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DATE

Thursday, Oct. 22, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Keith Waddell
• Chief Financial Officer - Michael C. Buckley

TAKEAWAYS

• Service Revenues -- $1.359 billion, reflecting performance that was approximately flat with the prior year on an adjusted basis.
• Net Income -- $49.9 million, representing an increase from $42.9 million in the third quarter of the previous year.
• Diluted EPS -- $0.49, up 14% from $0.43 one year ago, marking the first year-over-year increase in quarterly earnings per share since 2022.
• Talent Solutions Adjusted Revenue -- grew 2% year over year, representing the first return to growth for this segment since 2022.
• Permanent Placement Adjusted Revenue -- increased 6% year over year, driven by higher demand for full-time accounting and finance personnel.
• Contract Talent Solutions Adjusted Revenue -- grew 1% year over year, supported by growth in technology and finance specializations.
• Protiviti Adjusted Revenue -- decreased 3% year over year, primarily due to a 5% adjusted decline in U.S. operations.
• Contract Talent Bill Rates -- increased 3.6% compared to one year ago, accelerating from a 2.3% growth rate reported in the second quarter.
• Talent Solutions Gross Margin -- 47.4%, compared to 46.7% in the same period last year, benefiting from higher permanent placement revenue and increased spreads.
• Protiviti Adjusted Gross Margin -- 24.1%, up from 23% one year ago, partly due to cost actions and the use of margin-accretive contractors.
• Adjusted Operating Income -- $72.6 million, or 5.3% of revenue, compared to $61.2 million or 4.5% of revenue in the third quarter of the prior year.
• Accounts Receivable -- $826 million at the end of the quarter, with a days sales outstanding (DSO) measurement of 54.8 days.
• Q4 2026 Revenue Guidance -- $1.285 billion to $1.39 billion, with a midpoint representing 3% adjusted year-over-year growth.
• Q4 2026 EPS Guidance -- $0.36 to $0.46, with a midpoint of $0.41 that is 30% higher than the prior year.
• Restructuring Savings -- approximately $11 million per quarter in payroll savings resulting from cost actions implemented in the previous quarter.
• Capital Expenditures -- $60 million to $70 million projected for the full year 2026, which includes cloud computing implementation costs.
• U.S. Talent Solutions Revenue -- $670 million, up 3% year over year on an adjusted basis.
• Non-U.S. Talent Solutions Revenue -- $206 million, reflecting an adjusted 1% decrease year over year.
• Protiviti Non-U.S. Revenue -- $100 million, representing a 2% adjusted increase compared to one year ago.
• Cash Flow provided by Operations -- $66 million during the third quarter, with $59 million used for a cash dividend of $0.59 per share.
• Contract-to-Hire Revenues -- 3.4% of contract revenues, up from 3.2% in the third quarter of the prior year.

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RISKS

• Waddell stated, "Macroeconomic and geopolitical uncertainty continues. Including impacts to inflation and interest rates," noting that clients are navigating these factors as they make hiring decisions.
• Buckley noted that the first quarter tax rate is typically volatile due to the vesting of employee stock compensation, with an expected range of 36% to 40% for the first quarter of 2027.
• Buckley indicated that first quarter consolidated operating margins have historically been 1 to 2 percentage points lower sequentially than the fourth quarter due to seasonal internal audit declines and compensation adjustments.

SUMMARY

Robert Half Inc. (RHI +21.96%) reported a return to year-over-year growth in its Talent Solutions segment and highlighted improving market conditions across its talent and consulting businesses. Management reported that global enterprise revenues were supported by strengthening demand in technology and finance specializations, while earnings per share grew at a double-digit rate. The company is experiencing a significant increase in demand for anti-money laundering remediation and compliance services within its Protiviti segment, driven by recent regulatory enforcement actions against large financial institutions. The company stated it is investing in artificial intelligence to improve matching algorithms and client experience, viewing the technology as a driver of demand for specialized talent rather than a replacement for professional roles.

• CEO Waddell reported that treasury department regulators imposed significant fines against multiple large financial institutions, stating, "seeing a meaningful increase in demand for AML remediation and compliance" that benefits both Protiviti and Talent Solutions through contractor usage.
• Waddell noted that generative AI is making it harder for employers to vet candidates, stating, "This increases the value of our candidate evaluation and vetting processes combining proprietary performance insights rigorous skills assessment, and the judgment of our recruiters."
• Protiviti's technology consulting practice achieved record quarterly revenues, supported by high demand for platform transformation, cybersecurity, and data-related engagements.
• Management indicated that enterprise-level clients typically recover more quickly than small and midsized businesses, although they are observing signs that the latter group is beginning to catch up.
• The company reported that 80% of the largest global financial institutions are clients of Protiviti, providing a strong platform for the expanding risk and compliance business.
• Waddell characterized the recent improvement in Talent Solutions as a steady Rise that has continued for several quarters, though he noted the absence of a traditional "clearing event" that usually marks the start of a broad upcycle.
• The company expects Protiviti to return to year-over-year revenue growth in the fourth quarter of 2026, driven by the diversified pipeline and regulatory project demand.

INDUSTRY GLOSSARY

• AML: Anti-Money Laundering; refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.
• Contract-to-Hire (Conversions): A process where a client hires a contract professional as a full-time employee, resulting in a fee for the staffing firm.
• DSO (Days Sales Outstanding): A measure of the average number of days that it takes a company to collect payment after a sale has been made.
• Protiviti: Robert Half's global consulting subsidiary focused on internal audit, risk, and technology consulting.
• Talent Solutions: The segment of Robert Half's business that includes contract and permanent placement services for specialized professional roles.

Full Conference Call Transcript

Operator: Please stand by. Hello, and welcome to the Robert Half Third Quarter 26 Conference Call. Today's conference call is being recorded. Please press star and the number 1 on your telephone keypad. Our host for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half and Mr. Michael C. Buckley, Chief Financial Officer. Mr. Waddell, you may begin.

Keith Waddell: Hello, everyone. We appreciate your time today. Before we get started, I would like to remind you that the comments made on today's call contain forward looking statements, including predictions and estimates about our future performance, These statements represent our current judgment of what the future holds, However, they are subject to the risks, and uncertainties that could cause actual results, to differ materially from the forward looking statements. These risks and uncertainties are described in today's press release and our most recent 10-Ks and 10-Q filed with the SEC. We assume no obligation to update the statements made on today's call.

During this presentation, we may refer to certain non-GAAP financial measures as adjusted revenue growth excludes the impact of billing day variations and foreign currency exchange rates. Adjusted gross margin, SG&A, and operating income reflect the combining of investment gains and losses related to employee deferred compensation plans with corresponding changes in those obligations. These items have no impact on reported net income. Reconciliations and additional information are included in the supplemental schedules to our earnings release. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website roberthalf.com. For the third quarter of 26, global enterprise revenues were $1.359 billion roughly flat with last year on an adjusted basis.

Talent Solutions returned to adjusted year over year revenue growth for the first time since 2022 with revenues increasing 2%. Global enterprise earnings exceeded the midpoint of our third quarter guidance. Hiring activity continues to improve. Supported by gradually improving market conditions. Demand for risk and compliance consulting services also showed encouraging signs of improvement during the quarter. Our combination of innovative technology specialized expertise and high touch client service positions us well to deliver the talent and consulting solutions clients need to advance their business priorities. Net income per share in the third quarter was $0.49, up 14% from $0.43 a year ago. This marked the first year over year increase in quarterly earnings per share since 2022.

Cash flow provided by operations during the quarter was $66 million In September, 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 17% in the third quarter. Now I will turn the call over to our CFO, Mike Buckley.

Michael C. Buckley: Thank you, Keith. Hello, everyone. As Keith noted, global revenues were $1.359 billion in the third quarter. On an adjusted basis, third quarter Talent Solutions revenues were up 2% year over year. US talent solutions revenues were $670 million, up 3% from the prior year's third quarter. Non-U.S. Talent Solutions revenues were $206 million, down 1% year over year. Our contract talents operations achieved adjusted year over year revenue growth of 1%, and permanent placement operations delivered 6% growth. We conduct Talent Solutions operations through offices in the United States and 18 other countries. In the third quarter of 26, there were 64.6 billing days compared to 64.2 billing days in the third quarter 1 year ago.

The fourth quarter of 26 has 61.1 billing days compared to 61.4 billing days in the fourth quarter of 25. Billing days for the 4 quarters of 27 will be 61, 63.7, 64.5, and 61.5 for a total of 251.2 billing days in the year. Currency exchange rate fluctuations during the third quarter had a de minimus impact to reported revenues. Contract Talent Solutions bill rates for the third quarter increased 3.6% compared to 1 year ago, adjusted for changes in the mix of revenues by functional specialization currency, and country. This rate for the second quarter was 2.3%. Now let's take a closer look at results for Protiviti.

Global revenues in the third quarter were $483 million. $383 million of that 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. US Protiviti revenues were down 5% while non US Protiviti revenues were up 2% compared to 1 year ago. Protiviti and its independently owned member firms serve clients through locations in the United States and 27 other countries. Turning now to gross margin. In contract talent solutions, third quarter gross margin was 39.3% of applicable revenues, versus 38.9% in the third quarter 1 year ago.

Conversion, or contract to hire revenues were 3.4% of contract revenues in the current quarter compared to 3.2% in the third quarter of 25. Our permanent placement revenues were 13.4% of consolidated Talent Solutions revenues in the current quarter compared to 12.9% in the third quarter of 25. When combined with Contract Talent Solutions gross margin, overall gross margin for talent solutions was 47.4% of applicable revenues in the current quarter compared to 46.7% in the third quarter of 25. For Protiviti, gross margin was 24.2% of Protiviti revenues in the third quarter and 20.9% in the third quarter 1 year ago. Adjusted gross margin for Protiviti was 24.1% for the quarter just ended compared to 23% last year.

33.6% of global revenues in the third quarter compared to 36.2% in the same quarter 1 year ago. Adjusted 33.8% for the quarter just ended compared to 33.5% 1 year ago. 43.2% of Talent Solutions revenues in the third quarter versus 48.2% in the third quarter of 25. Adjusted Talent Solutions SG&A costs were 43.4% compared to 43.9% for the third quarter 1 year ago. Third quarter SG&A costs for 16.4% of Protiviti revenues compared to 15.5% for the same quarter 1 year ago. Reported operating income for the third quarter was $75 million. Adjusted operating income was $73 million in the quarter or 5.3% of revenues. This compares to $61 million or 4.5% of revenues 1 year ago.

Third quarter adjusted operating income for Talent Solutions was $36 million or 4% of revenues. This compares to $24 million or 2.8% of revenues last year. Adjusted operating income for Protiviti in the third quarter was $37 million or 7.7% of revenues, Adjusted operating income for Protiviti in the third quarter 1 year ago was $37 million or 7.5% of revenues. Our third quarter 26 income statement includes a $2 million loss from investments held in employee deferred compensation trusts. This is completely offset by an equal amount of lower employee deferred compensation costs which are reflected in SG&A expense and direct costs. As such, it has no effect on our reported net income.

Our third quarter tax rate was 33% in both the current quarter and the third quarter 1 year ago. At the end of the third quarter, accounts receivable were $826 million and implied days sales outstanding, or DSO, was 54.8 days. Before we move to fourth quarter guidance, let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing days. Contract Talent Solutions exited the third quarter with September revenues up 1% versus the prior year. The same as the 1% increase for the full quarter. Revenues for the first 2 weeks of October are up 2% compared to the same period last year.

Permanent placement revenues in September were up 5% versus September 2025. This compares to a 6% increase for the full quarter. For the first 3 weeks in October, permanent placement revenues were up 5% compared to the same period in 2020 in 2025. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. But as you know, these are very brief time periods We caution against reading too much into them. With that in mind, we offer the following fourth quarter guidance. Revenue, $1.285 billion to $1.39 billion Income per share $0.36 to $0.46.

Mid point revenue of $1.335 billion or 3% higher than the same period in 2025 on an adjusted basis. Midpoint earnings per share of $0.41 and are 30% higher than last year. Our midpoint revenue guidance for the fourth quarter reflects year over year revenue growth of 3% for Talent Solutions and 2% for Protiviti. The major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year over year for Talent Solutions up 1-5%. For Protiviti, flat to up 4%. Overall, up 1-5%. Adjusted gross margin percentages, contract talent, 38-40%. Protiviti, 22-25%. Overall, 37-40%. Adjusted SG&A as a percentage of revenue for Talent Solutions, 43-45% For Protiviti, 16-18%. And overall, 33-35%.

Adjusted operating income as a percentage of revenues for Talent Solutions, 2-4% for Protiviti, 6-8%, overall, 3-5%. You assume tax rate, 31-33%. And shares outstanding, 100.5 to 101.5 million shares. 2026 capital expenditures and cloud computing costs, $60 million to $70 million with $15 million to $20 million in the fourth quarter. For the first quarter of 27, we offer the following directional observations. Number 1, historically, Protiviti Q1 segment margins seasonally decline by mid-single-digit percentage points on a sequential basis. There are 2 primary drivers, Internal audit revenues are negatively impacted as clients focus instead on annual financial statements and related external audits.

In addition, Protiviti employees receive annual comp compensation adjustments effective January 1, which are recovered through pricing adjustments realized as client contracts are negotiated. Segment margins then improve accordingly. Based on this, first quarter consolidated operating margins have historically been 1 to 2 percentage points lower sequentially than the fourth quarter. Number 2, there is typically more variability in the Q1 tax rate compared to other quarters. Related to the vesting of our employee stock compensation awards. We currently expect the Q1 tax rate to be between 36-40%. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC file. Now I will turn the call back over to Keith.

Keith Waddell: Thank you, Mike. Our third quarter results reflect continued improvement in our Talent Solutions operations and Protiviti both contract talent solutions and permanent placement achieved year over year revenue growth Technology remains the strongest performing practice group within contract talent solutions, while finance and accounting also returned to year over year revenue growth. Across markets, clients remain focused on securing specialized expertise for high priority initiatives, particularly in the areas such as technology modernization, data, cyber security, and IT infrastructure. Small and midsized businesses continue to face significant challenges finding the skill talent they need. According to latest NFIB data, labor quality and availability is a top business problem reflecting a persistent skills gap.

That highlights the value of Robert Half's ability to connect clients with highly experienced professionals can make an immediate impact. Macroeconomic and geopolitical uncertainty continues. Including impacts to inflation and interest rates. Against this backdrop, organizations large and small remain resilient. And are steadily increasing their investment and opportunities to modernize operations and strengthen their competitive position. Whether implementing new technologies, improving productivity, or advancing strategic initiatives organizations need specialized talent and expertise to execute effectively. These investments create opportunities for our talent solutions and consulting services. Highly skilled professionals remain difficult to find, particularly in specialized disciplines, in demand candidates have choices and remain focused on flexibility career development, and competitive compensation.

These conditions apply to Robert Half's strings, our ability to quickly connect employers with specialized talent possessing the skills and experience organizations need. AI has increasingly become part of how work gets done. Across the professions we serve. Rather than broadly displacing specialized roles, these technologies are instead adding to the skills employers value and increasing the importance of professionals who compare strong functional expertise with AI fluency critical thinking, and sound judgment. The ability to assess and validate AI generated outcomes is becoming an increasingly important part of that skill set.

At the same time, the growing use of generative AI by job seekers is making it more challenging for employers to distinguish between candidates stated qualifications and demonstrated capabilities. This increases the value of our candidate evaluation and vetting processes combining proprietary performance insights rigorous skills assessment, and the judgment of our recruiters to help clients hire with greater confidence. As these challenges become more widespread, our ability to identify and validate highly capable talent represents an increasingly important competitive advantage. Beyond its impact on the hiring process, AI adoption is also creating new opportunities for specialized talent.

Whether related to AI exploration or for implementation across their operations, we are seeing growing demand for highly qualified talent to support this transition. This includes professionals with expertise in technology, data, finance, and business transformation, as well as those who can apply emerging technologies with their respective disciplines. These evolving requirements reinforce the value of our specialized recruiting expertise and deep understanding of the skills employers need. Protiviti's results exceeded our expectations for the quarter with every major solution or capability area above forecast. Technology consulting again posted all time high quarterly revenues with high demand for platform transformation cybersecurity, and data related and AI engagements.

The risk and compliance practice made significant progress during the quarter which is expected to continue. Leading the way were engagements to help clients address existing enforcement actions where regulators required further improvements to the quality and effectiveness of their anti money laundering program. Demand across Protiviti's broader solution offerings remain solid with a growing and diversified pipeline of opportunities. We expect Protiviti to return to year over year revenue growth in the fourth quarter. Our ability to strategically leverage contract professionals through our talent solutions business remains a distinct competitive advantage enabling us to deliver flexible solutions for clients while strengthening collaboration across the enterprise. Encouraged by the progress in our business and remain confident in the opportunities ahead.

As businesses navigate changing technology, work force, and operational requirements, we see continued opportunities to help clients access the expertise they need to adapt, execute, and grow. Our purpose has never been more relevant. Helping companies succeed through specialized talent and consulting expertise while helping people build meaningful careers. Backed by our trusted brand, exceptional people, innovative capabilities, and diversified business model, we remain confident in our ability to create long term value for our clients, our employees and our shareholders. Finally, we want to recognize and thank our employees around the world for their continued dedication to our clients.

Their commitment is reflected in Robert Half's recent accolades, including being named among Fortune's Best Workplaces in Consulting and Professional Services, Forbes World's Best Employers, and Forbes world's top companies for women. Now, Mike and I would be happy to answer your questions. Please ask just 1 question and a single follow-up as needed. If there is time, we will come back for additional questions.

Operator: Thank you. At this time, if you would like to ask a question, If you are 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 2 on your touch tone telephone. Again, that is star 1 if you would like to signal with questions. And your first question comes from the line of Andrew Steinerman with JPMorgan.

Andrew Steinerman: Keith, could you just help us dissect the pickup within Protiviti, particularly I am curious about the demand for AML compliance services. Earlier in the year, we said that sort of like the regulatory backdrop was not as fierce for AML compliance. Has something changed? You know, obviously, you are saying the demand for the risk of compliance is 1 of the drivers. To bring Protiviti back to growth in the fourth quarter. Is it the biggest driver that is changed kind of third into the fourth quarter for Protiviti?

Keith Waddell: The answer is yes. So during the last 90 days, treasury department regulators imposed significant fines and major enforcement actions against multiple large financial institutions. They. Most of them were in the news. And they related primarily to prior consent orders where the remediation efforts were found to be deficient. And this put banks generally on notice that AML compliance was still a top priority in part because it has direct links to national security And so these actions require many activities, including historical look backs significant increases in transactions and file review volumes, Often, these involve third party consultants to clear, Protiviti is fortunate to have a very strong presence in AML.

Have broad relationships across financial institutions, It does business with over 80% of the largest financial institutions globally. Seeing a meaningful increase in demand for AML remediation and compliance And the really good news is it benefits the entire organization because a significant amount of the work comes from contractors sourced through Talent Solutions. So it is a win for everybody. Makes total sense. Thank you, Keith.

Operator: And your next question comes from Mark Marcon with Baird.

Mark Marcon: Good afternoon, and encouraging to see the strong results. Keith, you mentioned your script a number of factors that are basically driving the growth in the talent solutions. And going from how difficult it is to find verified talented individuals and your ability to do that as well as a whole slew of new skills that are coming to the floor. And so the question is, you know, to what extent do you think that those trends make you a little bit more resistant to any sort of macro downturn that we could potentially have, given where fuel prices are, where interest rates are, just kind of the geopolitical environment.

And then as a follow-up to that, you know, if we can keep going, you know, what does that what does that say with regards to the margin profile for next year? Because the incremental margins look like they are pretty good, and it seems like you have a lot of excess capacity. I know it is a long question, but I just wanted to drill down on those. 2 elements.

Keith Waddell: Well, I think the first 1 was related to resilience. If the macro weakens. And I would say in addition to its difficult for clients to find talent, particularly verified talent for the reasons we have talked about. Unemployment is low, generally speaking. Which also makes it harder for our clients. The new skills are more difficult for our clients to source on their own. And we can also correlate existing skills to needed new skills in a way that it is hard for our clients to do on their own. And so I clearly think we are positioned well relative to prior cycles. Because of the lower unemployment. Still, what, 4.2% in the U.S.

In part because of the newer requirements. In part because verification of skills, is more important than ever with AI. And so we feel relatively good about resiliency. And as to margin profile, as you are already seeing even with low single digit growth that we have seen this past quarter, that we are projecting for the coming quarter. The combination of a little higher gross margin, a little SG&A leverage, we have got nice double digit increase in increases in operating income. At midpoint for Q4, that is up 30%. With some luck, that will be even more as we as we move forward.

And so coupled with Protiviti's strength, particularly in regulatory compliance, we are pretty bullish about margin possibilities. that is great. And can you just you have had really nice improvements in terms of Protiviti margins. Do you think that, that can also continue? I know leverage that you have got on the on the Talent Solutions side, but you know, I do not know if you have that same excess capacity with regards to AML. Well, I would say remember the cost actions. That they took just last quarter. And so those cost actions are a big contributor to the better margins because the remaining people are higher chargeable or more utilized, if you will.

Use of contractors by Protiviti is margin accretive and these AML projects are very contractor heavy. So that is a good thing for Protiviti's margins. But as we have said many, many times for many, many quarters, the plan for Protiviti is to have double digit operating margins, and that continues to be the plan. And so I think they made tremendous progress in a very short period of time with their margins. And this new demand and additional revenue that comes from more AML is even better news. And let's not forget that technology consulting is still Protiviti's largest practice group. And it just again did all time high quarterly revenues. that is terrific. Thank you.

Operator: And your next question comes from the line of Trevor Romeo with William Blair.

Trevor Romeo: Hi, good afternoon. Thanks for taking my questions, Keith and Mike. I wanted to actually continue kind of on the margin theme, but shift to gross margins for the contract talent solutions business. Because I think the bill rates accelerated nicely, I think, over a percentage point. And your gross margins expanded even adjusted for the conversion. So maybe you could just talk about that a little bit more, I guess, in terms of mix. Like, are you starting to see more movement in terms of highly skilled talent or FTAP placements accelerating, or just any other factors that might be helping the bill rates and the gross margins for the contract business right now?

Keith Waddell: So year on year, we are up 40 basis points in contract gross margin. Half of that is conversions. Which is a derivative of the strength and perm placement. The other half is pure spreads. And we have increased our spreads over the last year. Part of that is mix, As we have said, we have moved to higher skilled. Part of that is mix as to FTAP. Which is recovering because it was impacted the most. On the downside the last few years. And part of it is just kind of disciplined execution because gross margin maintenance and defending those have always been a priority at Robert Half and will continue to be.

Trevor Romeo: Okay. that is great. And then I guess on the first quarter directional observations that you gave, of course, appreciate the comments on margins and the tax rate. I guess, as you stand today with your current visibility, is there anything in terms of the top line that would tell you kind of differently than normal seasonality for revenue at this point? Or just how would you kind of I do not know, message the trends that you might see there?

Keith Waddell: I think the seasonal trend is a seasonal trend that will be around for a long, long time. And so because of the internal audit crowd out, as clients focus on external audit, And because of all the compensation adjustments that all fall on the same first day of the year, you are gonna have those impacts. But you recover from them the rest of the year Clearly, this improvement in regulatory risk and compliance will help the revenue side, but that does not directly impact internal audit. And internal audit is the 1 where they have the crowd out phenomenon as I just spoke to.

And I guess in terms of the Talent Solutions business, is there anything maybe different than you would normally expect? Not really. it is it is always a little quirky about what day of the week or month that the you know, the holidays fall. But that. that is just business as usual. But other than that, in Talent Solutions, we have seen steady, consistent, sequential improvement day by day, week by week, it is not a hockey stick. But it is a steady rise that we have seen for a few quarters now. That we see no reason would not continue. Yep. Alright. Well, great. Thank you, Keith.

Operator: And the next question comes from Kartik Mehta with Northcoast. Research.

Kartik Mehta: Hey, good afternoon. Just to maybe drill down a little bit on Protiviti. Obviously, the first quarter, talked about some seasonality. As you look at the fourth quarter, there any seasonality or lumpiness? I know the holidays probably have an impact, but I am curious based on the growth guidance you gave, if there would be any onetime issues, or this is just a consistent improvement in the business.

Keith Waddell: Well, I would say the holiday impacts Protiviti more so than Talent Solutions because many of their clients do a soft close. Between Christmas and New Year's. And so there is that impact, which remains But we have dialed in the benefit of the additional anti money laundering demand in the in this fourth quarter, but it is not a 1 off.

Kartik Mehta: Then just on the talent solutions, you know, when you look at SMB customers and enterprise customers, any difference or is the recovery been pretty broad based where both are participating?

Keith Waddell: I would say that enterprise traditionally recovers sooner and more quickly. that is been the case this time around. SMB is starting to catch up a bit. And so that is good news. But enterprise always gets a head start. Perfect. Thank you so much. I appreciate it.

Operator: And your next question will come from Keen Fai Tong with Goldman Sachs.

Keen Fai Tong: Hi, thanks. Good afternoon. Perm placement revenue grew 6% in the quarter, and that was well ahead of contract talent growth. To what extent would you say the strength in perm placements serves as a leading indicator of a broader hiring recovery. And, historically, what lag have you seen between firm placement and contract staffing?

Keith Waddell: And so, George, I would say they are coincident. And in fact, if you go to our website, we have got a slide that shows probably for 20 years we superimpose growth. Year over year growth rates for perm over year over year growth rates for contract. And my conclusion, looking to those graphs, is that they are coincident. Because perm placement always gets hit harder, on the downside, it is starting from a lower point at a lower base and comes out stronger on the upside. And I think that is exacerbated by low unemployment that we are currently in. Added to by this need for validation because of AI, I think makes perm relatively speaking, even more positive.

And so effectively easier comps because it gets a bigger hit on the downside, and because of low unemployment, more demand. Because it is harder for clients to hire themselves.

Keen Fai Tong: Got it. that is helpful. And then Talent Solutions has seen sequential improvement now for a couple of quarters, with contract revenue up 1% and then bill rates up about 3.5%, would you say hours worked or active contract placements have begun to grow year over year at this point, and when would you expect to see volumes to become a positive contributor to revenue growth?

Keith Waddell: Well, I think for the masterwork, the volumes are still somewhat down. But they are increasingly less down. And the trend is good. For the reasons we have talked about. Got it. Thanks very much.

Operator: And the next question is from Manav Patnaik with Barclays.

John Ronan Kennedy: Hi. Good evening. This is John Ronan Kennedy on, or good afternoon rather, on for Manav, thank you for taking our questions. Question on technology has led the recovery in finance and accounting has returned to growth. Are you beginning to see demand broaden beyond mission critical initiatives into more discretionary hiring or projects? Or is the recovery still concentrated in areas clients simply cannot defer?

Keith Waddell: Well, it is primarily areas they cannot defer. But to the extent they think or decide that there are projects that are, you know, critical to their competitiveness, They decide they need to modernize to get ready for AI, whatever that is going to mean. They are willing to spend selectively. But in contrast to prior cycles, that corresponded to overall recessions. Typically, the ending of an overall recession is a clearing event there is an all clear bell and everybody, including our SMB clients, feel more positive and demand overall increases. I would say, so far, it is still more selective. And the inflation concerns, the geopolitical concerns, all add to that.

Our clients are grinding their way through those uncertainties. But we have not yet had the clearing event you have had traditionally at the beginning of upcycles. Got it. Thank you.

John Ronan Kennedy: And then a question for Mike, please, on Talent Solutions operating margin range. I think it is guided to 2% to 4% in Q4. Can you help us think about what separates the low end from the high end, whether it is the revenue volume SG&A leverage? Or does GM gross margin mix remain an equally important swing factor?

Keith Waddell: Well, we always give a range. Right? We focus heavily on the midpoint of that range. But there is no magic. I mean, how impactful will the holidays be that is particularly variable as it relates to perm placement. If you look back over time, the variability in perm placement Q4 because of the holidays is more than the variability in contract because of the holidays. But I would not point to anything specific as to what is going to drive whether it is the midpoint low or high other than this client demand. Fair enough. Thank you.

Operator: And the next question comes from Jeffrey Silber with BMO Capital Markets.

Jeffrey Silber: Great. Thanks so much. Now that you have returned to growth for year over year growth Talent Solutions and you are guiding for that to happen in Protiviti in the current quarter. Can you remind us what you think the long term growth rates are for those businesses? I know they are cyclical, but maybe if we are looking peak to peak, any color would be great.

Keith Waddell: Well, again, it is a long term question. We typically think mid-single-digits for talent solutions. And for Protiviti, because it has such a small market share, relative to the big 4, and there is so much opportunity there. We would we would expect even higher kind of maybe from mid-singles to low-doubles. But again, those are long term educated guesses, maybe a way to call it.

Jeffrey Silber: that is what I asked for. So that is great. that is really helpful. And then as a follow-up, you had mentioned your remarks, you talked about some of these big remediation projects. Can you tell us roughly how long those last Is that something that might be rolling off in the first quarter?

Keith Waddell: Well, expectation is they last a lot longer than 1 quarter. I think if you look back, Protiviti's had some of those that have lasted years. Now remember, these are not brand new consent orders or enforcement actions. These are regulators coming in, seeing what is been done so far and says that is not enough. And so it is not a brand new start, but the point is these clearly have legs, and they are expected at a minimum to have multiple quarter legs. But it depends on the client. It depends on how aggressive they are. It depends on their internal resources, willingness to use external resources.

There are a lot of variables but it is not a quick in and out process. To say the least. Okay. Great. that is helpful. Thanks so much.

Operator: And the next question will come from Tobey Sommer with Truist.

Tobey Sommer: Thank you. I wanted to ask a question about your clients about the seasonality of profit Impacts with tax and operating income, etcetera, and margin in Q1. what is the what is the implied EPS impact at the bottom line from those factors?

Keith Waddell: Oh, well, I am not sure For this purpose, we have separated them and converted them to EPS. We basically said, collectively, at the pretax operating margin line, they typically cause a 1% to 2% pretax operating income impact I guess we could do the math and convert that to EPS. But, again, it is orders of magnitude. that is what we are talking. The tax rate in the first quarter is all over the place. Because of stock compensation And the issue is typically, you know, at what price were compensation grants made to employees versus when they vest, what tax deduction do you get for those? And the differential, positive or negative, impacts your tax rate.

And so that is why that tax rate in the first quarter is particularly volatile. I think last year, it was over 50%. The year before that, it was 20%. And that is heavily impacted by stock prices. Makes sense.

Tobey Sommer: I wanted to ask about the opportunity for you to leverage Talent Solutions with the areas that are growing in Protiviti. Is the current mix of demand sufficient so that you are. you do have opportunities for the 2 businesses to work together and sort of maximize your revenue and profit from those. And maybe could you refresh us on what areas of Protiviti should there be an increase in demand would be the sort of optimal ones? To leverage that relationship?

Keith Waddell: Well, the most contractor centric large projects Protiviti has are the risk and regulatory in this case, money laundering projects, that are very large and they are very contractor centric. And having access to those contractors and to be able to scale as quickly as we can scale for our clients. Is unquestionably a competitive advantage. And so risk and compliance to that practice has always been very contractor friendly. And it is loved by the enterprise as a whole, as I said earlier, because of the involvement of contractors. Technology consulting, which is taking advantage of the modernization AI adjacent, AI getting ready, that is also an area for contractors. Even internal audit.

Internal audit is an opportunity where Protiviti uses contractors as well. And so while it took us a while to get the collaboration we now have, with the success we have enjoyed with contractor usage it is unquestionably now a competitive advantage. And these newer projects that we talk about today we are scaling significantly and quickly in a way it is hard for competitors to do. it is a wonderful thing.

Operator: And our next question comes from Kevin McVeigh with UBS.

Bruno: Good afternoon. This is Bruno for Kevin McVeigh. Congrats on the results. Can you please confirm whether there was any benefit on the Q4 EPS guide from the last quarter restructuring?

Keith Waddell: Well, to the extent we took cost out of the business, those certainly accrue to the fourth quarter as well. And my recollection is, and correct me in the room if I am remembering wrong, it was about an $11 million a quarter benefit from payroll savings alone which clearly benefits the fourth quarter. Thank you.

Operator: And the next question comes from Stephanie Benjamin Moore with Jefferies.

Stephanie Benjamin Moore: Great. Good afternoon. Thank you so much. I wanted to touch on your AI investments I know that you have implemented a lot of investments over the last 12 months or so. Could you talk a bit about what you have seen thus far in terms of fill rates, increased productivity, at the individual level. And as we think about an up cycle, what does this mean in terms of your own head count with some of these tools? Thank you.

Keith Waddell: Well, I would say that initially, our tools are more focused on client and candidate experience than they are internal recruiter productivity. Not that we are not getting any, but we are focused on improving matching. And we have spent a lot of money improving our matching algorithms including upgrading them to the larger. To the to the latest large language models. On the client side, we have spent a lot of money in AI trying to have more of an intelligent pipeline approach to which clients we reach out to and why And it is it is kinda like the Amazon If you like this, then you will like that.

And so for our people, if we are dealing with business with this client, this client has this kind of profile, Here are other companies with a similar profile. Here's news stories and other information that we have access to about those companies And further, do we have any activity whatsoever across our organization all of which give us a reason to call and have something to talk about. And so, again, I would say, rather than focus first on cost savings and productivity, it is more around expanding access to clients access to candidates. Now having said that, particularly in the case of prioritizing leads, that definitely has had a productivity improving quality. For our people.

But as quickly as I say that, I think many have learned, and we would concur, that translating individual productivity to organizational productivity, there is a lot of slip between cup and lip. When you are trying to look at your organizational savings versus taking individual savings you might get in a in a given location and extrapolate that to everybody that works for you. And so we feel good about our investments. We are focused on client and candidate experience first. We are not ignoring the productivity gains for our people we are getting some. But we are more focused on client and candidate experience. Understood. Thank you.

Stephanie Benjamin Moore: And then maybe just for a follow-up and maybe I just maybe misunderstood. The what you your comment. But maybe just talk a little bit about as you think about focusing on roles in different end markets or different segments. And maybe you can talk about how that has changed as we think about this cycle versus prior cycles and if there are some targeted verticals that you are now focused on versus historically. Thank you.

Keith Waddell: I would say from a vertical point of view, probably the biggest change is in technology. And historically, our SMB clients the demand was for help desk PC technicians very operational driven, roles. And as technologies migrated over the years such that even smaller businesses have tech development requirements. That historically they did not have. Plus, as we focus more and more on the on midsides and mid cap companies as it relates to technology, Our mix of technology to the total, and I have not looked at it in a while.

But if you take a 10-year view, my guess is you would see technology is a much larger portion of the total today than it was 10 years ago. But that is in part because of the demand for our core SMB base has gravitated toward tech development. Because of how technology's changed. Understood. Thank you.

Operator: Okay. That was our last question. Thank you very much. Thank you. This concludes today's teleconference. If you missed any part of the call that 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.