Hello, and welcome to the Robert Half third quarter 2026 conference call. Today's conference call is being recorded. If you'd like to ask a question during the Q&A portion of the call, please press star and the number one on your telephone keypad. Our hosts for today's call are M. Keith Waddell, President and Chief Executive Officer of Robert Half, and 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're 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 third quarter of 2026, global enterprise revenues were $1.359 billion, roughly flat with last year on an adjusted basis. Talent Solutions returned to adjusted year-over-year revenue growth for the first time since 2022, with revenues increasing 2%. Global enterprise earnings exceeded the midpoint of our third quarter guidance. Hiring activity continues to improve, supported by gradually improving market conditions. Demand for risk and compliance consulting services also showed encouraging signs of improvement during the quarter.
Our combination of innovative technology, specialized expertise, and high-touch client service positions us well to deliver the talent and consulting solutions clients need to advance their business priorities. Net income per share in the third quarter was $0.49, up 14% from $0.43 a year ago. This marked the first year-over-year increase in quarterly earnings per share since 2022. Cash flow provided by operations during the quarter was $66 million. In September, we distributed a $0.59 per share cash dividend to our shareholders of record for a total cash outlay of $59 million. Return on invested capital for the company was 17% in the third quarter. Now I'll turn the call over to our CFO, Mike Buckley.
Thank you, Keith. Hello, everyone. As Keith noted, global revenues were $1.359 billion in the third quarter. On an adjusted basis, third quarter Talent Solutions revenues were up 2% year-over-year. U.S. Talent Solutions revenues were $670 million, up 3% from the prior year's third quarter. Non-U.S. Talent Solutions revenues were $206 million, down 1% year-over-year. Our Contract Talent Solutions operations achieved adjusted year-over-year revenue growth of 1%, and Permanent Placement operations delivered 6% growth. We conduct Talent Solutions operations through offices in the United States and 18 other countries. In the third quarter of 2026, there were 64.6 billing days, compared to 64.2 billing days in the third quarter one year ago. The fourth quarter of 2026 has 61.1 billing days, compared to 61.4 billing days in the fourth quarter of 2025.
Billing days for the four quarters of 2027 will be 61.5, 63.7, 64.5, and 61.5 for a total of 251.2 billing days in the year. Currency exchange rate fluctuations during the third quarter had a de minimis impact to reported revenues. Contract Talent Solutions bill rates for the third quarter increased 3.6% compared to one year ago, adjusted for changes in the mix of revenues by functional specialization, currency, and country. This rate for the second quarter was 2.3%. Now let's take a closer look at results for Protiviti. Global revenues in the third quarter were $483 million. $383 million of that is from the United States, and $100 million is from outside of the United States. On an adjusted basis, global third quarter Protiviti revenues were down 3% versus the year ago period.
U.S. Protiviti revenues were down 5%, while non-U.S. Protiviti revenues were up 2% 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, third quarter gross margin was 39.3% of applicable revenues versus 38.9% in the third quarter one year ago. Conversion or contract-to-hire revenues were 3.4% of contract revenues in the current quarter, compared to 3.2% in the third quarter of 2025. Our Permanent Placement revenues were 13.4% of consolidated Talent Solutions revenues in the current quarter, compared to 12.9% in the third quarter of 2025. When combined with Contract Talent Solutions gross margin, overall gross margin for Talent Solutions was 47.4% of applicable revenues in the current quarter, compared to 46.7% in the third quarter of 2025.
For Protiviti, gross margin was 24.2% of Protiviti revenues in the third quarter and 20.9% in the third quarter one year ago. Adjusted gross margin for Protiviti was 24.1% for the quarter just ended, compared to 23% last year. Enterprise SG&A costs were 33.6% of global revenues in the third quarter, compared to 36.2% in the same quarter one year ago. Adjusted enterprise SG&A costs were 33.8% for the quarter just ended, compared to 33.5% one year ago. Talent Solutions SG&A costs were 43.2% of Talent Solutions revenues in the third quarter versus 48.2% in the third quarter of 2025. Adjusted Talent Solutions SG&A costs were 43.4%, compared to 43.9% for the third quarter one year ago. Third quarter SG&A costs for Protiviti were 16.4% of Protiviti revenues, compared to 15.5% for the same quarter one year ago. Reported operating income for the third quarter was $75 million.
Adjusted operating income was $73 million in the quarter or 5.3% of revenues. This compares to $61 million or 4.5% of revenues one year ago. Third quarter adjusted operating income for Talent Solutions was $36 million or 4% of revenues. This compares to $24 million or 2.8% of revenues last year. Adjusted operating income for Protiviti in the third quarter was $37 million or 7.7% of revenues. Adjusted operating income for Protiviti in the third quarter one year ago was $37 million or 7.5% of revenues. Our third quarter 2026 income statement includes a $2 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 third quarter tax rate was 33% in both the current quarter and the third quarter one year ago. At the end of the third quarter, accounts receivable were $826 million and implied Days Sales Outstanding or DSO was 54.8 days. Before we move to fourth quarter guidance, let's review some of the monthly revenue trends we saw in the third quarter and so far in October, all adjusted for currency and billing days. Contract Talent Solutions exited the third quarter with September revenues up 1% versus the prior year, the same as the 1% increase for the full quarter. Revenues for the first two weeks of October are up 2% compared to the same period last year. Permanent Placement revenues in September were up 5% versus September 2025. This compares to a 6% increase for the full quarter.
For the first three weeks in October, Permanent Placement revenues were up 5% compared to the same period in 2025. We provide this information so that you have insight into some of the trends we saw during the third quarter and into October. We caution against reading too much into them. With that in mind, we offer the following fourth quarter guidance. Revenue, $1.285 billion to $1.385 billion. Income per share, $0.36 to $0.46. Midpoint revenue of $1.335 billion are 3% higher than the same period in 2025 on an adjusted basis. Midpoint earnings per share of $0.41 and are 30% higher than last year. Our midpoint revenue guidance for the fourth quarter reflects year-over-year revenue growth of 3% for Talent Solutions and 2% for Protiviti. The major financial assumptions underlying the midpoint of these estimates are as follows.
Adjusted revenue growth year-over-year for Talent Solutions up 1%-5%. For Protiviti, flat to up 4%. Overall, up 1%-5%. Adjusted gross margin percentages, Contract Talent 38%-40%, Protiviti 22%-25%, overall 37%-40%. Adjusted SG&A as a percentage of revenue for Talent Solutions 43%-45%, for Protiviti 16%-18%, and overall 33%-35%. Adjusted operating income as a percentage of revenues for Talent Solutions 2%-4%, for Protiviti 6%-8%, overall 3%-5%. The assumed tax rate 31%-33%, and shares outstanding 100.5 million to 101.5 million shares. 2026 capital expenditures and capitalized cloud computing costs $60 million-$70 million with $15 million-$20 million in the fourth quarter. For the first quarter of 2027, we offer the following directional observations.
Number one, historically, Protiviti Q1 segment margins seasonally decline by mid-single digit percentage points on a sequential basis. There are two primary drivers. Internal audit revenues are negatively impacted as clients' focus is shifted to annual financial statements and related external audits. In addition, Protiviti employees receive annual compensation adjustments effective January 1st, which are recovered through pricing adjustments realized as client contracts are negotiated. Segment margins then improve accordingly. Based on this, first quarter consolidated operating margins have historically been 1 percentage to 2 percentage points lower sequentially than the fourth quarter. Number two, there is typically more variability in the Q1 tax rate compared to other quarters related to the vesting of our employee stock compensation awards. We currently expect the Q1 tax rate to be between 36% and 40%.
All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filing. Now, I'll turn the call back over to Keith.
Thank you, Mike. Our third quarter results reflect continued improvement in our Talent Solutions operations and Protiviti. Both Contract Talent Solutions and Permanent Placement achieved year-over-year revenue growth. Technology remains the strongest performing practice group within Contract Talent Solutions, while finance and accounting also returned to year-over-year revenue growth. Across markets, clients remain focused on securing specialized expertise for high priority initiatives, particularly in the areas such as technology modernization, data, cybersecurity, and IT infrastructure. Small and mid-sized businesses continue to face significant challenges finding the skilled talent they need. According to latest NFIB data, labor quality and availability is a top business problem, reflecting a persistent skills gap that highlights the value of Robert Half's ability to connect clients with highly experienced professionals who can make an immediate impact. Macroeconomic and geopolitical uncertainty continues, including impacts to inflation and interest rates.
Against this backdrop, organizations large and small remain resilient and are steadily increasing their investment and opportunities to modernize operations and strengthen their competitive position. Whether implementing new technologies, improving productivity, or advancing strategic initiatives, organizations need specialized talent and expertise to execute effectively. These investments create opportunities for our Talent Solutions and consulting services. Highly skilled professionals remain difficult to find, particularly in specialized disciplines. In-demand candidates have choices and remain focused on flexibility, career development, and competitive compensation. These conditions play to Robert Half's strengths, including our ability to quickly connect employers with specialized talent possessing the skills and experience organizations need. AI has increasingly become part of how work gets done across the professions we serve.
Rather than broadly displacing specialized roles, these technologies are instead adding to the skills employers value and increasing the importance of professionals who can pair strong functional expertise with AI fluency, critical thinking, and sound judgment. The ability to assess and validate AI-generated outcomes is becoming an increasingly important part of that skill set. At the same time, the growing use of generative AI by job seekers is making it more challenging for employers to distinguish between candidates' stated qualifications and demonstrated capabilities. This underscores the value of our candidate evaluation and vetting processes, combining proprietary performance insights, rigorous skills assessment, and the judgment of our recruiters to help clients hire with greater confidence. As these challenges become more widespread, our ability to identify and validate highly capable talent represents an increasingly important competitive advantage.
Beyond its impact on the hiring process, AI adoption is also creating new opportunities for specialized talent. Whether related to AI exploration or for implementation across their operations, we are seeing growing demand for highly qualified talent to support this transition. This includes professionals with expertise in technology, data, finance, and business transformation, as well as those who can apply emerging technologies with their respective disciplines. These evolving requirements reinforce the value of our specialized recruiting expertise and deep understanding of the skills employers need. Protiviti's results exceeded our expectations for the quarter, with every major solution or capability area above forecast. Technology Consulting again posted all-time high quarterly revenues, with high demand for platform transformation, cybersecurity, data-related and AI engagements. The risk and compliance practice made significant progress during the quarter, which is expected to continue.
Leading the way were engagements to help clients address existing enforcement actions where regulators required further improvements to the quality and effectiveness of their anti-money laundering programs. Demand across Protiviti's broader solution offerings remains solid, with a growing and diversified pipeline of opportunities. We expect Protiviti to return to year-over-year revenue growth in the fourth quarter. Our ability to strategically leverage contract professionals through our Talent Solutions business remains a distinct competitive advantage, enabling us to deliver flexible solutions for clients while strengthening collaboration across the enterprise. We're encouraged by the progress in our business and remain confident in the opportunities ahead. As businesses navigate changing technology, workforce, and operational requirements, we see continued opportunities to help clients access the expertise they need to adapt, execute, and grow. Our purpose has never been more relevant. Helping companies succeed through specialized talent and consulting expertise, while helping people build meaningful careers.
Backed by our trusted brand, exceptional people, innovative capabilities, and diversified business model, we remain confident in our ability to create long-term value for our clients, our employees, and our shareholders. Finally, we want to recognize and thank our employees around the world for their continued dedication to our clients. Their commitment is reflected in Robert Half's recent accolades, including being named among Fortune's Best Workplaces in Consulting & Professional Services, Forbes World's Best Employers, and Forbes World's Top Companies for Women. Now, Mike and I'd be happy to answer your questions. Please ask just one question and a single follow-up as needed. If there's time, we'll come back for additional questions.
Thank you. At this time, if you would like to ask a question, please press star one on your touch-tone telephone. If you are joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you would like to withdraw your question, please press star two on your touch-tone telephone. Again, that is star one if you would like to signal with questions. Your first question will come from the line of Andrew Steinerman with JPMorgan.
Hey, Keith, could you just help us dissect the pickup within Protiviti? Particularly, I am curious about the demand for AML compliance services. Earlier the year, we said that like the regulatory backdrop wasn't as fierce for AML compliance. Has something changed? Obviously, you are saying the demand for the risk and compliance is one of the drivers to bring Protiviti back to growth in the fourth quarter. Is it the biggest driver that's changed kind of third into the fourth quarter for Protiviti?
The answer is yes. During the last 90 days, Treasury Department regulators imposed significant fines and major enforcement actions against multiple large financial institutions. Most of them were in the news, and they related primarily to prior consent orders where the remediation efforts were found to be deficient. This put banks generally on notice that AML compliance was still a top priority, in part because it has direct links to national security. These actions require many activities, including historical look-backs, significant increases in transactions and file review volumes. Often, these involve third-party consultants to clear. Protiviti is fortunate to have a and and and have broad relationships across financial institutions. it does business with over 80% of the largest financial institutions globally. We are seeing a meaningful increase in demand for AML remediation and compliance.
The really good news is it benefits the entire organization because a significant amount of the work comes from contractors sourced through Talent Solutions. It's a win for everybody.
Makes total sense. Thank you, Keith.
Your next question comes from Mark Marcon with Baird.
Hey, good afternoon, and encouraging to see the strong results. Keith, you mentioned in your script a number of factors that are basically driving the growth in the Talent Solutions, and going from how difficult it is to find verified talented individuals and your ability to do that, as well as a whole slew of new skills that are coming to the fore. The question is, to what extent do you think that those trends make you a little bit more resistant to any sort of macro downturn that we could potentially have given where fuel prices are, where interest rates are, just kind of the geopolitical environment? Then, as a follow-up to that, if we can keep going, what does that say with regards to the margin profile for next year?
Because the incremental margins look like they're pretty good, and it seems like you have a lot of excess capacity. I know it's a long question, but I just wanted to drill down on those two elements.
Well, I think the first one related to resilience if the macro weakens. I would say in addition to it is difficult for clients to find talent, particularly verified talent for the reasons we have talked about. Unemployment is low, generally speaking, which also makes it harder for our clients. The new skills are more difficult for our clients to source on their own, and we can also correlate existing skills to needed new skills in a way that it is hard for our clients to do on their own. I clearly think we are positioned well relative to prior cycles because of the lower unemployment. Still, what, 4.2% in the U.S.? In part because of the newer requirements, in part because verification of skills is more important than ever with AI. We feel relatively good about resiliency.
As to margin profile, as you are already seeing, even with low single-digit growth that we are seeing this past quarter, that we are projecting for the coming quarter, the combination of a little higher gross margin, a little SG&A leverage, we have got nice double-digit increases in operating income. At midpoint for Q4, that is up 30%. With some luck, that will be even more as we move forward. Coupled with Protiviti's strength, particularly in regulatory compliance, we are pretty bullish about margin possibilities.
That is great. You have had really nice improvements in terms of Protiviti margins. Do you think that that can also continue? I know the leverage that you have got on the Talent Solutions side, but I do not know if you have that same excess capacity with regards to AML.
Well, I would say remember the cost actions that they took just last quarter, so those cost actions are a big contributor to the better margins because the remaining people are higher chargeable or more utilized, if you will. Use of contractors by Protiviti is margin accretive, and these AML projects are very contractor-heavy, so that's a good thing for Protiviti's margins. As we've said many times for many quarters, the plan for Protiviti is to have double-digit operating margins, and that continues to be the plan. So I think they made tremendous progress in a very short period of time with their margins. This new demand and additional revenue that comes from more AML is even better news. Let's not forget that Technology Consulting is still Protiviti's largest practice group. It just, again, did all-time high quarterly revenues.
That's terrific. Thank you.
Your next question comes to the line of Trevor Romeo with William Blair.
Hi, good afternoon. Thanks for taking the questions, Keith and Mike. I wanted to actually continue on the margin theme, but shift to gross margins for the Contract Talent Solutions business, because I think the bill rates accelerated nicely, I think over a percentage point, and your gross margins expanded even adjusted for the conversion. So maybe you could just talk about that a little bit more, I guess, in terms of mix. Are you starting to see more movement in terms of highly skilled talent or FTEP placements accelerating, or just any other factors that might be helping the bill rates and the gross margins for the contract business right now?
Year-on-year, we are up 40 basis points in contract gross margin. Half of that is conversions, which is a derivative of the strength in Permanent Placement. The other half is pure spreads, and we have increased our spreads over the last year. Part of that is mix, as we have said, we have moved to higher skill. Part of that is mix as to FTEP, which is recovering because it was impacted the most on the downside the last few years. Part of it is just kind of disciplined execution because gross margin maintenance and defending those have always been a priority at Robert Half and will continue to be.
Okay, that is great. I guess on the first quarter directional observations that you gave, of course, appreciate the comments on margins and the tax rate. I guess as you stand today with your current visibility, is there anything in terms of the top line that would tell you kind of differently than normal seasonality for revenue at this point? Or just how would you kind of message the trends that you might see there?
I think the seasonal trend is a seasonal trend that will be around for a long time. Because of the internal audit crowd out, as clients focus on external audit, and because of all the compensation adjustments that all fall on the same first day of the year, you are going to have those impacts, but you recover from them the rest of the year. Clearly, this improvement in regulatory risk and compliance will help the revenue side, but that does not directly impact internal audit, and internal audit is the one where they have the crowd-out phenomenon, as I just spoke to.
I guess in terms of the Talent Solutions business, is there anything maybe different than you would normally expect?
Not really. It's always a little quirky about what day of the week or month that the holidays fall, but that's just business as usual. Other than that, in Talent Solutions, we've seen steady, consistent, sequential improvement day by day, week by week. It's not a hockey stick, but it's a steady rise that we've seen for a few quarters now that we see no reason wouldn't continue.
Yep. All right. Well, great. Thank you, Keith.
The next question comes from Kartik Mehta with Northcoast Research.
Hey, good afternoon. Keith, just to maybe drill down a little bit on Protiviti. Obviously, the first quarter you talked about some seasonality. As you look at the fourth quarter, is there any seasonality or lumpiness? I know the holidays probably have an impact, but I'm curious, based on the growth guidance you gave, if there would be any one-time issues or if this is just a consistent improvement in the business.
Well, I would say the holiday impacts Protiviti more so than Talent Solutions because many of their clients do a soft close between Christmas and New Year's, so there's that impact which remains. But we have dialed in the benefit of the additional anti-money laundering demand in this fourth quarter, but it's not a one-off.
On the Talent Solutions, when you look at SMB customers and enterprise customers, any difference, or has the recovery been pretty broad-based where both are participating?
I would say that enterprise traditionally recovers sooner and more quickly. That's been the case this time around. SMB is starting to catch up a bit, so that's good news. But enterprise always gets a head start.
Perfect. Thank you so much. I appreciate it.
Your next question will come from George Tong with Goldman Sachs.
Hi, thanks. Good afternoon. Permanent Placement revenue grew 6% in the quarter, and that was well ahead of Contract Talent growth. To what extent would you say the strength in Permanent Placement serves as a leading indicator of a broader hiring recovery? Historically, what lag have you seen between Permanent Placement and contract staffing?
George, I would say they're coincident. In fact, if you go to our website, we've got a slide that shows probably for 20 years, we superimposed year-over-year growth rates for perm over year-over-year growth rates for contract. My conclusion looking to those graphs is that they're coincident. Because Permanent Placement always gets hit harder on the downside, it's starting at a lower point, at a lower base, and comes out stronger on the upside. I think that's exacerbated by low unemployment that we're currently in, added to by this need for validation because of AI, I think makes perm, relatively speaking, even more positive. Effectively easier comps because it takes a bigger hit on the downside and, because of low unemployment, more demand, because it's harder for clients to hire themselves.
Got it. That's helpful. Talent Solutions has seen sequential improvement now for a couple of quarters. With contract revenue up 1% and bill rates up about 3.5%, would you say hours worked or active contract placements have begun to grow year-over-year at this point? When would you expect to see volumes to become a positive contributor to revenue growth?
Well, I think for the math to work, the volumes are still somewhat down, but they are increasingly less down, and the trend is good for the reasons we have talked about.
Got it. Thanks very much.
The next question is from Manav Patnaik with Barclays.
Hi, good evening. This is Ronan Kennedy on, or good afternoon rather, on for Manav. Thank you for taking our questions. Question on technology has led the recovery, and finance and accounting has returned to growth. Are you beginning to see demand broaden beyond mission-critical initiatives into more discretionary hiring of projects, or is the recovery still concentrated in areas clients simply can't defer?
Well, it's primarily areas they can't defer, but to the extent they think or decide that there are projects that are critical to their competitiveness, they decide they need to modernize to get ready for AI, whatever that's going to mean, they're willing to spend selectively. Contrasted to prior cycles that corresponded to overall recessions, typically, the ending of an overall recession is a clearing event. There's an all clear bell, and everybody, including our SMB clients, feel more positive and demand overall increases. I'd say, so far it's still more selective. The inflation concerns, the geopolitical concerns all add to that. Our clients are grinding their way through those uncertainties, but we haven't yet had the clearing event you've had traditionally at the beginning of up cycles.
Got it. Thank you. A question for my second, please,, on Talent Solutions operating margin range. I think it's guided to 2%-4% for quarter. Can you help us think about what separates the low end from the high end, whether it's the revenue volume and SG&A leverage, or does GM, gross margin mix, remain an equally important swing factor?
Well, we always give a range, right. We focus heavily on the midpoint of that range, but there's no magic. I mean, how impactful will the holidays be? That's particularly a variable as it relates to Permanent Placement. If you look back over time, the variability in Permanent Placement Q4, because of the holidays, is more than the variability in contract because of the holidays. But I wouldn't point to anything specific as to what's going to drive whether it's the midpoint, low or high, other than just client demand.
Fair enough. Thank you.
The next question comes from Jeff Silber with BMO Capital Markets.
Great. Thanks so much. Now that you have returned to year-over-year growth for Talent Solutions, and you are guiding for that to happen in Protiviti in the current quarter, can you remind us what you think the long-term growth rates are for those businesses. I know they are cyclical, but maybe if we are looking peak to peak, any color would be great.
Well, again, it is a long-term question. We typically think mid-single digits for Talent Solutions. For Protiviti, because it has such a small market share relative to the Big Four , and there is so much opportunity there, we would expect even higher, kind of maybe from mid-singles to low doubles. But again, those are long-term educated guesses, would maybe be a way to call it.
That is what I asked for, so that is great. That is really helpful. As a follow-up, you had mentioned in your remarks, you talked about some of these big remediation projects. Can you tell us roughly how long those last. Is that something that might be rolling off in the first quarter?
Well, the expectation is they last a lot longer than one quarter. I think if you look back, Protiviti's had some of those that have lasted years. Now remember, these aren't brand new consent orders or enforcement actions. These are the regulators coming in, seeing what's been done so far, and say, "That's not enough." It's not a brand-new start, but the point is these clearly have legs, and they're expected, at a minimum, to have multiple quarter legs. But it depends on the client. It depends on how aggressive they are. It depends on their internal resources, their willingness to use external resources. There are a lot of variables, but it's not a quick in-and-out process, to say the least.
Okay, great. That's helpful. Thanks so much.
The next question will come from Tobey Sommer with Truist.
Thank you. Wanted to ask a question about your comments about the seasonality of profit impacts with tax and operating income, et cetera, and margin in 1Q. What's the implied EPS impact at the bottom line from those factors?
Well, I am not sure for this purpose we have separated them and converted them to EPS. We basically said, collectively, at the pre-tax operating margin line, they typically cause a 1%-2% pre-tax operating income impact. I guess we could do the math and convert that to EPS, but again, it is orders of magnitude. That is what we are talking. The tax rate in the first quarter is all over the place because of stock compensation. The issue is typically at what price were compensation grants made to employees versus when they vest, what tax deduction do you get for those. The differential, positive or negative, impacts your tax rate. That is why that tax rate in the first quarter is particularly volatile. I think last year it was over 50%. The year before that, it was 20%. That is heavily impacted by stock prices.
Makes sense. I wanted to ask about the opportunity for you to leverage Talent Solutions with the areas that are growing in Protiviti. Is the current mix of demand sufficient so that you do have opportunities for the two businesses to work together and sort of maximize your revenue and profit from those? Maybe could you refresh us on what areas of Protiviti, should there be an increase in demand, would be the sort of optimal ones to leverage that relationship? Thanks.
Well, the most contractor-centric large projects Protiviti has are the risk and regulatory, in this case, anti-money laundering projects that are very large. They are very contractor-centric. Having access to those contractors and to be able to scale as quickly as we can scale for our clients is unquestionably a competitive advantage. Risk and compliance, that practice has always been very contractor friendly. It is loved by the enterprise as a whole, as I said earlier, because of the involvement of contractors. Technology Consulting, which is taking advantage of the modernization, AI adjacent, AI getting ready. That is also an area for contractors, and even internal audit. Internal audit is an opportunity where Protiviti uses contractors as well.
While it took us a while to get the collaboration we now have with the success we have enjoyed with contractor usage, it is unquestionably now at a competitive advantage. These newer projects that we talked about today, we are scaling significantly and quickly in a way it is hard for competitors to do.
Thank you.
It is a wonderful thing.
Our next question comes from Bruna Wernick with UBS.
Good afternoon. This is Bruna for Kevin McVeigh. Congrats on the result. Can you please confirm whether there was any benefit on the Q4 EPS guide from the last quarter restructuring?
Well, to the extent we took cost out of the business, those certainly accrue to the fourth quarter as well. My recollection is, and correct me in the room if I am remembering wrong, it was about $11 million a quarter in benefit from payroll savings alone, which clearly benefits the fourth quarter.
Thank you.
The next question comes from Stephanie Moore with Jefferies.
Great. Good afternoon. Thank you so much. I wanted to touch on your AI investments. I know that you have implemented a lot of investments over the last 12 months or so. Could you talk a bit about what you have seen thus far in terms of fill rate, increased productivity at the individual level? As we think about an up cycle, what does this mean in terms of your own headcount with some of these tools? Thank you.
Well, I'd say that initially, our tools are more focused on client and candidate experience than they are internal recruiter productivity. Not that we're not getting any, but we're focused on improving matching, and we've spent a lot of money improving our matching algorithms, including upgrading them to the latest large language models. On the client side, we've spent a lot of money in AI, trying to have more of an intelligent pipeline approach to which clients we reach out to and why. It's kind of like the Amazon, if you like this, then you'll like that. For our people, if we're doing business with this client, this client has this kind of profile. Here are other companies with a similar profile. Here's news stories and other information that we have access to about those companies. Further, do we have any activity whatsoever across our organization?
All of which give us a reason to call and have something to talk about. Again, I would say, rather than focus first on cost savings and productivity, it's more around expanding market, expanding access to clients, access to candidates. Now, having said that, particularly in the case of prioritizing leads, that definitely has had a productivity improving quality for our people. As quickly as I say that, I think many have learned, and we would concur, that translating individual productivity to organizational productivity, there's a lot of slip between cup and lip, when you're trying to look at your organizational savings versus taking individual savings you might get in a given location and extrapolate that to everybody that works for you. We feel good about our investments. We're focused on client and candidate experience first.
We're not ignoring that there are productivity gains for our people, and we're getting some, but we're more focused on client and candidate experience.
Understood. Thank you. Then maybe just for a follow-up, and maybe I just misunderstood your comment. But maybe just talk a little bit about, as you think about focusing on roles in different end markets or different segments, and maybe talk about how that has changed as we think about this cycle versus prior cycles and if there are some targeted verticals that you're now focused on versus historically. Thank you.
I would say from a vertical point of view, probably the biggest change is in technology. Historically, our SMB clients, the demand was for help desk, PC technicians, very operational-driven roles. As technologies migrated over the years, such that even smaller businesses have tech development requirements that historically they didn't have. Plus, as we focused more and more on mid-size, mid-cap companies as it relates to technology, our mix of technology to the total, I haven't looked at it in a while, but if you take a 10-year view, my guess is you would see technology is a much larger portion of the total today than it was 10 years ago. That's in part because of the demand for our core SMB base has gravitated toward tech development because of how technology's changed.
Understood. Thank you.
Okay. That was our last question. Thank you very much.
Thank you. This concludes today's teleconference. If you missed any part of the call, it will be archived in 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.