Robert Half signals Q4 midpoint revenue target of $1.295B amid early recovery trends

Earnings Call Insights: Robert Half Inc. (RHI) Q3 2025

MANAGEMENT VIEW

* CEO M. Waddell reported that "global enterprise revenues were $1.354 billion, down 8% from last year's third quarter on both a reported basis and on an adjusted basis." He stated that "client and job seeker caution continued during the quarter, subduing hiring activity and new project starts," but expressed optimism, noting, "we're encouraged by the weekly trends and contract talent revenues, which sustained late second quarter levels for most of the third quarter and began to grow sequentially in September and into October."
* Waddell highlighted, "Our fourth quarter revenue guidance at and above the midpoint reflects a return to sequential growth on a same-day constant currency basis for the first time since the second quarter of 2022."
* Cash flow from operations was $77 million for the quarter, with a $0.59 per share dividend distributed and $20 million spent repurchasing approximately 550,000 shares.
* CFO Michael Buckley stated, "On an adjusted basis, third quarter Talent Solutions revenues were down 11% year-over-year... U.S. Talent Solutions revenues were $649 million, down 11% from the prior year's third quarter. Non-U.S. Talent Solutions revenues were $207 million, down 12% year-over-year."
* Buckley detailed, "Global revenues in the third quarter were $498 million: $398 million of this is from the United States and $100 million is from outside of the United States. On an adjusted basis, global third quarter Protiviti revenues were down 3% versus the year ago period."

OUTLOOK

* For the fourth quarter, Waddell announced, "Revenues, $1.245 billion to $1.345 billion, income per share $0.25 to $0.35. Midpoint revenues of $1.295 billion are 7% lower than the same period in 2024 on an as-adjusted basis."
* Buckley explained, "Our midpoint revenue guidance for the fourth quarter reflects a return to positive adjusted sequential growth for the first time in 13 quarters."
* Management expects adjusted revenue growth year-over-year: Talent Solutions, down 8% to 11%; Protiviti, flat to down 4%; overall, down 5% to 9%.
* Adjusted gross margin percentages: Contract Talent, 38% to 40%; Protiviti, 22% to 24%; overall, 36% to 39%.
* Tax rate is projected to be 30% to 34% with shares outstanding between 99 million and 100 million.

FINANCIAL RESULTS

* Net income per share was $0.43 compared to $0.64 in the third quarter 1 year ago.
* Contract Talent Solutions bill rates for the third quarter increased 3.7% compared to 1 year ago.
* Contract Talent Solutions gross margin was 38.9% of applicable revenues, unchanged from the previous year.
* Protiviti gross margin was 20.9% of revenues in the third quarter, compared to 24.6% a year ago.
* Operating income for the quarter was $14 million, with adjusted operating income at $61 million or 4.5% of revenue.
* The company reported a $48 million gain from investments held in employee deferred compensation trusts, fully offset by higher deferred compensation costs with no net income impact.

Q&A

* Mark Marcon, Baird, asked about Protiviti pipeline conversion and margin impacts. Waddell responded that the pipeline is "growing on a gross basis year-on-year and it's also growing on a probability of success weighted basis... we're replacing [large projects] with smaller projects that have shorter durations... there's a mix shift to shorter projects."
* Marcon also questioned dividend sustainability. Waddell emphasized, "the dividend is very important, and we remain very committed to it. I would say that the second and third quarters and then for the -- that midpoint guidance for the fourth quarter, our free cash flow more than covers the dividend."
* Andrew Steinerman, JPMorgan, asked if the fourth quarter guide is conservative. Waddell replied, "We would describe the guide as conservative... what we forecast is just barely being positive."
* John Ronan Kennedy, Barclays, requested details on Q4 margin drivers. Waddell explained, "operating income fourth quarter down 1.3 percentage points sequentially... the progression from Q3 to Q4 with our guidance is very normal, very nonremarkable."
* Stephanie Moore, Jefferies, asked about Protiviti's gross margin compression and long-term outlook. Waddell attributed compression to "cumulative inflation," a mix shift to smaller projects, and utilization efforts, but said, "Protiviti is very committed to getting their gross margins back to double digits... we definitely expect higher Protiviti gross margins and therefore, operating margins in 2026."
* Trevor Romeo, William Blair, asked about operating margin improvement. Waddell pointed to moving up the skill curve and leveraging technology, stating, "the single most important thing we can do for upside to margins is to continue to move up the skill curve across our Talent Solutions practice groups."
* Keen Fai Tong, Goldman Sachs, asked about sequential revenue growth and AI risk. Waddell reported "between 1.5% and 2% sequential growth rate" in weekly contract talent revenues and downplayed near-term Gen AI risks, saying, "We've seen very little impact."

SENTIMENT ANALYSIS

* Analysts pressed on dividend sustainability, margin drivers, and Protiviti's outlook, with a slightly cautious tone, particularly regarding recovery timing and margin pressure.
* Management maintained a confident but pragmatic tone, frequently describing guidance as conservative and emphasizing commitment to the dividend and operational discipline. Waddell stated, "we remain very committed to returning all our free cash flow to investors."
* Compared to the previous quarter, management expressed greater optimism about sequential growth trends, with more discussion of early signs of recovery.

QUARTER-OVER-QUARTER COMPARISON

* Q3 revenues were $1.354 billion vs. Q2's $1.37 billion, both down year-over-year.
* Sequential improvement was noted in contract talent revenue trends, shifting from stabilization in June/July (Q2) to growth in September/October (Q3).
* Guidance for Q4 now projects positive sequential revenue growth for the first time since Q2 2022.
* Protiviti's year-over-year growth rate turned negative in Q3 after four quarters of growth, with management attributing this to project mix and competitive factors.
* Management's tone has shifted from cautious stabilization in Q2 to more confident, albeit measured, optimism in Q3.
* Analyst questions remained focused on recovery durability, margin compression, and capital allocation, with continued emphasis on cost controls and technology investments.

RISKS AND CONCERNS

* Management cited continued client and job seeker caution, subdued hiring activity, and new project starts as persistent challenges.
* Gross margin compression at Protiviti was attributed to inflation, project mix shift, and utilization issues.
* The risk of AI-driven job automation was addressed, with management suggesting limited near-term impact on the business.
* Analyst concerns centered on dividend sustainability, Q4 margin dynamics, and the pace of recovery in both contract and permanent placement revenues.

FINAL TAKEAWAY

Robert Half management highlighted early signs of sequential revenue improvement in contract talent solutions, guiding to Q4 midpoint revenues of $1.295 billion and projecting the first positive sequential growth in over three years. While Protiviti faces gross margin pressure from project mix and inflation, leadership remains committed to restoring higher margins through disciplined cost management and technology investment. Confidence in dividend sustainability was reiterated, with free cash flow coverage emphasized. Overall, management signaled cautious optimism for recovery, supported by improving client confidence and a robust pipeline in both core businesses.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/rhi/earnings/transcripts]

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