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RH

ROBERT HALF INC. (RHI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 came in below Street: revenue $1.352B vs S&P Global consensus $1.409B* and EPS $0.17 vs $0.36*, as macro uncertainty and elongated decision cycles weighed on Talent Solutions; Protiviti grew modestly YoY but margins were hit by one-time cost actions .
  • Management executed corporate cost reductions in March/April (~$80M annualized savings), reducing Q1 EPS by ~$0.13 and positioning for sequential profitability improvement from Q2 onward .
  • Q2 2025 guidance brackets consensus: revenue $1.31–$1.41B (midpoint ~$1.36B vs Street $1.353B*) and EPS $0.36–$0.46 (midpoint ~$0.41 vs Street $0.40*), with adjusted operating margin guided to 3–6% and tax 31–35% .
  • Capital returns remain a priority: dividend raised to $0.59 (Mar 14, 2025) and ~650k shares repurchased for ~$39M in Q1; management reiterated intent to maintain and grow the dividend through the cycle .

What Went Well and What Went Wrong

What Went Well

  • Protiviti growth and pipeline remained resilient: Q1 Protiviti revenue $477M (as reported +2.7% YoY; adjusted +4.7% YoY) with weighted pipeline up YoY; management expects sequential growth into Q2 .
  • Pricing/mix tailwinds: Contract Talent bill rates rose +4.2% YoY (vs +3.4% in Q4), aided by mix shift toward higher-skill tech roles and applications/software work .
  • Structural cost actions: ~$80M annual savings (75% of a full-quarter benefit in Q2 for Protiviti; full run-rate from Q3), with management stating, “We reduced our administrative cost structure…Revenue-producing roles were not impacted” .

Selected quotes:

  • “Despite the uncertain outlook, we’re very well positioned to capitalize on emerging opportunities…” .
  • “Protiviti…achieved year-over-year revenue growth for the third quarter in a row…prospect and pipeline remain very strong” .
  • “We’d like to…retain the dividend…our intention [is] not only to keep it but to keep increasing it” .

What Went Wrong

  • Headline miss vs consensus: Revenue $1.352B and EPS $0.17 undershot S&P Global consensus $1.409B* and $0.36*; management cited “heightened economic uncertainty over U.S. trade and other policy developments” elongating cycles and suppressing hiring .
  • Talent Solutions volume pressure: Adjusted YoY revenue down ~11% with U.S. -10% and non-U.S. -15%; conversion-to-hire flat at 3.2% of contract revenues; permanent placement declines persisted albeit with early April stabilization .
  • Protiviti margin compression: Q1 included ~$8M one-time charges; adjusted GM fell to 18.1% (from 20.7% LY), with deleverage on bench impacting profitability .

Financial Results

Headline P&L by Quarter (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($B)$1.465 $1.382 $1.352
Diluted EPS ($)$0.64 $0.53 $0.17
Gross Margin % (Total, As Reported)39.0% 38.8% 36.9%
Gross Margin % (Total, As Adjusted)39.4% 38.9% 36.6%

Q1 2025 vs S&P Global Consensus

MetricQ1 2025 ActualQ1 2025 S&P Global Consensus*Result
Revenue ($B)$1.352 $1.409*Miss
Diluted EPS ($)$0.17 $0.36*Miss

Values with asterisks (*) retrieved from S&P Global.

Segment Revenue (oldest → newest)

Segment ($MM)Q3 2024Q4 2024Q1 2025
Finance & Accounting (Contract Talent)614.1 574.9 562.9
Administrative & Customer Support178.4 172.8 165.6
Technology160.2 158.0 152.5
Intersegment Elimination(122.3) (120.2) (117.9)
Total Contract Talent Solutions830.4 785.5 763.2
Permanent Placement123.3 108.1 112.1
Protiviti511.3 488.8 476.6
Total Service Revenues1,465.0 1,382.4 1,351.9

Q1 2025 YoY As-Reported growth rates: Finance & Accounting -12.3%; Admin & CS -17.2%; Technology -3.4%; Protiviti +2.7% .

KPIs and Operating Drivers

KPIQ4 2024Q1 2025
Billing Days (quarter)61.6; Q1 2025 expected 61.9; FY 2025 total 250.7 (Q2: 63.2; Q3: 64.2; Q4: 61.4) 61.9 (vs 62.8 LY); Q2 2025 63.2 (vs 63.5 LY)
Contract Talent Bill-Rate YoY+3.4% +4.2%
Conversion (Contract→Perm)3.2% of contract revenues 3.2% of contract revenues
Perm as % of Talent Solutions12.1% 12.8%
DSO (days)50.5 52.4
Cash Flow from Ops$155M (Q4) $(59)M (seasonal outflows)
Share Repurchases~1.0M shares; $77M (Q4) ~0.65M shares; $39M; 668,761 shares reported

Non-GAAP and one-time items

  • Q1 included ~$17M one-time charges to reduce ongoing administrative expenses: ~$9M in Talent Solutions, ~$8M in Protiviti; adjusted operating income was $19M (1.4% of revenue) .
  • Deferred compensation investment losses ($20M) fully offset within SG&A/direct costs; no net income impact .
  • Adjusted gross margin: Total 36.6% (vs 38.7% LY); Protiviti adjusted GM 18.1% (vs 20.7% LY) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025n/a$1.31–$1.41B; midpoint ~$1.36B New
EPS (Diluted)Q2 2025n/a$0.36–$0.46; midpoint ~$0.41 New
Adjusted Gross Margin % – Contract TalentQ2 2025n/a38–40% New
Adjusted Gross Margin % – ProtivitiQ2 2025n/a21–24% New
Adjusted SG&A % – EnterpriseQ2 2025n/a33–35% New
Adjusted Operating Income % – OverallQ2 2025n/a3–6% New
Tax RateQ2 2025n/a31–35% New
Shares OutstandingQ2 2025n/a100–101M New
Capex + Capitalized CloudFY 2025$75–$95M (from Q4 call) $75–$95M; Q2: $15–$25M Maintained
Cost Savings (Run-Rate)Starting Q2 2025n/a~$18M in Q2; ~$20M in Q3/Q4; ~$80M annual New
DividendQ1 2025$0.53 (Dec-24) $0.59 (paid Mar 14, 2025) Raised

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Macro/business confidenceWeekly trends stabilized; confidence improving on inflation and rate cuts Confidence “surged” post-elections; activity up but starts lagging; billing-day/FX headwinds quantified Confidence moderated on U.S. trade/policy uncertainty; cycles elongated Improving → Cautious
Protiviti growth/pipelineVery strong sequential/YoY gains; breadth across solutions Up ~5% (as adjusted); strong pipeline (risk/compliance standout) 2.7% as-reported; 4.7% adjusted; pipeline weighted up YoY; sequential growth expected Growth intact; near-term margin pressure
Cost actions/efficiency—Held internal staff; trough-like margins; set up for recovery ~$80M annualized admin cost reductions; revenue roles preserved New, supportive
AI/technology enablementProduct/app enhancements recognized (w3 awards) —AI guiding recruiter outreach; better conversion, fewer calls Building
Pricing/mix—Bill rates +3.4% YoY Bill rates +4.2% YoY; moving up-skill curve in tech Strengthening
International/Europe—Modestly softer vs U.S.; comps important Non-U.S. Talent Solutions -15% YoY; Germany defense/infra opportunity cited Softer near term

Management Commentary

  • Strategy and positioning: “We’re very well positioned to capitalize on emerging opportunities…through the strength of our industry-leading brand, our people, our technology and our unique business model” .
  • Cost discipline without impairing growth capacity: “We reduced our administrative cost structure…Revenue-producing roles were not impacted…annual cost savings of $80 million” .
  • Dividend commitment: “We’re…committed…to raise that dividend…our intention not only to keep it but to keep increasing it” .
  • Demand lens: “Client and job seeker caution continues to elongate decision cycles and subdue hiring activity and new project starts” .

Q&A Highlights

  • Protiviti mix and margins: Non-discretionary solutions (regulatory remediation/internal audit) underpin demand; margin affected by bench deleveraging in Q1, with better sequential flow-through expected as utilization improves and some FTE work is swapped to contractors .
  • Capital allocation: Strong commitment to dividend sustainability/growth despite near-term earnings pressure; Q1 cash flow seasonally weak, expected to rebound .
  • Cost actions rationale/timing: Renewed macro uncertainty and persistent negative leverage justified admin reductions; importantly, revenue roles were not cut .
  • Near-term trends: Contract down ~12% YoY in early April; perm down ~2% YoY for first 3 weeks of April (less predictive), with weekly revenues essentially flat over the most recent six weeks .
  • AI impact on industry demand: Management attributes revenue pressure to cyclical caution, not AI displacement; sees AI potentially increasing usage (Jevons paradox) longer term .

Estimates Context

  • Q1 2025 results vs S&P Global: Revenue $1.352B vs $1.409B* (Miss); EPS $0.17 vs $0.36* (Miss). Management cited fewer billing days, stronger FX headwinds, and elongated decision cycles as drags .
  • Q2 2025 outlook vs S&P Global: Guidance midpoint ~$1.36B revenue and ~$0.41 EPS aligns slightly above consensus revenue $1.353B* and EPS $0.40*; adjusted operating margin guided to 3–6% with ~$18M cost-savings benefit embedded in Q2 .

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s narrative is a macro-driven miss with clear execution on cost actions; the ~$80M annualized savings and Q2 margin framework set a floor and support sequential EPS improvement from Q2 .
  • Talent Solutions volume remains the swing factor; watch weekly sequential trends, billing-day cadence (Q2 tailwind vs Q1), and whether client “show-me” tone converts to starts in late Q2/Q3 .
  • Protiviti continues to outgrow, with regulatory/risk and tech consulting engines intact; expect better flow-through as utilization normalizes and contractor mix rises .
  • Pricing/mix is favorable (bill rates +4.2% YoY), especially in higher-skill tech; this supports gross margins when volumes recover .
  • Capital returns are intact and a support for the equity story (dividend up to $0.59, buybacks ongoing), signaling confidence in cash generation normalization .
  • Q2 guidance is essentially in line/slightly above Street midpoints, reducing near-term downside risk; upside requires macro clarity (trade policy, confidence) translating to hiring and project starts .
  • Monitor execution on $18M Q2 cost savings and the full run-rate in 2H; if sequential revenue stabilizes, operating leverage could be meaningful into 2026 .