Prepared remarks
Hello, and welcome to the Robert Half First Quarter 2026 Conference Call. Today's conference call is being recorded. Operator provided instructions. Our hosts for today's call are Mr. Keith Waddell, President and Chief Executive Officer of Robert Half; and Mr. Michael Buckley, Chief Financial Officer. Mr. Waddell, you may begin.
Hello, everyone. We appreciate your time today. Before we get started, I'd 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-K 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. 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 first quarter of 2026, global enterprise revenues were $1.3 billion, down 4% from last year's first quarter on a reported basis and down 6% on an adjusted basis. We're very pleased that talent solutions delivered a second consecutive quarter of positive sequential growth on a same-day constant-currency basis with revenue trends strengthening as the quarter progressed and into early April. Overall, we believe market conditions are becoming increasingly conducive to our business and our unique combination of award-winning high-tech capabilities and high-touch expertise positions us well to deliver meaningful value for clients in navigating a dynamic business environment.
Net income per share in the first quarter was $0.14 compared to $0.17 in the first quarter a year ago. As Mike will discuss, first quarter EPS was impacted by a seasonally elevated tax rate, tied to stock-based compensation, which we expect to normalize as the year progresses. We remain very well positioned to capitalize on emerging opportunities and support our clients' talent and consulting needs through the strength of our industry-leading brand, people, technology and unique business model that includes both professional staffing and business consulting services. Cash flow used in operations during the first quarter was $112 million. Cash outflows are seasonally elevated each year in the first quarter due to the annual payment cycle for bonuses and SaaS subscription renewals, among others. In March, we distributed a $0.59 per share cash dividend to our shareholders of record for a total cash outlay of $62 million. Return on invested capital for the company was 4% in the first quarter. Now I'll turn the call back over to our CFO, Mike Buckley.
Thank you, Keith, and hello, everyone. As Keith noted, global revenues were $1.3 billion in the first quarter. On an adjusted basis, first quarter talent solutions revenues were down 7% year-over-year. U.S. talent solutions revenues were $626 million, down 7% from the prior year's first quarter. Non-U.S. talent solutions revenues were $208 million, down 3% year-over-year. We conduct talent solutions operations throughout offices in the United States and 18 other countries. In the first quarter of 2026, there were 61.9 billing days, the same as the first quarter one year ago. The second quarter of 2026 has 63.1 billing days compared to 63.2 billing days in the second quarter of last year. Currency exchange rate movements during the first quarter had the effect of increasing reported year-over-year total revenues by $24 million, $16 million for talent solutions and $18 million for Protiviti.
Contract talent solutions bill rates for the first quarter increased 2.6% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency and country. This rate for the fourth quarter was 3.2%. Now let's take a closer look at the results for Protiviti. Global revenues in the first quarter were $466 million. $362 million of that is from the United States and $104 million is from outside of the United States. On an adjusted basis, global first quarter Protiviti revenues were down 4% versus the year-ago period. U.S. Protiviti revenues were down 6%, while non-U.S. Protiviti revenues were up 8% compared to one 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, gross margin was 38.9% of applicable revenues in both the current quarter and the first quarter one year ago.
Conversion or contract-to-hire revenues were 3.1% of contract revenues in the current quarter compared to 3.2% in the first quarter of 2025. Our permanent placement revenues were 13.1% of consolidated talent solutions revenues in the current quarter compared to 12.8% in the first quarter of 2025. When combined with contract talent solutions gross margin, overall gross margin for talent solutions was 46.8% of applicable revenues in the current quarter compared to 46.7% in the first quarter of 2025. For Protiviti, gross margin was 19.2% of Protiviti revenues in the first quarter and 18.9% in the first quarter one year ago. Adjusted gross margin for Protiviti was 18.8% for the quarter just ended compared to 18.1% last year. Enterprise selling, general and administrative costs were 34.1% of global revenues in the first quarter compared to 34.0% in the same quarter one year ago. Adjusted enterprise SG&A costs were 34.6% for the quarter just ended compared to 35.2% one year ago.
Talent solutions SG&A costs were 44.2% of talent solutions revenues in the first quarter versus 43.7% in the first quarter of 2025. Adjusted talent solutions SG&A costs were 45% for the quarter just ended compared to 45.5% last year. First quarter SG&A costs for Protiviti were 15.9% of Protiviti revenues compared to 16.3% for the same quarter one year ago. Operating income for the first quarter was $37 million. Adjusted operating income was $29 million in the quarter or 2.2% of revenues. First quarter adjusted operating income from talent solutions was $16 million or 1.8% of revenues. Adjusted operating income for Protiviti in the first quarter was $13 million or 2.9% of revenues. Our first quarter 2026 income statement includes an $8 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 first quarter tax rate was 56% compared to 22% one year ago. This elevated tax rate is primarily the result of a tax charge related to our employee stock-based compensation grants, the majority of which vested in the first quarter and the magnified impact of nondeductible tax items when measured against seasonally low Q1 pretax income. At the end of the first quarter, accounts receivable were $776 million and implied days sales outstanding, or DSO, was 53.8 days. Before we move to second quarter guidance, let's review some of the monthly revenue trends we saw in the first quarter and so far in April, all adjusted for currency and billing days. Contract talent solutions exited the first quarter with March revenues down 5% versus the prior year compared to a 7% decrease for the full quarter. Revenues for the first two weeks of April were down 1% compared to the same period last year.
Permanent placement revenues in March were down 6% versus March 2025. This compares to a 5% decrease for the full quarter. For the first three weeks of April, permanent placement revenues were down 7% compared to the same period in 2025. We provide this information so you have insight into some of the trends we saw during the first quarter and into April. 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 second quarter guidance: revenue, $1.275 billion to $1.375 billion; income per share, $0.20 to $0.30; income per share, excluding the $0.03 one-time severance charge, which I'll discuss in a moment, $0.23 to $0.33. Midpoint revenues of $1.325 billion are 4% lower than the same period in 2025 on an adjusted basis. Our midpoint revenue guidance for the second quarter reflects continued positive adjusted sequential revenue growth for talent solutions.
Our Q2 revenue guidance for Protiviti reflects ongoing shifts in the U.S. financial services regulatory environment, which Keith will address in just a moment. As a result, cost actions are planned that impacted our Q2 midpoint adjusted gross margin guidance by $5 million in expected severance costs or $0.03 per share. We expect these actions will be fully completed by the beginning of the third quarter. Major financial assumptions underlying the midpoint of these estimates are as follows. Adjusted revenue growth year-over-year for talent solutions, flat to down 4%; Protiviti, down 4% to 8%, overall down 1% to 5%. Adjusted gross margin percentage, contract talent, 38% to 40%. Protiviti, 19% to 21%. Overall, 36% to 39%. Adjusted SG&A as a percentage of revenue, talent solutions, 43% to 45%. Protiviti, 16% to 18%. Overall, 34% to 36%. Adjusted operating income as a percentage of revenues; talent solutions, 2% to 4%.
Protiviti, 2% to 4%. Overall, 2% to 4%. Tax rate, 34% to 36%. Shares outstanding, 100 million to 101 million. 2026 capital expenditures and capitalized cloud computing costs, $70 million to $90 million with $15 million to $25 million in the second quarter. For the third quarter, we offer the following general observations. For talent solutions, typical Q3 seasonal trends show relatively flat sequential revenues due to summer holiday effects, especially in Europe. That said, current trends would result in Q3 year-on-year adjusted revenue growth of 1% to 3%, marking a return to positive growth for the first time since 2022. For Protiviti, Q3 revenues typically increased sequentially tied to seasonally higher internal audit work related to clients' annual internal control certifications. This typically drives higher staff utilization rates and elevated incremental margins, and we expect a similar pattern this year.
In addition, Q3 for Protiviti will benefit from the absence of Q2 severance costs and lower Q3 staff costs following the Q2 cost actions previously referenced. We estimate Q3 Protiviti sequential revenue gains of 0% to 3% and combined with the newer low cost structure, Q3 adjusted segment margins of 7% to 9%, a substantial improvement over Q2 margins and comparable to margins from last year. We estimate that both talent solutions and Protiviti will deliver positive year-over-year segment income growth in Q3 driving Q3 consolidated net income and EPS growth of 8% to 12% year-over-year. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings. Now I'll turn the call back over to Keith.
Thank you, Mike. Our first quarter results for talent solutions reflect continued sequential growth on a same-day constant currency basis. We experienced some weather-related disruption in February, but activity levels improved steadily throughout March and into early April. This included increased client engagement and higher numbers of job orders, particularly in areas such as technology modernization, data initiatives and IT infrastructure. Resource levels in small and midsized businesses, which represent the majority of our client base, remain lean following several years of cost discipline, creating capacity constraints as project activity begins to recover. In addition, broader labor market indicators continue to point to underlying demand for skilled talent. Unemployment remains low, particularly among college-educated workers and in many of the roles we support, while job openings continue to run above historical averages.
Decision timelines remain extended but are beginning to improve as companies revisit postponed initiatives and consider hiring tied to business-critical priorities. Economic uncertainties related to the conflicts in the Middle East and higher energy costs have not yet significantly impacted client demand. However, concerns remain if these conditions persist. Candidate behavior also reflects a gradually improving market. Professionals with in-demand skills are increasingly selective with continued preference for flexibility and competitive compensation, reinforcing the value of our ability to deliver highly skilled talent efficiently. With respect to artificial intelligence, we continue to see limited impact on employment levels related to the roles we place in our specialties. This is supported by multiple external studies, and there is very little evidence to date that AI adoption is leading to widespread job displacement.
Instead, AI is reshaping the way work gets done and increasing the need for skilled professionals with domain expertise and enhanced AI skills who can also apply judgment, validate outputs and support implementations. In addition, the growing use of generative AI by job seekers has increased application volumes, made it more difficult to verify candidate qualifications and made resumes more homogenous and harder to differentiate. This further underscores the value of our services, including our proprietary data on candidate performance and our ability to deliver vetted proven talent. Protiviti's segment results were impacted by the Q1 seasonal trends we previously guided with internal audit revenues sequentially lower and higher staff compensation costs due to annual adjustments made as of January 1. Protiviti is also navigating continued shifts in its risk and compliance solutions practice, reflecting ongoing changes in the U.S. financial services regulatory environment.
With a marked decline in new enforcement actions and notable easing in prior enforcement requirements, client demand is increasingly focused on enhancing the efficiency of ongoing compliance programs, which currently involve substantial internal resources and aging infrastructure. This shift is influencing the mix of Protiviti's work with relatively fewer large-scale remediation engagements and increased demand for efficiency-oriented solutions, including the application of advanced technologies. These engagements are typically shorter in duration and have different resource leverage profiles than traditional remediation work. We are actively aligning our resource levels with these evolving client needs while continuing to invest in capabilities that support long-term growth. As such, we are taking cost actions that will reduce annual cost by $30 million and result in a Q2 one-time charge of $5 million or $0.03 per share.
These cost actions are expected to be fully implemented by the beginning of the third quarter. Protiviti's pipeline remains strong across all of its other major solutions, which are all expected to grow sequentially in the second quarter. Our strategic engagement of contract professionals via our talent solution operations plays an essential role in Protiviti's success and further amplifies our unique enterprise-wide competitive advantage. Looking ahead, we believe current market conditions are increasingly conducive to our business. Clients are operating with lean teams. Unemployment remains low, making it harder for our clients to hire on their own and demand for professionals with specialized skills persists as confidence continues to improve, even modest increases in hiring activity can drive incremental demand for our services. We remain energized by our time-tested corporate purpose to connect people to meaningful and exciting work and provide clients with the talent and consulting expertise they need to compete and grow.
Our unique combination of award-winning high-tech capabilities and high-touch expertise positions us well to support clients as they navigate an evolving labor market and increasingly complex business environment. Finally, we'd like to thank our global workforce for their continued dedication. Their efforts have earned Robert Half recent recognition as one of America's Most Innovative Companies by Fortune and one of the Fortune 100 Best Companies to Work for. And just this week, we were named by Forbes as one of America's Best Employers for company culture. Now Mike and I'd be happy to answer your questions. Please ask us one question and a single follow-up as needed. If there's more time, we'll come back to you.
Questions and answers
Operator provided instructions. The first question will come from Trevor Romeo with William Blair.
I wanted to start with the Q3 commentary you had in the prepared remarks. I really appreciate your thoughts there, first of all. When you talk about returning to, I guess, 1% to 3% revenue growth for talent solutions, are you just essentially taking the recent kind of weekly revenues and holding them constant? Or is there any further improvement there? And then for Protiviti, the sequential growth you embed there, does that contemplate any recovery in the risk and compliance area?
Okay. So for talent solutions, our current run rate is stronger than our Q2 guidance, which would fall over into Q3. And so I would say we're somewhat conservative for Q2 and its carryover into Q3. So hopefully, there's some upside there. Risk and compliance, we've taken a hard look at kind of the portfolio of projects that we have. We have not assumed any short-term snapback, if you will, in the risk and compliance practice, but we believe it to be reasonable.
Okay. Appreciate that. And then maybe as far as Protiviti's other solution areas outside risk and compliance, maybe you could talk about the underlying demand trends there and specifically on the tech consulting. I know you mentioned efficiency-oriented solutions. So maybe just a more specific sense of how the revenue trends for the tech consulting business are trending and what you kind of see in the next several quarters going forward?
Yes. So I think I'll start by kind of updating on the mix of solution areas within Protiviti. And tech consulting is now the largest. It's about one-third of their revenues. Internal audit would be next at 25%. Risk and compliance would be 20% and business process improvement and a couple of other small make up the other 20%. So tech consulting is the largest, and we would argue has the brightest prospects as we speak. That crosses tech modernization, data, cyber, and the same themes would carry over into talent solutions, but we're very upbeat about Protiviti's tech consulting solutions area. Internal audit is solid. It's not as impacted by financial services as is risk and compliance. And so in risk and compliance, 75% or more of that relates to financial services and internal audit, it's well less than half. And so internal audit has the most longer-term contract-related revenue sources.
So it's the most stable and the least impacted and not that it's totally unimpacted by the regulatory rollback that we're talking about. And so we feel really good about technology. We feel good about internal audit. And in business process improvement, particularly as we move more and more into getting ready for AI with our clients, process improvement is a big part of that. On the risk and compliance side itself, remember, this is a U.S. phenomenon. Outside the U.S., regulatory enforcement action work is still quite strong, and we have some very good engagements there outside the U.S. We would also say there's areas like fintech, insurance and other adjacent but still within financial services opportunities that we're pursuing. And then further, specifically, to the extent that banks aren't spending as much time internally on regulatory compliance per se and dealing with enforcement actions, they've got more time to focus on efficiencies and with their aging infrastructure.
There's a lot of low-hanging fruit there. We've already shown many of our banking clients that frankly, the co-sourcing work they do with us, we're more efficient than their internal people are. And so there's learning we've experienced. There's automation we've already taken advantage of that we convey to our clients as well. And so we think while there's this lull in enforcement action work, there's a big opportunity with helping our clients become more efficient with the very large resources they're already dedicating to compliance themselves.
Operator provided instructions. And the next question comes from Mark Marcon with Baird.
In terms of the first question, when a number of my peers and I attended the staffing industry analyst conference in Austin, Texas, several private staffing firms said they are seeing a pickup in demand. Part of that seems to be because, in some cases, companies are holding off on permanent hiring but the work still needs to be done, so they are turning more to temps if hiring freezes are in place. I'm wondering to what extent you are seeing some improvement in talent solutions, and whether that might also be the case for some of your smaller clients. What are you seeing as the primary driver of the improving sequential trends in talent solutions? I want to start there.
Well, I would say for our SMB clients, our permanent operations are just as strong, if not stronger, than our contract operations are. So we're certainly not seeing disproportionate weakness in perm while contract gains. Instead, we would point out once again that if you look over the last four years, companies with fewer than 500 employees have hired 2.5 to 3x fewer people than those at bigger companies, they're leaner and there's a backlog of projects to be done. And as they get more confident about the future, they're more willing to invest. And I would argue it's that more than a pause on full time that's fueling demand for contract. As we go up to larger companies, I think there is some evaluation by larger companies as to what this whole AI wave is going to mean to their full-time employee count. And while they're making that evaluation to the extent they have needs, they use more contractors in that case. But as to our bread-and-butter core SMB clients, it's more about pent-up demand and really lean resources or only so much you can stretch your existing employees. And our SMB clients are pretty much at that point.
Great. And then stepping over to Protiviti. You're taking a $5 million cost action here in this quarter, and that's going to yield $30 million in terms of savings. So the cost action, that falls all in the gross margin line, which basically would imply that it's basically bench talent that is being pruned. And I'm wondering, is that all in the risk and compliance area? Or how is that set up? And to what extent, is it broader than just risk and compliance?
It's primarily by leaps and bounds directly related to the regulatory enforcement action work that I just described. And so it's Q2 cost actions relative to people in that particular area.
Okay. Can I just sneak one more in? Regarding the other areas, particularly on the technology side, another player is saying they are seeing delays with projects and things being pushed back. Are you seeing any of that?
It's kind of hard not to be aware of another company. But just a couple of comments as well as about delays. I'd say, first of all, remember, we're 70% SMB, 30% mid-cap. They're mostly large cap. They have a large exposure to federal government. We have a less than 1% exposure to federal government. They've grown significantly by acquisition. All our growth is organic. We have no debt. We have a strong balance sheet. Tech is our strongest practice group. Not only has there not been delays in the areas of tech modernization, data, cyber that I talked about earlier, the pipeline is strong. The project size itself is smaller, but there are more of them. Frankly, our mid-cap is even stronger than our SMB in tech and Protiviti, too, which then leans towards large cap, it's also Protiviti's largest and strongest solution area. And so the answer is an emphatic no. We're not seeing delays. And if you look at the progression and the improvement we saw over the course of the first quarter, which has continued into the second, tech is a big part of that. It's the largest part of that.
Operator provided instructions. And the next question will come from Andrew Steinerman with JPMorgan.
Keith, now that Robert Half is closer to targeted year-over-year growth in the third quarter, my question is, what do you think about the shape of the revenue recovery for Robert Half kind of once it begins?
Well, we're optimistic about the shape of the recovery for the reasons we've talked about. There is pent-up demand. Job openings are way above traditional levels. Unemployment is low. It's harder for our clients to hire. It's harder yet again for them to hire themselves because of AI and the homogenization of resumes that we've talked about. And so given the leanness of our client base, we're further enthused about the shape of recovery. It seems like we've had a false start or two the last two years. Last year, it was tariffs. This year, so far, the conflict in Iran doesn't seem to have an impact. But Andrew, we're feeling pretty good about where we are. We just had our annual top awards conference in Las Vegas for our people. There were 600 or 700 of them. So we get to interact directly firsthand. And I've got to tell you, the excitement and enthusiasm level was palpable. And meaningfully better than it was 12 months ago, and that felt great.
And it shows up in our numbers. We talked to you about earlier what we've done post-quarter in contract, which is dramatically better even than how we ended the quarter in March. As I said, the run rate we've got so far this quarter is greater than our guidance we've given and probably by a greater extent than we've had in a long time. So we feel good. We feel good. And then as it relates to Protiviti, they've got this headwind from less scrutiny by the financial services regulators, but they've taken quick and effective cost actions. Interestingly, if you would pro forma our Q2 guidance and you would not only give effect to the severance, but you would also apply the cost savings as if they were in place then. And so then our Q2 guidance midpoint would be $0.33, right? So you'd add $0.03 for severance and you'd add $0.05 for cost savings to get a total of $0.08. And so our Q3 guidance rather than being what it was or what it is, it'd be $0.33. So that's pretty respectable and pretty close to what the expectations were absent the headwind on the regulatory front for Protiviti.
Operator provided instructions. And the next question will come from Jeff Silber with BMO Capital Markets.
You talked about some of the actions you're taking in Protiviti. I'm just curious, from an internal headcount perspective in talent solutions, are you starting to add hires? Or do you still have excess capacity and therefore don't need to add headcount to reach your goals?
We still have our 15% to 30% of capacity in talent solutions. So we're holding the line as we speak. We do anticipate some leverage as things get better. I think the guidance we've given you here for quarters two and three assume about 1 point as a percent of revenue of SG&A leverage as we move forward into those better circumstances. And so holding the line as we speak on talent solutions. But I can assure you, at least half of those people I was just with in Las Vegas talked to me about things are getting better. We need more headcount.
All right. That's great to hear. Can I also ask a question about U.S. versus non-U.S. trends both in talent solutions and Protiviti. You gave us the numbers, but if we can get a little bit more color there, that will be great.
I'd say on talent solutions, the biggest difference for the first quarter, we had more strength in permanent placement. In the international zone, permanent placement is a larger portion of the total in the international zone than it is in the U.S. And we had strength across several countries. It wasn't isolated. And so that drove the outperformance in talent solutions non-U.S. In Protiviti, the difference in the regulatory environment is significant, and we still have some meaningful regulatory enforcement actions we're working on outside the U.S. and the environment is very different in the U.S. as we talked about.
Operator provided instructions. And the next question will come from Manav Patnaik with Barclays.
This is Ronan Kennedy on for Manav. If I may, please, I just have a follow-up on what was discussed on the Q3 guide in response to Trevor and Andrew's question. Is it as simple as you have that run rate, which is dramatically better exiting the quarter in contract, have the cost efficiency actions and productivity. Is it as simple as run rate element of conservatism, comp and cost actions? Or are there as to what needs to happen from a trend standpoint and sensitivities?
No, no. It's just as simple as you described. It's existing run rate, even less conservative or more conservative, if you will, than existing run rate, plus cost actions gets you year-on-year revenue growth, year-on-year income growth. It's simple math. There's no complicated math.
Fair enough. Nothing to be particularly mindful of with regards to drivers and trends and/or sensitivities to those for each of the respective businesses?
I'm sorry, I didn't hear that last part.
So nothing to be particularly mindful of with regards to drivers and trends and/or sensitivities to those for each of the respective businesses?
No. No. I mean we called out the typical drivers of the Q3 trends, a little softer in perm because of summer, particularly Europe. Protiviti benefits, companies work on their internal controls, certifications in a big way in Q3, getting ahead of year-end and Protiviti gets a lift from that. And that lift is principally with their full-time staff, so they get better utilization, better chargeability, which drives higher incremental margins. And as we said, our expectation would be Protiviti's segment margins to get back into the 7% to 9% range, which is consistent with a year ago, notwithstanding these financial services industry headwinds.
Got it. And then if I may, please follow up on contract solutions. I think it exited March down roughly 5% year-over-year versus down 7% for the full quarter and then April trending close to flat. What drove that improvement? Was it volume starts, fill rates, mix? And how confident are you in that persisting through Q2?
Well, it was broad-based. It was led by technology. We're excited about that trend line. We think it's sustainable. Our guidance is more conservative than that start. But we feel the best we felt in a long time, including better than we felt 90 days ago.
Operator provided instructions. And the next question will come from George Tong with Goldman Sachs.
It appears the permanent placement revenues exiting the quarter and heading into March or April worsened a bit from Q1, which is different than contract talent solutions doing better exiting the quarter and into April. Could you dive deeper into what's causing that dichotomy in performance, that separation, perm weakening and temps doing better?
Well, perm is more volatile on a weekly or monthly basis than is contract. Short-term perm trends are not nearly as predictive of how we'll end up for a given quarter. And so frankly, if anything, as we looked at our own internal guidance, perm for the quarter actually exceeded our internal expectations more so than contract. And so we read very little into one month or post quarter. And if you look back and you'll do a study with hindsight looking at how we started a quarter versus how we reported the entire quarter, you'll see that they're not very predictive. And so quite frankly, we still feel good about perm, equally good about perm as we do about contract. And ironically, versus our own internal expectations, perm actually outperformed.
Got it. You talked about expecting positive growth across the business in Q3 year-over-year. Does that apply to the individual lines within talent solutions, so finance and accounting, admin, customer support, technology, all of those you expect to inflect positively in Q3 as well?
Yes. I don't have that in front of me. It would certainly be true for tech that's close, if not already there. It's likely true for finance and accounting, administrative customer service, maybe not. We've walked away from some lower-margin business in ACS, as we call it. We've further reallocated some headcount away from that practice group area to the others. And so it might be for internal reasons that would not be the case for ACS. But again, overall, which, what I argue, is the most important. We do expect not only sequential but year-on-year contract revenue growth for Q3. And frankly, we feel even better about that based on what we've seen as up through this morning, which is when we got last week's results, we feel great about the prospect that we're going to have year-on-year revenue growth again. And as I talked about earlier, not only year-on-year top line growth, but even more year-on-year bottom line growth.
Operator provided instructions. And the next question will come from Kartik Mehta with Northcoast Research.
It seems as though decision timelines still remain a little bit extended. And I'm wondering if you could look at them in terms of what they were when they were normal, how stretched they are? And maybe normal has been a long time ago, but just your perspective on where they are today versus where they were when things were better.
I'm not sure we've quantified precisely by what extent they're longer. It's not a few percentage points. I'd venture to say 20% to 30% longer, but that's an educated guess based on the data I'm looking at.
And then can you just, obviously, SMB clients are lagging a little bit behind enterprise clients. I imagine that's impacting the mix compared to when things were a lot better. What kind of impact is that having on margin for you?
Well, our mid-cap margins are a little bit lower than SMB margins, but they're not dramatically lower, and they're nowhere near what the other publicly held staffing firms that deal principally with large-cap clients have. And so from a margin perspective, they're not that different. The mid-caps are a little smaller, but not orders of magnitude smaller. But the mid-cap clients are doing better for us at the top line than our SMBs, and that's a very typical pattern. SMBs always lag enterprise. And so our view of enterprise is both our 30% of staffing, which are mid-cap as well as what we're seeing in Protiviti ex financial services regulatory.
Operator provided instructions. And the next question comes from Stephanie Moore with Jefferies.
I wanted to return to the discussion on AI. You always provide excellent insight into the investments you're making, and this has been a key theme across the sector. I wanted a bit more detail on two aspects of AI. First, are you seeing benefits from those investments, for example higher placement rates or faster time to close job openings? Second, there's widespread discussion across industries about AI potentially eliminating certain jobs. Could you address any strategic changes you're considering in end markets or roles that could be disintermediated by AI?
As far as benefits from our investments, our principal investments, as you know, have been in how we match candidates to job orders. Our clients for 40 years when surveyed, the most important thing to them is the quality of candidates that we deliver that match their needs. And so our AI specifically addresses that. It's award-winning. We continuously look at the inputs, the weightings, the factors we use there, it continues to improve. Our people have adopted it. We've embedded it into the tools they use every day anyway. And so I would argue that the quality of our matches, which is not only what our clients care most about. But if you ask their candidates, what's the most important thing to them, it's the quality of the jobs that we offer. And that same matching engine does that same matching for the benefit of our candidates. And I would argue, again, our award-winning matching engine, which is AI-driven, does a better and better and better job.
And it's core to who we are. It's core to how we provide value to our clients and our candidates. And so there's no question in my mind. And the fact that it's driven based on proprietary data around candidate performance rather than clicks, which is what many of the larger aggregator job board, AI-native platforms use, I would argue it further distinguishes it because we're trying to optimize for candidate performance, not for clicks. Similarly, as we've talked about before, we're trying to make our pipeline more intelligent by rank-ordering for our people the prospects that they should pursue. So we can quantify number of calls it takes for them to get a connect with the client. Further, we can quantify the conversion rates once they do connect, and they're both meaningfully improved when they use our AI-driven intelligent pipeline. On this issue of job elimination, with every passing day, I get more and more convinced that this is about augmentation more than it is displacement, that it's more about taking somebody that already has domain expertise and enhancing their skills with AI.
And I'll take a person with that domain expertise as enhanced every day versus a novice that doesn't have domain expertise using these new tools. Domain expertise is not obsolete. I don't think it will become obsolete. And every technology cycle, every technology wave we've seen historically, that's exactly what's happened, and that's exactly what we see playing out so far, and I would expect to continue to see play out.
Operator provided instructions. And your next question will come from Tobey Sommer with Truist.
This is Tyler Barishaw on for Tobey. On the regulatory environment, you mentioned it's a little weaker. Will this weakness last for the remainder of the administration, or do you expect it to be temporary? I'm just curious about your thoughts on this period of weakness.
Well, it's either going to last the duration of this administration or there's going to be some event. There's going to be some money laundering event that's going to trigger a rethink of the current environment. But it's certainly unprecedented, particularly the way the examiners have followed a new administration relative to the past because typically, there's more inertia at the examiner implementation level relative to policies above it than this time where they've gotten in line. And so as I said, it's either a different administration or some event that could happen. History says major money laundering events do happen. And arguably, with less scrutiny, they may happen more often. But the good news is Protiviti has kind of bitten the bullet and said, all right, let's assume this is the new normal. Now let's adjust our cost structure accordingly, and that's what they've done. They've done it quickly and they've done it effectively.
Got it. That makes sense. I think last quarter, you said you expect Protiviti margins to increase by about 100 basis points year-over-year. Just curious with these cost actions and the weakness in the regulatory environment, does that guidance still stand or any changes to that?
Well, given that the headwinds are more than we expected on the regulatory scrutiny front, just to stay even with last year's margins, I think, is an accomplishment in this market. Might we do better than that? Yes. But I would probably dial that back again given that the headwinds intensified and the cost actions certainly get us back to near last-year margins. Maybe there's some upside there, but let's let it be upside.
Operator provided instructions. And the next question is from Kevin McVeigh with UBS.
I don't know if you mentioned this in another call. But regarding the restructuring, was that primarily Protiviti? And how much does it benefit Q3?
So just to be clear, we have a pro forma Q2 as if these actions were taken as of the beginning of Q2, and that adds $0.08 to our Q2 guidance. $0.03 is the absence of severance and $0.05 is the impact of the cost savings. Because those cost savings are expected to be done complete by the beginning of Q3, the Q3 number we've given you is pure. There's no severance and it has the full impact of cost savings. But what that does is it takes your Q2 pro forma EPS to $0.33, which is $0.08 higher than what we just guided. And the Q3 directional guidance we gave includes the benefit of the cost savings and doesn't have any severance.
That was our last question. Thank you very much for joining us. Thank you. This concludes today's teleconference. If you missed any part of the call, it will be archived in the audio format in the Investor Center of Robert Half's website at roberthalf.com. You can also log into the conference call replay. Details are contained in the company's press release issued earlier today.