Robert Half Earnings Call Signals Early Recovery Hints

Robert Half International ((RHI)) has held its Q4 earnings call. Read on for the main highlights of the call.

Robert Half Balances Early Signs of Recovery With Profit Pressures in Latest Earnings Call

Robert Half International’s latest earnings call struck a cautiously constructive tone, as management pointed to a long-awaited return to sequential revenue growth, firmer pricing and strong cash generation, even while acknowledging continued year-over-year revenue declines, thinner margins and a sharp drop in quarterly earnings. Executives framed 2026 as a transitional year: trends are improving week by week, but profitability and earnings per share remain constrained in the near term, particularly by elevated tax charges and margin pressure at the Protiviti consulting unit.

Enterprise Revenue and Sequential Momentum

Robert Half reported Q4 2025 global enterprise revenue of $1.302 billion, down 6% year over year on a reported basis and 7% on an adjusted basis. Despite the decline, the company emphasized a key inflection point: both talent solutions and the overall enterprise returned to positive sequential revenue growth on a same-day, constant-currency basis for the first time since early 2022. Weekly revenue trends continued to improve into January, suggesting that while the broader demand environment remains subdued versus last year, underlying activity levels are slowly firming.

Strong Operating Cash Flow and Capital Returns

Operating cash generation was a notable bright spot. Q4 cash flow from operations reached $183 million, up 18% from the prior year’s fourth quarter. For full-year 2025, free cash flow was sufficient to fully cover the company’s $0.59 per-share quarterly dividend (totaling $59 million in Q4 alone) and still support roughly $100 million of share repurchases. This combination underscores Robert Half’s ability to maintain shareholder returns even amid cyclical revenue pressure, providing a buffer for investors focused on capital discipline and balance sheet strength.

Protiviti Revenue Stability and International Strength

Protiviti, the company’s consulting and risk advisory arm, delivered Q4 revenue of $479 million, with adjusted revenue down a modest 3% year over year. While the U.S. business remains under pressure, non-U.S. Protiviti revenue grew 9% year over year, highlighting geographic resilience and international demand. Management stressed that Protiviti remains a core, profitable growth platform over time, even as it works through a reset following the anniversary of unusually large prior-year project work.

Improving Pricing Trends on Contract Roles

Pricing in contract staffing continued to firm, supporting margins despite softer volumes. Contract talent solutions bill rates rose 3.2% year over year on an adjusted basis (stripping out mix, currency and country effects). That pricing leverage helped keep contract staffing gross margin essentially flat at 39.2% versus 39.1% in the prior-year quarter. The ability to pass through higher bill rates in a mixed macro backdrop suggests Robert Half still retains solid pricing power with clients, an important lever if volume growth accelerates later in the cycle.

Talent Solutions Gross Margin Resilience

In the company’s broader talent solutions segment, gross margin showed resilience despite revenue declines. Overall talent solutions gross margin came in at 46.7% of applicable revenue in Q4, slightly above the 46.4% recorded a year ago. Contract-to-hire revenue remained stable at 3.2% of contract revenue, indicating that client appetite for flexible hiring arrangements has not materially deteriorated. This stability in mix and margin provides some protection to profitability as the volume recovery remains gradual.

Adjusted Operating Profit and Segment Profitability

Robert Half reported Q4 adjusted operating income of $43 million, representing 3.3% of revenue, highlighting that the business remains profitable but operating on thinner margins than in stronger cycles. At Protiviti, adjusted operating income was $34 million, or 7.1% of that segment’s revenue, underscoring that the consulting arm continues to contribute positively despite recent margin compression. Management portrayed these segment-level profits as a base from which margins can expand as demand improves and cost ratios normalize over time.

Corporate Recognition and Strategic Positioning

Beyond the numbers, the company emphasized its strategic positioning and brand strength. Robert Half was named one of Fortune’s “Most Admired Companies” for the 29th consecutive year, while Protiviti again appeared on Glassdoor’s “Best Places to Work” list for the third straight year. Management linked these accolades to competitive advantages in attracting talent and clients. They also highlighted structural tailwinds—such as an aging workforce and lean staffing at small and mid-sized businesses—as well as emerging AI-related service opportunities, arguing that these long-term drivers can support demand for both talent and consulting services even through cyclical fluctuations.

Year-over-Year Revenue Declines

Despite better sequential trends, year-over-year comparisons remain negative. Adjusted Q4 enterprise revenue fell 7% versus the prior year, with talent solutions adjusted revenue down 9%. Within talent solutions, U.S. revenue declined 9% to $623 million, while non-U.S. revenue fell 8% to $200 million. Looking ahead to Q1 2026, the midpoint of guidance implies another roughly 5% year-over-year decline in adjusted enterprise revenue, underscoring that a full top-line recovery is still several quarters away even if the company is now past the trough.

Earnings and EPS Pressure

Profitability has borne the brunt of the downturn. Q4 reported net income per share dropped to $0.32 from $0.53 a year earlier, reflecting lower revenue, higher cost ratios and tax effects. Guidance for Q1 2026 calls for EPS in a wide range of $0.08 to $0.18, with a midpoint of just $0.13. Management flagged an unusually high projected Q1 tax rate of 56%–58% as a key driver of this near-term earnings pressure. While this elevated tax burden is expected to be transitory, it means investors should anticipate subdued EPS in the first quarter despite improving operating trends.

Protiviti Margin Compression

Protiviti’s profitability has softened even as revenue has held relatively steady. Q4 Protiviti gross margin declined to 21.9% on a reported basis and 22.8% on an adjusted basis, down from 24.9% and 25.1%, respectively, a year ago—roughly 230 basis points of adjusted margin contraction. Management attributed the decline to business mix and the anniversary of previously large projects that carried stronger margins. Restoring Protiviti margins closer to historical levels will be a key driver of consolidated earnings leverage when demand for advisory and project-based work normalizes.

Rising SG&A Ratios

Selling, general and administrative (SG&A) expenses have increased as a share of revenue, limiting operating leverage. Enterprise SG&A rose to 35.9% of revenue (34.6% on an adjusted basis), versus 34.1% (33.8% adjusted) a year earlier. In talent solutions, SG&A climbed more sharply to 47.6% from 44.4% (45.6% vs. 43.9% on an adjusted basis). These higher cost ratios partly reflect the company maintaining capacity and capability through the downturn, but they also delay margin recovery until revenue growth becomes more robust. Investors will watch for evidence that SG&A can be held in check as volumes rebuild.

Weak Permanent Placement and Month‑to‑Month Trends

Permanent placement remains the softest part of the portfolio and a drag on overall growth. Permanent placement revenue was down 11% in December versus the prior-year December, and the full quarter saw a 5.9% decline. Early Q1 data showed continued weakness, with the first three weeks of January down 9.4% year over year. Contract talent trends appeared somewhat better but still negative: December contract talent revenue fell about 8.9%, and the first two weeks of January were down 6.6%. The company is leaning more heavily on contract and project-based work as clients remain cautious on permanent hiring.

Low Adjusted Talent Solutions Operating Income

The talent solutions segment is currently operating with very slim profitability. Adjusted operating income in Q4 was just $9 million, equal to 1.1% of segment revenue, highlighting how sensitive this business is to revenue fluctuations. With SG&A elevated and permanent placement weak, only modest revenue declines can significantly compress margins. Conversely, even modest growth could produce outsized bottom-line improvement if the company can maintain pricing and gross margins while holding SG&A growth below revenue growth.

Elevated Q1 Tax Charge and Share-Based Tax Impact

Tax dynamics represent an additional headwind in the near term. For Q1, Robert Half expects a tax rate of 56%–58%, well above typical levels, driven largely by stock-based compensation vesting dynamics and a roughly $4.5 million tax charge tied to the current share price being below grant values. This one-off effect is estimated to shave about $0.05 per share from Q1 earnings. Management emphasized that tax rates should normalize to around 33%–35% for the rest of 2026, implying a more supportive backdrop for EPS after the first quarter.

Forward-Looking Guidance and 2026 Outlook

Looking ahead, Robert Half guided Q1 2026 revenue to a range of $1.26 billion to $1.36 billion, with a midpoint of $1.31 billion—about 5% lower year over year on an adjusted basis but consistent with continued positive sequential growth in talent solutions. Q1 adjusted operating margin is expected to decline roughly 1 percentage point from Q4, including a roughly 4‑point seasonal drop at Protiviti, reflecting typical early-year patterns and the heavy tax load. For full-year 2026, management’s midpoint assumptions call for adjusted revenue down 3%–6%, with talent solutions declining 4%–8% and Protiviti flat to down 4%. Targeted adjusted gross margins sit at 38%–40% for contract talent and 18%–21% at Protiviti, while adjusted SG&A is expected at 44%–46% of revenue in talent solutions and 15%–17% at Protiviti. This translates to modest adjusted operating margin ranges of 0%–3% for talent solutions, 2%–5% for Protiviti and 1%–3% overall. The company plans capital expenditures and capitalized cloud spending of $70 million–$90 million in 2026, with $10 million–$20 million front-loaded into Q1. Management reiterated that if current strengthening trends persist, a return to year-over-year revenue growth by the third quarter is achievable.

In sum, Robert Half’s earnings call portrayed a business that appears to be moving past the worst of the downturn but still wrestling with weak permanent hiring, higher cost ratios and temporary tax distortions. Sequential revenue growth, firm pricing and robust cash generation offer reasons for cautious optimism, while thin margins, Protiviti pressure and subdued 2026 guidance argue for patience. For investors, the story now hinges on whether the early signs of demand improvement translate into sustainable growth and margin expansion in the back half of the year and beyond.