as if customers were to share in that benefit? And I guess, my other question is, just on ACS, on admin and customer support, I guess, to what degree of confidence do you have that that business line rebalance in line with historical levels? You know, in the quarter, it seems to remain fairly weak and, given implementation of AI, there's, you know, there are comments out there that say that this business line could be one of the most at risk. So just any comments on that would be super helpful. And that's all for me. Thank you.
When you think of pricing going forward.
This include on a D C risks.
Customers.
<unk>.
Sure.
Benefit and I guess.
My other question is just on Acs.
Customer support I.
I guess two wouldn't agree confidence do you have the business line.
Environment.
Oracle levels.
And the quota it seems to remain fairly weak.
Implementation with.
There is.
Yes.
Their comments.
Comments are there to say that this business line could be one of the most of the risk. So just any comments on that would be super helpful. That's all for me. Thank you.
So protiviti pricing going forward in the in the AI era.
Keith Waddell: So Protiviti pricing going forward in the AI era, Protiviti and virtually every consulting firm is currently looking at, should they, could they, will they price differently than hourly, time and materials going forward? Should it be more outcome-based? Should it be more unit based, based on what's being worked on, you know, number of cases, number of transactions. And so I would say, the entire industry is taking a very creative and innovative look at how it prices, with a strong consideration to the value added and how should they appropriately participate in the value added, that might be different than the time and materials of late, but early days there. ACS, we do have confidence in ACS.
Keith Waddell: So Protiviti pricing going forward in the AI era, Protiviti and virtually every consulting firm is currently looking at, should they, could they, will they price differently than hourly, time and materials going forward? Should it be more outcome-based? Should it be more unit based, based on what's being worked on, you know, number of cases, number of transactions. And so I would say, the entire industry is taking a very creative and innovative look at how it prices, with a strong consideration to the value added and how should they appropriately participate in the value added, that might be different than the time and materials of late, but early days there. ACS, we do have confidence in ACS. ACS had a couple of larger projects at the end that kept its negative growth rates higher than the rest. Oddly enough, and kind of counter to the trend you hear about, our customer service, which includes call center, actually did better than the rest of ACS. So you can't, you can't pin AI call center impact on ACS's relative performance.
<unk>.
Protiviti and virtually every consulting firm is currently looking at should should they could they will day pricing differently than hourly time and materials going forward should it be more outcome based should it be more.
Unit based based on whats being worked on a number of cases number of transactions and so I would say the entire industry is taking a very.
Creative and innovative look at how it prices.
With a strong consideration to the value added and how should they appropriately participate in that value added.
That might be different and the time and materials.
But early days there.
Acs.
We do have confidence in Acs.
Keith Waddell: ACS had a couple of larger projects at the end that kept its negative growth rates higher than the rest. Oddly enough, and kind of counter to the trend you hear about, our customer service, which includes call center, actually did better than the rest of ACS. So you can't, you can't pin AI call center impact on ACS's relative performance.
ACS had a couple of larger projects that in the cabinets negative growth rates higher than the rest.
Oddly enough and kind of counter to.
The trend you hear about our customer surface, which includes call center actually did better than the rest of Acs. So you can't you can't pin AI call center impact on Acs as relative performance.
And the next question will come from Jeff Silber with BMO capital markets.
Operator: The next question will come from Jeff Silber with BMO Capital Markets.
Operator: The next question will come from Jeff Silber with BMO Capital Markets.
Thanks, So much wanted to ask a couple of questions about town solutions that were asked about protiviti. Firstly, if we can just focus on your internal head count.
Jeff Silber: Thanks so much. Wanna ask a couple of questions about Talent Solutions that were asked about Protiviti. First, if we can just focus on your internal headcount. I know it shrunk a little bit, but the rate of decline, I guess, is getting less worse, so to speak. What do you expect for 2026? Do you think you'll be adding headcount in Talent Solutions, and what will it take to get there?
Jeff Silber: Thanks so much. Wanna ask a couple of questions about Talent Solutions that were asked about Protiviti. First, if we can just focus on your internal headcount. I know it shrunk a little bit, but the rate of decline, I guess, is getting less worse, so to speak. What do you expect for 2026? Do you think you'll be adding headcount in Talent Solutions, and what will it take to get there?
I know it shrunk a little bit but the rate of decline I guess is getting less worse. So to speak what do you expect for 2026 do you think youll be adding head count and talent solutions and what will it take to get there.
On talent solutions, we did not reduce heads as much as revenues would have otherwise dictated as things declined and you should we therefore have unused capacity.
Keith Waddell: On Talent Solutions, we did not reduce heads as much as revenues would have otherwise dictated as things declined. And we therefore have unused capacity anywhere from 15 to 30%, based on what metrics you use and how robust the demand environment is. But we can grow nicely in Talent Solutions without adding heads, given what we've done so far, which is hold on to our better people.
Keith Waddell: On Talent Solutions, we did not reduce heads as much as revenues would have otherwise dictated as things declined. And we therefore have unused capacity anywhere from 15 to 30%, based on what metrics you use and how robust the demand environment is. But we can grow nicely in Talent Solutions without adding heads, given what we've done so far, which is hold on to our better people.
Okay.
Anywhere from 15% to 30% based on.
What metrics you use.
And how how robust the demand environment is but we can grow nicely and talent solutions without adding heads given what we've done so far which is hold onto our better people.
Alright, that's great to hear and then also on talent solutions can we just get some comments, what's going on internationally versus the U S. And if you can focus on any specific markets that are doing better or worse that would be great.
Jeff Silber: All right. That's great to hear. And then also on Talent Solutions, can we just get some comments, what's going on internationally versus the US? And if you can focus on any specific markets that are doing better or worse, that'll be great.
Jeff Silber: All right. That's great to hear. And then also on Talent Solutions, can we just get some comments, what's going on internationally versus the US? And if you can focus on any specific markets that are doing better or worse, that'll be great.
Well and as we break out the growth rates between U S and international talent solutions, and frankly, they're not very different one to another.
Keith Waddell: Well, and as we break out the growth rates between US and international Talent Solutions, frankly, they're not very different, one to another. Generally speaking, Germany's doing well, the UK is doing well, Canada is doing well, and Brazil are doing well. But, like, not much different than the last few quarters and not much different than the US.
Keith Waddell: Well, and as we break out the growth rates between US and international Talent Solutions, frankly, they're not very different, one to another. Generally speaking, Germany's doing well, the UK is doing well, Canada is doing well, and Brazil are doing well. But, like, not much different than the last few quarters and not much different than the US.
Generally speaking, Germany is doing well the UK is doing well, Canada is doing well in Brazil are doing well, but.
Not much different than the last few quarters and not much different than the U S.
Alright, I appreciate the color. Thanks, so much.
Jeff Silber: All right. Appreciate the call. Thanks so much.
Jeff Silber: All right. Appreciate the call. Thanks so much.
And the next question comes from Kevin Mcveigh with UBS.
Operator: And the next question comes from Kevin McVey with UBS.
Operator: And the next question comes from Kevin McVey with UBS.
Great. Thanks, so much.
Kevin McVey: Great. Thanks so much, and thank you for all the perspective. Keith, were there any charges or right sizing of the expense base to position for 2026 to help with some of the margin expansion that it looks like you're gonna be able to put up over the course of the year?
Kevin McVey: Great. Thanks so much, and thank you for all the perspective. Keith, were there any charges or right sizing of the expense base to position for 2026 to help with some of the margin expansion that it looks like you're gonna be able to put up over the course of the year?
Thank you for all that perspective.
Was there any.
Charges or right sizing of the expense base to position for 'twenty six to help with some of the margin expansion that it looks like youre going to be able to put up over the course of the year.
Keith Waddell: No special charges in Q4 for headcount related or any other expenses. And it's pretty much taking our current cost structure and, you know, getting more efficient where we can, getting more on the Protiviti side as they manage kind of all levels of their pyramid, from managing directors down to the entry-level consultants, and the mix of that versus contractors. All of those play a part in their gross margins and their operating margins. So no special charges. It is what it is. It's straightforward, but we do believe we can add to margins. In fact, Protiviti, I would say Protiviti would be disappointed if for 2026, they didn't add 100 to 200 basis points to their gross and operating margins for the year.
No special charges and fourth quarter for head count related or any other expenses.
Keith Waddell: No special charges in Q4 for headcount related or any other expenses. And it's pretty much taking our current cost structure and, you know, getting more efficient where we can, getting more on the Protiviti side as they manage kind of all levels of their pyramid, from managing directors down to the entry-level consultants, and the mix of that versus contractors. All of those play a part in their gross margins and their operating margins. So no special charges. It is what it is. It's straightforward, but we do believe we can add to margins. In fact, Protiviti, I would say Protiviti would be disappointed if for 2026, they didn't add 100 to 200 basis points to their gross and operating margins for the year.
And it's pretty much taking our current cost structure and.
Getting more efficient where we can.
Getting more on the Protiviti side as they manage kind of all levels of their pyramid for managing directors down too.
The entry level consultants and the mix of that versus contractors all of those play a part.
And their gross margins in their operating margins so no special charges.
It is what it is it's straightforward, but we do believe we can add to margins in fact protiviti.
I would say protiviti would be disappointed if for 2026, they didnt add 100 to 200 basis points to their gross and operating margins for the year.
Got it and then.
Kevin McVey: Got it. And then the commentary on the Q2 was super helpful. You think from an EPS perspective, should it be kind of the normal sequential step up that you see from a Q1 to Q2?
Kevin McVey: Got it. And then the commentary on the Q2 was super helpful. You think from an EPS perspective, should it be kind of the normal sequential step up that you see from a Q1 to Q2?
Commentary on the Q2 was Super helpful. You think from an EPS perspective should it be kind of the normal sequential step up that you see from Q1 to Q2.
Keith Waddell: I would say that's true. I think you need to be careful when you look at 2025's sequential trend from Q1 to, to Q2. We took a, a cost action charge in Q1 that didn't repeat in Q2, and so that progression is not representative of a normal progression, and just be careful with that. But otherwise, from a revenue standpoint, as I said earlier, not much typical impact. Contract, a little less seasonally, perm, a little more seasonally, Protiviti, better, and particularly better on the margin side as they start to, distance themselves from their seasonally low first quarter.
Keith Waddell: I would say that's true. I think you need to be careful when you look at 2025's sequential trend from Q1 to, to Q2. We took a, a cost action charge in Q1 that didn't repeat in Q2, and so that progression is not representative of a normal progression, and just be careful with that. But otherwise, from a revenue standpoint, as I said earlier, not much typical impact. Contract, a little less seasonally, perm, a little more seasonally, Protiviti, better, and particularly better on the margin side as they start to, distance themselves from their seasonally low first quarter.
I would say that's true I think you need to be careful when you look at 2020 fives sequential trend from Q1 to Q2, we took a.
Our cost action charge in Q1 that didn't repeat in Q2 and so.
And that progression.
Is not representative of a normal progression and just be careful with that but otherwise from a revenue standpoint, as I said earlier.
Not much typical impact.
Contract, a little less seasonally perm, a little more seasonally.
Protiviti, better and particularly better on the margin side as they start to.
Distance themselves from the seasonally low first quarter.
So I know last year was about 24 cents.
Kevin McVey: Right. So I know last year was about $0.24. It's so do you think maybe like $0.15? Because I know there's the adjustment factor on the tax rate, too, right? The tax rate goes down a lot from Q1 to Q2.
Kevin McVey: Right. So I know last year was about $0.24. It's so do you think maybe like $0.15? Because I know there's the adjustment factor on the tax rate, too, right? The tax rate goes down a lot from Q1 to Q2.
Or do you think maybe like 15th because I know, there's the adjustment factor on the tax rate to rate the tax rate goes down a lot from Q1 to Q2, that's right that's right and again I think.
Keith Waddell: That's right. That's right. And again, I think, you know, last year and, and prior trends at the revenue line are fine, but just be careful on SG&A... not to overly rely on the short-term trend because of the cost actions.
Keith Waddell: That's right. That's right. And again, I think, you know, last year and, and prior trends at the revenue line are fine, but just be careful on SG&A... not to overly rely on the short-term trend because of the cost actions.
Last year and prior trends at the revenue line are fine, but just be careful on SG&A not overly rely on the short term trend because of the cost actions.
Kevin McVey: Until fall. And that was, again, about $0.17, I think, last year, right? Or $0.08, something like that. $0.08.
Kevin McVey: Until fall. And that was, again, about $0.17, I think, last year, right? Or $0.08, something like that. $0.08.
That's helpful and that was again about 17 cents I think last year or 8% something like that.
Keith Waddell: It was 17 million, as I recall, in cost, in severance cost in Q1. That didn't repeat in Q2. So Q2 showed an improvement with the absence of those costs, and you won't see that improvement this Q2, because we don't have those severance costs.
Keith Waddell: It was 17 million, as I recall, in cost, in severance cost in Q1. That didn't repeat in Q2. So Q2 showed an improvement with the absence of those costs, and you won't see that improvement this Q2, because we don't have those severance costs.
It was $17 million as I recall in our cost severance cost in Q1 that didn't it didn't repeat in Q2. So Q2 showed an improvement with the absence of those costs and you won't see that improvement.
This Q2, because we don't have those severance costs.
And that's a normal tax rate keeps almost $17 million right. If we just to make that adjustment right right. Okay.
Kevin McVey: And that's a normal tax rate, Keith, on the $17 million, right? If just to make that adjustment.
Kevin McVey: And that's a normal tax rate, Keith, on the $17 million, right? If just to make that adjustment.
Keith Waddell: Right. Right.
Keith Waddell: Right. Right.
Kevin McVey: Okay.
Kevin McVey: Okay.
Keith Waddell: Right.
Keith Waddell: Right.
Alright, thank you.
Kevin McVey: Thank you.
Kevin McVey: Thank you.
Yep.
Keith Waddell: Yep.
Keith Waddell: Yep.
And the next question will come from Kartik Mehta with Northcoast research.
Operator: The next question will come from Kartik Mehta with North Coast Research.
Operator: The next question will come from Kartik Mehta with North Coast Research.
Keith I was hoping to go back to your comments on productivity and pricing and you had said kind of the big four nothing is different it kind of stays the same.
Kartik Mehta: Keith, I was hoping to go back to your comments on Protiviti and pricing, and you had said kind of the Big Four, you know, nothing is different. It kind of stays the same. As you look to get price increases in 2026, I'm assuming you will, since, you know, you've got to offset the comp expense. You know, what's the environment like and maybe your confidence level as to why you might be able to get some price increases in 2026 to offset cost, expense increases?
Kartik Mehta: Keith, I was hoping to go back to your comments on Protiviti and pricing, and you had said kind of the Big Four, you know, nothing is different. It kind of stays the same. As you look to get price increases in 2026, I'm assuming you will, since, you know, you've got to offset the comp expense. You know, what's the environment like and maybe your confidence level as to why you might be able to get some price increases in 2026 to offset cost, expense increases?
As you look to get price increases in 2026, I'm, assuming you will.
Youre kind of offset the comp expense.
What's the environment like in maybe your confidence level as to why you might be able to get some price increases in 2026 to offset comp.
Increases.
Oh, I didn't say the industry arent getting any increases they are because of it but the other dimension to this is the nature of the work.
Keith Waddell: Well, I didn't say the industry aren't getting any increases. They are, because, but the other dimension to this is the nature of the work, both as to industry, as to solution, and many times that mix, determines the composite rate as much as anything. But, I mean, generally speaking, the industry's getting cost of living type increases as they have to, to give those to their staff, which is true with Protiviti as well. But mix is a big deal, and as Protiviti's had less of the large, high margin FSI regulatory that it has replaced with smaller, somewhat lower margin, other types of work, there's been some compression there. But again, it's not like there are no increases currently in bill rates.
Keith Waddell: Well, I didn't say the industry aren't getting any increases. They are, because, but the other dimension to this is the nature of the work, both as to industry, as to solution, and many times that mix, determines the composite rate as much as anything. But, I mean, generally speaking, the industry's getting cost of living type increases as they have to, to give those to their staff, which is true with Protiviti as well. But mix is a big deal, and as Protiviti's had less of the large, high margin FSI regulatory that it has replaced with smaller, somewhat lower margin, other types of work, there's been some compression there. But again, it's not like there are no increases currently in bill rates. What you see is more a function of mix, of relative mix of resources than the pure same level last year versus same level this year.
Both as to industry as to solution and many times that mix determines.
Composite rate as much as anything.
Generally speaking the industry is getting cost of living type increases as they have to to give those to their staff, which is which is true with protiviti as well, but mix is a big deal.
As Protiviti has had less of.
The large.
High margin Ssi regulatory debt it has replaced with smaller somewhat.
Lower margin other types of work there has been some compression there.
But again.
It's not like there are no increases currently in bill rates, what you see is more a function of mix.
Keith Waddell: What you see is more a function of mix, of relative mix of resources than the pure same level last year versus same level this year.
A relative mix of resources than the pure.
Same level last year versus same level this year.
And then just your comments on AI, obviously, maybe not having as a negative impact is.
Kartik Mehta: And then, can you just your comments on AI, obviously, maybe not having as negative of an impact as people would like to think, but what about on the other side? You know, how could this be a driver, or how much of a driver could it be, especially for Protiviti and maybe Talent Solutions, in terms of helping your customers?
Kartik Mehta: And then, can you just your comments on AI, obviously, maybe not having as negative of an impact as people would like to think, but what about on the other side? You know, how could this be a driver, or how much of a driver could it be, especially for Protiviti and maybe Talent Solutions, in terms of helping your customers?
People would like to thank but what about on the other side.
How could this be a driver or how much of a driver could it be especially for productivity and maybe talent solutions.
In terms of helping your customers.
Well.
Keith Waddell: Well, that's an interesting question. A couple of comments on AI generally before I get to that. I'd say everybody wants to target accounting as being especially vulnerable to AI. And I would argue, and I would at least ask everyone to consider, that AI or that accounting, even at SMBs, is already fully automated. Even the smallest companies use QuickBooks and NetSuite. They have tax software, et cetera. And so I think you need to think about the starting point as to how impactful AI would be, as much as what the impact itself going to be. I also would suggest that you need to think about that accounting is very precise and accuracy sensitive, which matters because currently, GenAI, LLMs, are nowhere near as accurate as they need to be, to be trusted in accounting.
Keith Waddell: Well, that's an interesting question. A couple of comments on AI generally before I get to that. I'd say everybody wants to target accounting as being especially vulnerable to AI. And I would argue, and I would at least ask everyone to consider, that AI or that accounting, even at SMBs, is already fully automated. Even the smallest companies use QuickBooks and NetSuite. They have tax software, et cetera. And so I think you need to think about the starting point as to how impactful AI would be, as much as what the impact itself going to be. I also would suggest that you need to think about that accounting is very precise and accuracy sensitive, which matters because currently, GenAI, LLMs, are nowhere near as accurate as they need to be, to be trusted in accounting.
That's a that's an interesting question.
Couple of comments on AI generally before I get to that I'd say.
Everybody wants to target accounting as being especially vulnerable to AI.
And I would argue in our at least ask everyone to consider that.
AI the or that.
Accounting, even at Smbs is already fully automated even the smallest companies use quickbooks and net suite. They have tax software et cetera, and so I think you need to think about the starting point as to how impactful AI would be.
As much as what the impact itself going to be I also would suggest that you need to think about that.
That.
Accounting.
It's a very precise and accuracy sensitive.
Which matters because currently gin a I L. L. EMS are nowhere near as accurate as they need to be to be trusted and accounting.
Keith Waddell: As you think about AI adoption, particularly in accounting, particularly for SMBs, I think those are factors that need to be considered that typically aren't when people kind of race to accounting as particularly vulnerable. As to upside, AI is actually making it harder for our clients to hire. It's now easier for job seekers to mass apply, which overwhelms our clients. Further, over half, according to Gartner, job seekers today are using AI to tailor their resume to the job requirement, which makes it harder for our clients to distinguish one candidate from another. Further, LLM hallucinations in that process of tailoring resumes are actually creating fictitious work histories to improve the match. To prove this, we did a little test with our data science group.
And so as you think about.
As you think about AI adoption, particularly in accounting, particularly for SMBs, I think those are factors that need to be considered that typically aren't when people kind of race to accounting as particularly vulnerable. As to upside, AI is actually making it harder for our clients to hire. It's now easier for job seekers to mass apply, which overwhelms our clients. Further, over half, according to Gartner, job seekers today are using AI to tailor their resume to the job requirement, which makes it harder for our clients to distinguish one candidate from another. Further, LLM hallucinations in that process of tailoring resumes are actually creating fictitious work histories to improve the match. To prove this, we did a little test with our data science group.
AI adoption, particularly in accounting, particularly for Smbs I think those are factors that need to be considered that typically arent when people kind of race to accounting as particularly vulnerable.
As to upside.
AI is actually making it harder for our clients to hire.
It's now easier for job seekers to mass apply which overwhelms our clients further.
Over half according to Gartner job seekers today are using AI to tailor their resume to the job requirement.
Which makes it harder for our clients to distinguish one candidate from another.
Further.
<unk>.
L. L M Hayes hallucinations in that process tailoring resumes.
We're actually creating fictitious work histories to improve the match.
To prove this we did a little test, but our data science group.
We took 25000 job descriptions, we took 50000 resumes we gave those to the top three L. L. EMS.
Keith Waddell: We took 25,000 job descriptions, we took 50,000 resumes, we gave those to the top 3 LLMs, and the prompt was: while staying true to the original resume, tailor the resume to the job requirement. And what we found was one of the LLMs frequently fabricated and created fictitious work history, one of the LLMs never did that, and one was in the middle... But the point is, it's harder than ever for our SMB clients to trust what a resume shows, particularly as to work history, which makes our services, our vetting, even more valuable. And for us, the gold standard for vetting is having performance ratings for how candidates actually performed on prior assignments. And so as AI makes it harder for our clients to hire, we play a bigger and more important role, which is good for us.
We took 25,000 job descriptions, we took 50,000 resumes, we gave those to the top 3 LLMs, and the prompt was: while staying true to the original resume, tailor the resume to the job requirement. And what we found was one of the LLMs frequently fabricated and created fictitious work history, one of the LLMs never did that, and one was in the middle... But the point is, it's harder than ever for our SMB clients to trust what a resume shows, particularly as to work history, which makes our services, our vetting, even more valuable. And for us, the gold standard for vetting is having performance ratings for how candidates actually performed on prior assignments. And so as AI makes it harder for our clients to hire, we play a bigger and more important role, which is good for us.
And the prompt was while staying true to the original resume tailor the resume to the job requirement.
And what we found was one of the Alliums frequently fabricated and created fictitious work history.
What are the Alliums never did that and one was in the middle.
But the point is it's harder than ever for our SMB clients to trust what a resume.
<unk>, particularly as to work history.
Which makes our services are vetting even more valuable.
And for US the gold standard for vetting is having performance ratings for how candidates actually.
Performed on prior assignments and so as AI it makes it harder for our clients to hire.
We play a bigger and more important role which is good for us.
Thank you I appreciate that Keith.
Operator: Thank you. Appreciate that, Keith.
Operator: Thank you. Appreciate that, Keith.
And the next question will come from Tobey Sommer with true Securities.
Operator: The next question will come from Toby Sommer with Truist Securities.
Operator: The next question will come from Toby Sommer with Truist Securities.
Tobey Sommer: Thanks, Keith. I wanted to just ask you a question about what incremental margins historically looked like in a recovery, and then maybe you could point out any nuances or differences that you would anticipate as revenue improves here versus that historic norm.
Thanks, Keith I wanted to just ask you a question about what incremental margins historically look like.
Tobey Sommer: Thanks, Keith. I wanted to just ask you a question about what incremental margins historically looked like in a recovery, and then maybe you could point out any nuances or differences that you would anticipate as revenue improves here versus that historic norm.
Recovery and then maybe you could point out any nuances or differences that you would anticipate.
As revenue improves.
Here versus that historic norm.
I guess, the easiest way to think about it for us is and hopefully a conservative way to think about it as we reach race on the way back up what happened on the way too.
Keith Waddell: I guess the easiest way to think about it for us is, and hopefully a conservative way to think about it, is we retrace on the way back up, what happened on the way down. And as we delevered cost on the downside, we'll relever those costs on the upside. And while everybody wants to first attribute the headcount deleveraging to our recruiters and salespeople, quite frankly, it's much more related to corporate services and field management. And I would argue those are easier to relever than would necessarily be the case with recruiters and salespeople. And so I would say the conservative, conservative thing to do would be to retrace the path up, similar to the path down.
Keith Waddell: I guess the easiest way to think about it for us is, and hopefully a conservative way to think about it, is we retrace on the way back up, what happened on the way down. And as we delevered cost on the downside, we'll relever those costs on the upside. And while everybody wants to first attribute the headcount deleveraging to our recruiters and salespeople, quite frankly, it's much more related to corporate services and field management. And I would argue those are easier to relever than would necessarily be the case with recruiters and salespeople. And so I would say the conservative, conservative thing to do would be to retrace the path up, similar to the path down.
And as we de Levered cost on the downside, we will re lever those cost on the upside and while everybody wants to.
First a tribute to head count deleveraging to our recruiters and salespeople quite frankly, it's much more related to corporate services and field management and I would argue those are easier to re lever then would necessarily be the case with recruiters and salespeople.
And so I would say the conservative conservative thing to do would be to retrace the path up similar to the path down.
Understood.
Tobey Sommer: Understood. If you could dig into Protiviti, and what are the industry verticals that are, you know, sort of growing and contributing the most versus those that may be lagging? And in your answer, I'd love it if you could touch on financial services and where that falls.
Tobey Sommer: Understood. If you could dig into Protiviti, and what are the industry verticals that are, you know, sort of growing and contributing the most versus those that may be lagging? And in your answer, I'd love it if you could touch on financial services and where that falls.
But if I if you could dig into the productivity what are the.
Industry verticals that are.
Sort of growing and contributing the most versus those that may be lagging and in your answer I'd love. It if you could touch on financial services and where that falls.
But clearly MSI is protiviti is largest industry group.
Keith Waddell: Well, clearly, FSI is Protiviti's largest industry group. As I said earlier, in the United States, the regulatory environment has become more benign. Examiners are more flexible, particularly with deadlines and dates, which means clients have more time to do it themselves, which comes at some expense to all of the third-party providers, Protiviti included. And so there's a modest headwind, modest headwind there, that's being offset by tech modernization, all the data optimization, platform modernization, everything related to that, that Protiviti is participating in nicely. Further, they're starting to see traction in the PE-IPO transaction market, which there's also a tailwind head coming from that. And so when you look at Protiviti's pipeline, it is disproportionately tech-related as we speak, and we feel good about that.
Keith Waddell: Well, clearly, FSI is Protiviti's largest industry group. As I said earlier, in the United States, the regulatory environment has become more benign. Examiners are more flexible, particularly with deadlines and dates, which means clients have more time to do it themselves, which comes at some expense to all of the third-party providers, Protiviti included. And so there's a modest headwind, modest headwind there, that's being offset by tech modernization, all the data optimization, platform modernization, everything related to that, that Protiviti is participating in nicely.
As I said earlier in the United States the regulatory environment.
<unk> has become more benign examiners are more flexible.
Particularly with deadlines and dates which means clients have more time to do it themselves.
Which comes at some expense.
All of the third party providers Protiviti included and so there was a modest headwind modest headwind there.
That's being offset by <unk>.
Tech modernization all of that data optimization platform modernization.
Everything related to that that Protiviti is participating in nicely.
Further they are starting to see traction in the P/e IPO transaction market for which there is also a tailwind coming from that.
Further, they're starting to see traction in the PE-IPO transaction market, which there's also a tailwind head coming from that. And so when you look at Protiviti's pipeline, it is disproportionately tech-related as we speak, and we feel good about that. Tech consulting is Protiviti's largest solution area across their solutions, and it's been that way for some time, and it's becoming even more so as all this demand related to tech modernization, data optimization in advance of AI, are prevalent.
So when you look at opportunities.
Pipeline is disproportionately tech related as we speak.
And we feel good about that Jack consulting is <unk> largest solution area.
Keith Waddell: Tech consulting is Protiviti's largest solution area across their solutions, and it's been that way for some time, and it's becoming even more so as all this demand related to tech modernization, data optimization in advance of AI, are prevalent.
Crossed their solutions and it's been that way for some time and its becoming even more so.
As all of this demand related to detect modernization.
Data optimization and advance of AI.
Are prevalent.
Thank you.
Tobey Sommer: Thank you.
Tobey Sommer: Thank you.
And the next question will come from Mark Mark Hahn with Baird.
Operator: The next question will come from Mark Marcon with Baird.
Operator: The next question will come from Mark Marcon with Baird.
Okay.
A follow up with regards to the.
Mark Marcon: A follow-up with regards to the, with regards to this, you know, the, the margin improvement as you, as you relever. You know, if, if we take a look at 2025, you know, we did $5.375 billion in terms of revenue with an EBITDA margin of 3.4% for the full year. And obviously, that included a charge, so we could strip that out. But what I'm wondering is, you know, back in 2018, 2019, pre-COVID, we were able to generate, you know, 10% EBITDA margins in the, you know, doing 5.8 to 6 billion dollars in revenue. And so I'm wondering, is that a more appropriate way to think about, you know, the, the level of revenue growth that we need to get as it relates to the incremental margins?
Mark Marcon: A follow-up with regards to the, with regards to this, you know, the, the margin improvement as you, as you relever. You know, if, if we take a look at 2025, you know, we did $5.375 billion in terms of revenue with an EBITDA margin of 3.4% for the full year. And obviously, that included a charge, so we could strip that out. But what I'm wondering is, you know, back in 2018, 2019, pre-COVID, we were able to generate, you know, 10% EBITDA margins in the, you know, doing 5.8 to 6 billion dollars in revenue. And so I'm wondering, is that a more appropriate way to think about, you know, the, the level of revenue growth that we need to get as it relates to the incremental margins? Or do we need to get, you know, back into... We obviously had a post-pandemic boom in 2022 and parts of 2021. Do we need to get back to those revenue levels in order to get back to double-digit margins?
With regards to this.
The margin improvement.
<unk>.
If we take a look at 2025, we did 537 $5 billion in terms of revenue.
EBIT margin of three 4% for the full year and obviously that included the charge. So we could strip that out but.
What I'm wondering is.
Back in 2018, 2019, pre Covid, we were able to generate.
10% EBITDA margins.
<unk> doing.
Five $8 billion to $6 billion in revenue.
And so I'm wondering is that.
More appropriate way to think about.
The level of revenue growth that we need to get.
As it relates to the incremental margins or do we need to get.
Mark Marcon: Or do we need to get, you know, back into... We obviously had a post-pandemic boom in 2022 and parts of 2021. Do we need to get back to those revenue levels in order to get back to double-digit margins?
Back into we obviously had a post pandemic boom.
In 2022 and parts of 2021, do we need to get back to those revenue levels in order to get back to double digit margins.
Keith Waddell: You know, I haven't done the specific math that you're referring to, but I would say the biggest difference would be between pre-pandemic and now, has been the cumulative inflation since then. And so we've had to pay our workforce ... cumulative inflation, and that has to be offset as part of getting back to those, those EBIT margins.
Uh huh.
Keith Waddell: You know, I haven't done the specific math that you're referring to, but I would say the biggest difference would be between pre-pandemic and now, has been the cumulative inflation since then. And so we've had to pay our workforce ... cumulative inflation, and that has to be offset as part of getting back to those, those EBIT margins.
Haven't done the specific math that you are referring to but I would say the biggest difference would be between.
Pre pandemic and now has been the cumulative inflation since then and so we've had to.
Our workforce that cumulative inflation.
And that has to be offset as part of getting back to.
Those those margins those EBIT margins.
Got it and then internal staff.
Mark Marcon: Got it. And then-
Mark Marcon: Got it. And then-
Keith Waddell: Internal staff, right?
Keith Waddell: Internal staff, right?
Alright.
Mark Marcon: Yeah.
Mark Marcon: Yeah.
Keith Waddell: The contractor staff, it's a pass-through that we've covered nicely with gross margin.
Keith Waddell: The contractor staff, it's a pass-through that we've covered nicely with gross margin.
Contractor staff, it's a pass through that we've covered nicely with the gross margin.
Mark Marcon: On this level setting, you mentioned, you know, if the normal seasonal trends occur, then, you know, we may end up inflecting to positive year-over-year growth in the third quarter. If that ends up occurring, what would be a kind of a realistic, you know, margin assumption around if we were just modestly up 1% to 2%?
Mark Marcon: On this level setting, you mentioned, you know, if the normal seasonal trends occur, then, you know, we may end up inflecting to positive year-over-year growth in the third quarter. If that ends up occurring, what would be a kind of a realistic, you know, margin assumption around if we were just modestly up 1% to 2%?
And just level setting.
You mentioned the normal seasonal trends occur then we may end up inflicting to.
Positive year over year growth in the third quarter, if that ends up occurring what would be kind of a realistic.
Margin assumption around.
If we were just modestly up 1% to 2%.
Well again I started with <unk>.
Keith Waddell: Well, again, I started with, Protiviti will be disappointed if they don't get another 100 to 200 basis points.
Keith Waddell: Well, again, I started with, Protiviti will be disappointed if they don't get another 100 to 200 basis points.
Protiviti will be disappointed if they don't get another 100 to 200 basis point you heard that.
Mark Marcon: I heard that. Yep.
Mark Marcon: I heard that. Yep.
Yes, Brian.
Keith Waddell: Right. Talent Solutions, I think with a continuation of the trend that we're talking, we would have modest improvements in the short term for that incremental revenue. But again, it would certainly be nice to see positive year-over-year growth of kind of low to mid single digits in the third quarter.
Keith Waddell: Right. Talent Solutions, I think with a continuation of the trend that we're talking, we would have modest improvements in the short term for that incremental revenue. But again, it would certainly be nice to see positive year-over-year growth of kind of low to mid single digits in the third quarter.
Talent solutions I think with.
A continuation of the trend that we're talking we would have modest improvements in the short term for that incremental revenue.
But again.
It would certainly be nice to see positive year on year growth.
Kind of low to mid single digits in the third quarter.
Yeah.
Certainly what great. Thank you.
Mark Marcon: It certainly would. Great. Thank you.
Mark Marcon: It certainly would. Great. Thank you.
Okay.
Okay. So that was our last question. We appreciate you joining us today. Thank you very much.
Keith Waddell: Okay. So that was our last question. We appreciate you joining us today. Thank you very much.
Keith Waddell: Okay. So that was our last question. We appreciate you joining us today. Thank you very much.
Okay.
Operator: Thank you. This concludes today's teleconference. If you missed any part of the call, it will be archived in audio format in the Investor Center of Robert Half's website at roberthalf.com. You can also log in to the conference call replay. Details are contained in the company's press release issued earlier today.
Operator: Thank you. This concludes today's teleconference. If you missed any part of the call, it will be archived in audio format in the Investor Center of Robert Half's website at roberthalf.com. You can also log in to the conference call replay. Details are contained in the company's press release issued earlier today.
Thank you.
This concludes today's teleconference. If you.
Missed any part of the call will be archived in audio format in the Investor Center of Robert Half's website at Robert half Dot Com.
Can also logged into the conference call replay details are contained in the company's press release issued earlier today.
