Executive Summary / Key Takeaways

• Strategic Resilience Amidst Headwinds: Robert Half Inc. (RHI) has demonstrated resilience through a challenging macroeconomic environment, leveraging its dual business model of specialized talent solutions and Protiviti's business consulting services. Despite recent revenue declines, the company's strategic cost actions and technological investments position it for future growth.
• Signs of Sequential Improvement: After a prolonged period of caution, RHI's fourth-quarter 2025 revenue guidance reflects an anticipated return to sequential growth on a same-day constant currency basis, a significant inflection point since the second quarter of 2022. This is supported by improving weekly trends in contract talent revenues in late Q3 and early Q4.
• Protiviti's Growth and Margin Potential: The Protiviti segment, a key differentiator, continues to exhibit a strong pipeline and is committed to achieving double-digit operating margins in 2026 and beyond, despite recent gross margin compression from project mix shifts and staff reallocation.
• Technological Edge and AI Integration: RHI is actively investing in AI-driven matching engines and recruiter tools, enhancing efficiency and candidate placement quality. This technological differentiation is expected to strengthen its competitive moat against smaller, less-resourced rivals, particularly in its 70% SMB client base.
• Commitment to Shareholder Returns: With a conservative, fortress balance sheet and robust free cash flow generation, RHI remains deeply committed to its dividend, which management states is well-covered by current free cash flow, underscoring its long-term value proposition for investors.

A Dual-Engine Approach to Talent and Consulting

Robert Half Inc. (NYSE:RHI) stands as a venerable institution in the specialized talent solutions and business consulting landscape, tracing its origins back to 1948. The company's enduring presence is built upon a dual-engine business model: its core Talent Solutions, encompassing contract and permanent placement across critical professional fields like finance, accounting, technology, and legal, and Protiviti, its global business consulting arm. This integrated approach, where Protiviti often leverages contract professionals sourced through Talent Solutions, provides a unique competitive advantage, enabling RHI to offer comprehensive solutions from high-volume staffing to strategic advisory.

The broader industry landscape has been characterized by a prolonged period of client and job seeker caution, extending decision cycles and subduing hiring activity. However, recent macroeconomic indicators suggest a potential shift. The U.S. job market remains resilient, with overall unemployment at 4.3% as of August 2025, and an even tighter 2.7% for college-educated professionals. Furthermore, the NFIB Small Business Optimism Index has shown modest sequential rebounds, with hiring plans reaching their highest levels since January. These conditions, marked by elevated job openings and low unemployment, historically precede periods of robust growth for RHI, as clients face increasing pressure to fill critical roles and address deferred projects.

Technological Edge: Fueling Efficiency and Competitive Moat

Robert Half's strategic investments in technology, particularly Artificial Intelligence (AI), are foundational to its competitive positioning and future growth. The company is actively developing and deploying "award-winning matching engines" that enhance the precision of connecting skilled candidates with suitable opportunities and vice versa. These AI tools are also integrated into recruiter workflows, prioritizing leads and aggregating comprehensive company information from various internal and external sources to improve targeting and conversion rates. This "digital labor" capacity is expected to yield significant productivity gains, allowing RHI to scale operations more efficiently without a proportional increase in human capital.

The tangible benefits of this technological differentiation are clear. Management notes that these tools lead to "fewer calls to get a client visit" and "better conversion rates to job orders". For investors, this translates into a stronger competitive moat, particularly against local and regional staffing firms that lack the resources and proprietary data to develop comparable advanced AI capabilities. While the broader impact of AI on the labor market remains a subject of debate, RHI's internal studies and external surveys, such as the NFIB's finding that 98% of its constituents reported no AI impact on employee numbers, suggest minimal displacement in RHI's core professional segments. Given that 70% of RHI's business serves small and medium-sized businesses (SMBs), which are typically later adopters of new technologies, RHI's proactive AI integration positions it to capture market share as these clients eventually seek more sophisticated, efficient talent solutions.

Performance Under Pressure: A Deep Dive into Recent Financials

The past year has tested RHI's operational agility. For the third quarter of 2025, global enterprise revenues stood at $1.354 billion, marking an 8% year-over-year decline on both a reported and adjusted basis. Net income per share was $0.43, down from $0.64 in the prior year. For the nine months ended September 30, 2025, total service revenues were $4.08 billion, a decrease of 7.6% from the prior year, with net income of $101 million, or $1.01 per diluted share. These figures were largely in line with management's guidance, reflecting continued client and job seeker caution.

The Contract Talent Solutions segment reported revenues of $746.2 million for Q3 2025, a decrease of 10.9% year-over-year on an adjusted basis. This decline was primarily driven by a 13.4% decrease in hours worked by engagement professionals, partially offset by a 3.6% increase in average bill rates. Despite these revenue pressures, the segment maintained a gross margin of 38.9%, demonstrating the resilience of its pay-bill spreads and the perceived value of its services. Operating income for this segment was $16.7 million, representing 2.2% of revenues.

Permanent Placement Talent Solutions experienced an 11.4% adjusted year-over-year revenue decrease in Q3 2025, reaching $110.1 million. The segment's gross margin remained exceptionally high at 99.8%, as direct costs are de minimis. The revenue decline was attributed to a 13.3% decrease in placements, partially mitigated by a 2.6% increase in average fees per placement. Management noted that softness in perm placement was more a function of candidate caution (reluctance to switch jobs without significant compensation or flexibility incentives) than a lack of client demand.

Protiviti, RHI's consulting arm, saw its adjusted revenues decrease by 3.4% year-over-year in Q3 2025 to $498.1 million. This was influenced by a 10.8% decrease in average hourly bill rates, partially offset by an 8.2% increase in billable hours. Protiviti's adjusted gross margin compressed to 23% in Q3 2025 from 25.8% in Q3 2024. This compression stemmed from cumulative inflation impacting staff costs, challenges in passing these costs through in a competitive market, and a strategic reallocation of full-time Protiviti staff to contractor roles to maintain utilization, which, while beneficial for staff retention, carries a lower bill rate compared to traditional consulting engagements. Operating income for Protiviti was $37 million, or 7.5% of revenues (adjusted).

In response to persistent economic headwinds, RHI implemented cost reduction actions in March and April 2025, targeting administrative expenses and non-revenue-producing roles. These measures are expected to generate $80 million in annual savings, with $18 million realized in Q2 2025 and $20 million in each of Q3 and Q4 2025, contributing to improved profitability.

Liquidity and Shareholder Returns: A Fortress Balance Sheet

Robert Half maintains a robust financial position, characterized by a "very conservative fortress balance sheet". As of September 30, 2025, cash and cash equivalents stood at $365 million. Operating activities generated $137 million in net cash flows for the nine months ended September 30, 2025. While cash used in investing activities totaled $63 million, primarily for capital expenditures and investments in employee deferred compensation trusts, the company's liquidity remains strong.

RHI's commitment to shareholder returns is unwavering. The company declared a quarterly cash dividend of $0.59 per share on October 30, 2025. Management explicitly states that "free cash flow more than covers the dividend", with a substantial cash cushion on the balance sheet. For the nine months ended September 30, 2025, cash used in financing activities included $180 million for dividends paid and $92 million for common stock repurchases. The company has 5.6 million shares available for repurchase under its board-approved plan. This consistent return of capital, alongside a $100 million credit agreement secured in May 2025 (with no cash borrowings as of Q3 2025), underscores RHI's financial discipline and confidence in its long-term outlook.

Competitive Dynamics: Differentiated Strengths in a Fragmented Market

Robert Half operates within a highly competitive global staffing and consulting market. Its primary direct competitors include global staffing giants like ManpowerGroup , Adecco Group (AHEXY), and Randstad (RANJY), as well as specialized firms such as Kelly Services (KELYA) and executive search and consulting firm Korn Ferry (KFY). RHI's market positioning is defined by its specialized expertise in professional fields, particularly finance, accounting, and technology, and the unique integration of its talent solutions with Protiviti's consulting services.

Compared to broader staffing firms like ManpowerGroup (MAN) and Adecco, RHI's focused approach in high-skill sectors allows for greater precision in candidate matching and deeper client relationships. While larger rivals may boast greater scale and broader market reach, RHI's specialized expertise often translates into a premium value proposition and stronger customer loyalty. For instance, RHI's gross margins in Contract Talent Solutions have remained remarkably stable at around 39% even during the recent downturn, which management views as a proxy for the value clients perceive. This contrasts with the qualitative descriptions of "stable profitability margins" or "improved profitability margins" cited for some competitors, suggesting RHI's niche focus provides a strong pricing power.

Protiviti's competitive edge is further amplified by its ability to leverage RHI's Talent Solutions for contract professionals, a collaboration that has seen its usage rise, with revenues generated by sourced contractors up 18% in Q4 2024. This "enterprise competitive advantage" is particularly potent against the "Big 4" consulting firms, from which Protiviti actively seeks market share. While Protiviti has faced gross margin compression due to competitive pricing and a shift to smaller projects, its commitment to achieving double-digit operating margins in 2026 and beyond highlights its strategic intent to regain profitability leadership.

Indirect competitors, including online job platforms like LinkedIn and Indeed, and AI-driven recruitment software, present a different challenge. However, RHI's management argues that these tools primarily impact early-career, entry-level hiring, a segment less central to RHI's business, which focuses on experienced professionals. Furthermore, RHI's significant investment in its own AI-driven matching and lead-scoring engines is designed to outperform these platforms by offering superior candidate quality and more relevant job opportunities, thereby strengthening its competitive stance, especially with its SMB client base who are typically later adopters of new technologies.

Outlook and Strategic Trajectory: Signs of a Turnaround

Robert Half's outlook for the fourth quarter of 2025 signals a potential inflection point. The company's revenue guidance of $1.245 billion to $1.345 billion, with a midpoint of $1.295 billion, implies a 7% year-over-year decline on an adjusted basis. Crucially, this guidance "reflects a return to sequential growth on a same-day constant currency basis for the first time since the second quarter of 2022". This cautious optimism is underpinned by observed weekly trends in contract talent revenues, which began to grow sequentially in September and October. The Q4 2025 EPS guidance is set at $0.25 to $0.35.

For its segments, Talent Solutions is projected to see an adjusted year-over-year revenue decline of 8% to 11% in Q4 2025, while Protiviti is expected to be flat to down 4%. Protiviti's pipeline continues to grow across all major solutions areas, and its growth rates are expected to improve at the midpoint of Q4 guidance. Management anticipates higher Protiviti gross margins and operating margins in 2026 and beyond, driven by a return to a more favorable project mix and diligent staff management.

Looking further ahead, RHI expects 2025 capital expenditures to range from $75 million to $90 million, with $15 million to $25 million in Q4. Seasonal impacts are anticipated in Q1 2026, with Protiviti's segment margins typically declining sequentially due to annual compensation adjustments and a focus on external audits by clients. However, the $80 million in annual cost savings from recent administrative reductions will provide a significant boost to profitability, with full quarterly benefits expected in Q3 and Q4 2025.

The company's strategic responses to market dynamics, including its proactive cost management and continuous investment in AI, are designed to capitalize on an eventual upcycle. Management notes that current labor market conditions, with elevated job openings and low unemployment, are "even more favorable than similar metrics from the early recovery periods following the dot-com and great financial crisis downturns". This pent-up demand, coupled with aging workforce demographics and clients' desire for flexible resources, represents significant structural tailwinds for RHI's long-term growth.

Conclusion

Robert Half Inc. is navigating a complex economic landscape with a clear strategic vision and a resilient business model. While recent financial performance has reflected broader market caution, the company's proactive cost management, unwavering commitment to its dividend, and strategic investments in technology, particularly AI, position it favorably for a rebound. The anticipated return to sequential revenue growth in Q4 2025, coupled with Protiviti's strong pipeline and long-term margin expansion goals, signals a potential inflection point for investors. RHI's differentiated expertise, strong brand, and integrated service offerings provide a robust competitive moat, enabling it to capitalize on the underlying strength of the labor market and emerging opportunities. Investors should monitor the conversion of improving business confidence into actual hiring and project starts, as well as Protiviti's progress towards its double-digit operating margin target, as key indicators of RHI's continued success in the evolving talent and consulting industry.