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RH

ROBERT HALF INC. (RHI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $1.354B and diluted EPS was $0.43; results were in line with guidance and essentially in line with consensus, with a small EPS beat and a slight revenue miss versus S&P Global consensus estimates (revenue $1.358B*, EPS $0.427*) .
  • Management issued Q4 2025 guidance calling for revenue of $1.245B–$1.345B and EPS of $0.25–$0.35, with the midpoint implying a return to positive adjusted sequential growth for the first time since Q2 2022; adjusted operating margin is guided down ~130 bps sequentially due to fewer billing days .
  • Protiviti revenue was $498M with reported gross margin at 20.9% (adjusted 23.0%); margin compression reflected mix shift to smaller engagements and reallocating FTEs to contractor roles to preserve utilization .
  • The company generated $77M operating cash flow, paid a $0.59/share dividend in September, announced another $0.59/share dividend payable Dec 15, and repurchased ~550K shares for $20M; cash ended Q3 at $365M .

What Went Well and What Went Wrong

What Went Well

  • Management observed weekly sequential growth in Contract Talent Solutions in September and into October, supporting Q4 guidance for positive adjusted sequential revenue growth: “began to grow sequentially in September and into October” and “between a 1.5% and 2% sequential growth rate” .
  • Strong cash returns to shareholders: $0.59 dividend paid in September and another $0.59 announced payable Dec 15; buybacks of ~550K shares for $20M this quarter; management reaffirmed commitment to the dividend .
  • Clear AI-enabled productivity initiatives (matching engines, lead scoring, generative AI for client intel) to drive recruiter/sales efficiency and margin upside over time .

What Went Wrong

  • Broad-based demand caution continued; Q3 revenue fell 7.5% YoY to $1.354B and EPS fell to $0.43 from $0.64; Talent Solutions and Permanent Placement remained down double digits YoY .
  • Protiviti gross margin compressed YoY (reported 20.9% vs 24.6%; adjusted 23.0% vs 25.8%), driven by mix shift to smaller/shorter projects and reallocation of full-time staff to lower-rate contractor roles .
  • SG&A deleverage persisted: enterprise SG&A was 36.2% of revenue vs 34.9% last year (adjusted 33.5% ~flat YoY); overall GAAP operating margin declined to 1.0% .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$1.352 $1.370 $1.354
Diluted EPS ($)$0.17 $0.41 $0.43
Gross Margin % (Reported)36.9% 37.2% 37.2%
SG&A % of Revenue (Reported)34.0% 37.1% 36.2%
Operating Income ($USD Millions)$38.9 $1.5 $13.6
Adjusted Operating Income ($USD Millions)$18.7 $59.2 $61.2
Adjusted Operating Margin %1.4% 4.3% 4.5%
Consensus Revenue ($USD Billions)*$1.409$1.354$1.358
Consensus EPS ($)*$0.362$0.402$0.427

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

Segment revenue breakdown:

Segment Revenues ($USD Millions)Q3 2024Q3 2025
Finance & Accounting (Contract)$614.131 $553.364
Administrative & Customer Support (Contract)$178.409 $158.689
Technology (Contract)$160.184 $157.851
Elimination of intersegment (Contract)$(122.321) $(123.681)
Total Contract Talent Solutions$830.403 $746.223
Permanent Placement$123.275 $110.125
Protiviti$511.326 $498.129
Total Service Revenues$1,465.004 $1,354.477

Selected KPIs:

KPIQ2 2025Q3 2025
Contract Talent bill rate YoY change+3.8% +3.7%
Billing days63.2 64.2
DSO (days)—55.8
Cash from Operations ($USD Millions)$119 $77
Cash & Cash Equivalents ($USD Millions)$380.547 $365.289
Dividend per share$0.59 (paid Sep) $0.59 (payable Dec 15)
Buybacks~450K shrs, $20M ~550K shrs, $20M
Diluted shares (avg, Millions)100.539 100.041

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q3 2025$1.310–$1.410 Actual $1.354 Met within range
EPS ($)Q3 2025$0.37–$0.47 Actual $0.43 Met within range
Revenue ($USD Billions)Q4 2025—$1.245–$1.345 New
EPS ($)Q4 2025—$0.25–$0.35 New
Adjusted GM %Q4 2025—Contract 38–40%; Protiviti 22–24%; Total 36–39 New
Adjusted SG&A % of RevQ4 2025—Talent 44–46%; Protiviti 15–17%; Total 33–36 New
Adjusted Op Inc %Q4 2025—Talent 0–2%; Protiviti 6–8%; Total 2–5 New
Tax rate (%)Q4 2025—30–34 New
Billing days (days)Q4 202561.6 (PY) 61.4 Shorter quarter
Dividend per shareQ4 2025$0.59 (Sept paid) $0.59 (Dec 15 payable) Maintained
Q1 2026 tax itemQ1 2026—$4M unfavorable ($0.04/share) New

Earnings Call Themes & Trends

TopicQ1 2025 (Prev)Q2 2025 (Prev)Q3 2025 (Current)Trend
AI/productivity & tech enablementLaunched cost actions; reiterated AI-enhanced matching/lead scoring and recruiter productivity Continued emphasis on AI readiness and tech modernization in Talent Solutions Award-winning matching engines; generative AI for company intel; margin upside potential from tech Improving deployment/impact
Macro/tariffs & decision cyclesElevated uncertainty post-election and trade policy; elongated cycles Confidence eased modestly; sequential stabilization by June/July Early signs of improvement; weekly trends up; guide conservative due to seasonality Cautious optimism
Protiviti pipeline & marginsPipeline up; Q1 cost actions; margins expected to improve with savings Q3 guided slight YoY decline due to large project roll-offs; seasonal SOX lift Pipeline growing; margin compression drivers (smaller projects; FTE reallocation); targeting double-digit op margins in 2026 Near-term pressure, longer-term improving
SMB vs enterpriseSMB more cautious; enterprise more resilient Enterprise more resilient vs SMB Enterprise stronger; SMB should outgrow in recovery Consistent pattern
Capital returns/dividendReaffirmed dividend priority; $80M annual savings from cost actions supports margins Dividend paid; buybacks; free cash flow coverage improving Dividend “very important”; near-term FCF covers dividend; cash cushion; potential further cost actions if needed Stable/committed
Labor market churn & bill ratesChurn subdued; bill rates +4.2% YoY; moving up skill curve Bill rates +3.8% YoY Bill rates +3.7% YoY; perm candidate turndowns increasing due to comp/work flexibility Steady rate gains; perm dynamics mixed

Management Commentary

  • “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.” — M. Keith Waddell, CEO .
  • “We would describe the guide as conservative… if you looked at our September, so far October results… we would grow sequentially by 1.5 to 2 points… What we've forecast is just barely being positive.” — CFO .
  • “Protiviti’s gross margin compression… cumulative inflation… competitive Big Four pricing… reassigning Protiviti full-time employees to projects otherwise staffed by contractors… mix shift to smaller, shorter duration projects.” — CFO .
  • “We remain very committed to returning all our free cash flow to investors… Near-term results say free cash flow covers the dividend… $360 million of cash on the balance sheet.” — CFO .

Q&A Highlights

  • Dividend sustainability: Management emphasized commitment; near-term FCF covers dividend; substantial cash cushion; cost structure will be managed if trends deteriorate .
  • Guidance conservatism: Q4 guide set with cushion vs recent weekly trends; fewer billing days imply normal seasonal negative leverage; operating margin down ~130 bps sequentially aligns with 10-year pattern .
  • Protiviti margins: Compression driven by mix shift and FTE reallocation; aiming for double-digit operating margins in 2026 with project mix normalization and tighter staff cost management .
  • Perm vs contract dynamics: Perm more volatile and recently better than contract; candidate-side turndowns driven by insufficient compensation/work flexibility despite client demand .
  • AI impact minimal near term: Studies and internal analysis show limited displacement; RH’s business skewed to experienced talent; AI viewed as long-run productivity tool, not short-term threat .

Estimates Context

  • Q3 2025: Actual revenue $1.354B vs consensus $1.358B* (slight miss); EPS $0.43 vs consensus $0.427* (small beat). Q2 2025: Revenue $1.370B vs $1.354B* (beat); EPS $0.41 vs $0.402* (beat). Q1 2025: EPS $0.17 vs $0.362* (miss) due to ~$0.13/share one-time cost actions; revenue $1.352B vs $1.409B* (miss) .
  • Q4 2025 consensus ahead of earnings day: Revenue ~$1.290B*, EPS ~$0.298*; management’s guidance midpoint implies slightly higher revenue and EPS range consistent with positive adjusted sequential growth .
    Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential stabilization and early weekly growth trends support a cautiously constructive Q4 setup; the guide appears conservatively framed versus recent run-rates .
  • Protiviti margins should improve over 2026 as project mix normalizes; near-term Q4 gross margin decline is seasonally driven by fewer billing days .
  • Dividend is a central capital return pillar and appears covered by near-term FCF, with ~$365M cash providing buffer; buybacks remain opportunistic but secondary to dividend .
  • Talent Solutions gross margins remain resilient despite industry downturn, underscoring pricing power and value-add; bill rates continue to rise (+3.7% YoY in Q3) .
  • Perm hiring shows mixed signals (better than contract recently) but candidate-side constraints (comp/work flexibility) may cap near-term strength .
  • Near-term trading: Expect focus on weekly trend updates and December billing-day headwinds; small beats/misses vs consensus likely drive muted immediate reaction; dividend stability is a support.
  • Medium-term thesis: AI-enabled productivity, mix shift up the skill curve, and Protiviti’s margin path to double-digit levels underpin cyclical recovery leverage when demand normalizes .