Earnings Call Transcript - RHI Q1 2025

Operator, Operator

Please standby. Hello and welcome to the Robert Half First Quarter 2025 Conference Call. Today's conference is being recorded. Our host 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.

Keith Waddell, CEO

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 in 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 mention some non-GAAP financial measures and reference these figures as adjusted. Specifically, we present adjusted revenue growth rates, which remove the impacts on reported revenues from the changes in the number of billing days and foreign currency exchange rates. Additionally, we present adjusted gross margin, adjusted selling, general, and administrative expenses, and adjusted operating income by combining the gains and losses on investments held to fund the company's obligations under employee deferred compensation plans with the changes in the underlying deferred compensation obligations. Since the gains and losses from investments and the changes in deferred compensation obligations completely offset, there is no impact on our reported net income. Reconciliations and further explanations of these measures are included in a supplemental schedule to our earnings press release. For the first quarter of 2025, global enterprise revenues were $1.352 billion, down 8% from last year's first quarter on a reported basis, and down 6% on an adjusted basis. Net income per share in the first quarter was $0.17, compared to $0.61 in the first quarter one year ago. First quarter 2025 net income was reduced by $0.13 per share for one-time charges related to cost actions to reduce ongoing administrative expenses. Business confidence levels moderated during the quarter in response to heightened economic uncertainty over U.S. trade and other policy developments. Client and job seeker caution continues to elongate decision cycles and subdue hiring activity and new project starts. Despite the uncertain outlook, we are very well-positioned to capitalize on emerging opportunities and support our clients' talent and consulting needs through the strength of our industry-leading brand, our people, our technology, and our unique business model that includes both professional staffing and business consulting services. Cash flow used in operations during the quarter was $59 million. Cash outflows are typically 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 $61 million. Our per share dividend has grown an average of 11.6% annually. Since its inception in 2004, the March 2025 dividend was 11.3% higher than the prior year. We also acquired approximately 650,000 Robert Half shares during the quarter for $39 million. We have 6.6 million shares available for repurchase under our Board-approved stock repurchase plan. Return on invested capital for the company was 5% in the first quarter. Now, I'll turn the call back over to our CFO, Mike Buckley.

Michael Buckley, CFO

Thank you, Keith. Hello everyone. As Keith noted, global revenues were $1.352 billion in the first quarter. On an adjusted basis, first quarter Talent Solutions revenues were down 11% year-over-year. U.S. Talent Solutions revenues were $676 million, down 10% from the prior year's first quarter. Non-U.S. Talent Solutions revenues were $199 million, down 15% year-over-year. We conduct Talent Solutions operations through offices in the United States and 17 other countries. In the first quarter, there were 61.9 billing days compared to 62.8 billing days in the same quarter one year ago. The second quarter of 2025 has 63.2 billing days compared to 63.5 billing days during the second quarter of 2024. Currency exchange rate movements during the first quarter had the effect of decreasing reported year-over-year total revenues by $12 million; $10 million for Talent Solutions and $2 million impact to Protiviti. Contract Talent Solutions bill rates for the first quarter increased 4.2% 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 3.4%. Now, let's take a closer look at the results for Protiviti. Global revenues in the first quarter were $477 million, $387 million of that is from the United States and $90 million is from outside of the United States. On an adjusted basis, global first quarter Protiviti revenues were up 5% versus the year ago period. U.S. Protiviti revenues were up 4%, 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 28 other countries. Turning now to gross margin. In Contract Talent Solutions, first quarter gross margin was 38.9% of applicable revenues versus 39.5% in the first quarter one year ago. Conversion or contract-to-hire, revenues were 3.2% of contract revenues in both the current quarter and the first quarter of 2024. Our permanent placement revenues were 12.8% of consolidated Talent Solutions revenues in the current quarter and 12.3% in the first quarter of 2024. When combined with contract Talent Solutions gross margin, overall gross margin for Talent Solutions was 46.7% compared to 47% of applicable revenues in the first quarter one year ago. For Protiviti, gross margin was 18.9% of Protiviti revenues in both the current quarter and the first quarter of 2024. Adjusted gross margin for Protiviti was 18.1% for the quarter just ended compared to 20.7% last year. Protiviti's gross margin for the current quarter includes $8 million of one-time charges related to cost reductions to reduce ongoing administrative expenses. These mid-April actions are expected to result in annual savings of $32.5 million, with 75% of a full quarter's benefit recognized in the second quarter due to timing and the full benefit each quarter thereafter. Enterprise SG&A costs were 34% of global revenues in the first quarter compared to 35.4% in the same quarter one year ago. Adjusted enterprise SG&A costs were 35.2% for the quarter just ended compared to 33% one year ago. Talent Solutions SG&A costs were 43.7% of Talent Solutions revenues in the first quarter versus 44.3% in the first quarter of 2024. Adjusted Talent Solutions SG&A costs were 45.5% in the quarter just ended compared to 40.8% last year. Talent Solutions SG&A for the current quarter includes $9 million in one-time charges related to mid-March cost actions to reduce ongoing administrative expenses, which are expected to result in annual savings of $47.5 million with full effect in the second quarter and thereafter. First quarter SG&A costs for Protiviti were 16.3% of Protiviti revenues compared to 15.9% of revenues the same quarter one year ago. Operating income for the quarter was $39 million. Adjusted operating income was $19 million in the first quarter or 1.4% of revenue. First quarter adjusted operating income for our Talent Solutions divisions was $10 million or 1.2% of revenue. Adjusted operating income for Protiviti in the first quarter was $9 million or 1.8% of revenue. Adjusted operating income includes $17 million of one-time charges related to cost actions to reduce ongoing administrative expenses, $9 million for Talent Solutions, and $8 million for Protiviti. Our first quarter 2025 income statement includes a $20 million loss from investments held in employee deferred compensation trust. This is completely offset by an equal reduction of employee deferred compensation costs, which are reflected in SG&A expenses and direct costs. As such, it has no effect on our reported net income. Our first quarter tax rate was 22% compared to 30% one year ago. The lower 2025 rate reflects the accelerated timing of certain tax credits that would have otherwise been recorded in the upcoming fourth quarter. This has no impact on the estimated full-year tax rate for 2025 of 31% to 33%. At the end of the first quarter, accounts receivable were $787 million and implied days sales outstanding, or DSO, was 52.4 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 13% versus the prior year compared to a 12% decrease for the full quarter. Revenues for the first two weeks of April were down 12% compared to the same period last year. Permanent placement revenues in March were 10% versus March 2024. This compares to an 8% decrease for the full quarter. For the first three weeks of April, permanent placement revenues were down 2% compared to the same period in 2024. We provide this information so that you have insight into some of the trends we saw during the first quarter and into April. However, 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. Revenues of $1.31 billion to $1.41 billion, income per share $0.36 to $0.46. Midpoint revenues of $1.36 billion are 7% lower than the same period in 2024 on an as-adjusted basis. On a sequential basis, mid-quarter estimated Q2 revenues are down 4%. For the most recent six-week period ended April 11th, weekly sequential revenues have remained essentially flat. The major financial assumptions underlying the midpoint of these estimates are as follows: adjusted revenue growth year-over-year for Talent Solutions, down 10% to 14%; for Protiviti up 1% to 4%; overall, down 5% to 9%. Adjusted gross margin percentages for contract talent are 38% to 40%; Protiviti 21% to 24%; overall 37% to 39%. Adjusted SG&A as a percentage of revenue Talent Solutions, 43% to 45%; Protiviti, 15% to 16%; overall, 33% to 35%. We adjusted operating income as a percentage of revenues: Talent Solutions, 2% to 4%; Protiviti, 6% to 8%; overall, 3% to 6%. Tax rate, 31% to 35%; shares outstanding 100 million to 101 million. 2025 capital expenditures and capitalized cloud computing costs, $75 million to $95 million with $15 million to $25 million in the second quarter. 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.

Keith Waddell, CEO

Thank you, Mike. U.S. trade policy uncertainty has caused many economists to lower their economic growth forecast for the remainder of the year. Business confidence levels, which had surged following the U.S. elections, have recently moderated. Given this, in March, we reduced our administrative cost structure and lowered staffing levels at corporate services and for administrative field positions in Talent Solutions, and did so in April for Protiviti. Revenue-producing roles were not impacted. This results in annual cost savings of $80 million and will improve profitability levels. Despite the present uncertain outlook, we remain optimistic about our growth prospects once economic conditions improve. U.S. job openings continue to reflect strong pent-up demand and remain well above historical averages. The supply of labor remains tight. The unemployment rate in the United States for those with a college degree is only 2.6%, with rates for many in-demand accounting, finance, and other professionals even lower. Though the latest NFIB Small Business Optimism Index is off its recent peaks, it is still only slightly below its long-term average. Furthermore, 40% of small business owners report job openings they could not fill in March. Of those trying to hire, 87% reported few or no qualified applicants for the positions they were attempting to fill. As business confidence improves, hiring urgency returns, project demand accelerates, deferred backlogs and growth initiatives are reprioritized, and labor churn normalizes. This puts pressure on client resources that are often already stretched thin and creates hiring and consulting demand that traditionally sets the stage for very strong gains early in the growth cycles. Although Protiviti's results were also impacted by elevated economic uncertainty, it achieved year-over-year revenue growth for the third quarter in a row. Protiviti's prospects and pipeline remain very strong, though the current environment has lengthened the time it takes to convert opportunities to wins and begin projects. The expanded use of contract professionals, sourced through Talent Solutions, continues to be a significant contributor to Protiviti's success and is a key component of our enterprise-wide competitive advantage. We hold steadfast to 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 constantly compete and grow. We'd like to thank our employees across the globe for their resilience and unwavering commitment to success. Their efforts have earned us significant recognition already in 2025, including being entered as One of America's Most Innovative Companies by Fortune, and One of America's Best Large Employers by Forbes. We're particularly proud that high levels of employee engagement again earned both Robert Half and Protiviti recognition as two of Fortune's 100 Best Companies to Work For. Now, Mike and I would 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 to you for additional questions.

Operator, Operator

Thank you. And your first question comes from the line of Mark Marcon with Baird.

Mark Marcon, Analyst

Hey, good afternoon and thanks for taking my questions. Keith, when we take a look at Protiviti, clearly, the revenue was still up year-over-year. The margins ended up contracting. Obviously, you've got a bench model and deleveraging. So, the questions are around Protiviti. When you think about the book of business within Protiviti, how much would you characterize as basically being recurring or less discretionary relative to purely more discretionary, nice to have because you're still looking at potential growth for the first quarter, and I'm wondering how you think that kind of unfolds as the year goes along and where the margins could end up being if things stay steady-state or conversely, if things get a little bit worse? And then I've got a follow-up.

Keith Waddell, CEO

We've never distinctly separated discretionary from non-discretionary services. When analyzing our primary solutions, the areas of risk and compliance, particularly in regulatory remediation, are non-discretionary. In technology consulting, there is a distinction between essential tasks and improvements. In our largest sector, financial services, internal audits are mandatory. Other industries may have some leeway, but business process improvements tend to be the most discretionary. Overall, the four areas are roughly equal, though technology is slightly larger, and risk consulting is somewhat smaller. We have seen revenue growth for three consecutive quarters, and despite the uncertain macroeconomic environment, we anticipate sequential growth in all major solutions for the second quarter. We are being more cautious about growth compared to previous years, but we remain optimistic because of our pipeline. Adjusting for slower pipeline conversion times, we feel reasonably confident about Protiviti's profitability. The revenue shortfall mainly affected Protiviti employees rather than contract workers, impacting profitability disproportionately. The good news is that in the next quarter, we expect to see a positive change where more revenue translates to improved profitability. This is due to better utilization of our full-time staff and the strategic replacement of some full-time staff with contractors, resulting in cost savings. Overall, we anticipate one of our better sequential improvements given these dynamics.

Mark Marcon, Analyst

That's great. And then I'm hesitant to ask this question, but I've been getting it a lot from a lot of different investors, and I know it's top of mind with a number of them. I think I know the answer already. But when we take a look at capital allocation, where does the dividend sit on your capital allocation priorities? And could you envision a scenario based on what you're currently seeing where the dividend would ever be cut?

Keith Waddell, CEO

And so we've had a long-term commitment to return our excess cash flow to shareholders. Over the long-term, that's been about 50% dividends, 50% repurchases. As earnings have contracted, dividends play a much larger role in that capital return. We're committed just as we have since we started in 2004, to raise that dividend. We just raised it last quarter, and it would certainly be our intention not only to keep it but to keep increasing it. And the cash flow of the first quarter, as we already commented, there are seasonal impacts to cash flow, i.e., annual bonus payments, annual SaaS payments that make first quarter cash flow look low, but we certainly expect that to rebound nicely for that reason. So, no change in capital allocation strategy, still return all our excess cash flow to shareholders. Retain the dividend, and it just happens to be given where overall cash flow is, the dividend is going to be a larger portion of the total, but that's something we believe will work its way out as we move forward in time just as we have in the past. But no change in capital allocation strategy.

Mark Marcon, Analyst

That's what I expected. Thanks a lot.

Operator, Operator

And the next question will come from Andrew Steinerman with JPMorgan.

Andrew Steinerman, Analyst

Hi, Keith. I'd like to hear a little bit more about the efficiencies Robert Half is bringing to the administrative cost structures in both Talent Solutions and Protiviti. You were very clear to say these cost savings won't affect revenue-producing roles. Could you just be a little more specific about how you're replacing these roles? Is this a tech-enabled solution? Are the revenue roles going to be enabled to hungrily go after orders with these efficiencies?

Keith Waddell, CEO

Well, for two or three years, we've had some pretty significant negative leverage on our administrative compensation and overhead cost. And our view was that given lower volumes and technology improvements and tools that we've implemented over the last few years, we could operate more efficiently. The majority of the reductions were in corporate services. Those reductions that happened in the field were more field management positions, not field sales support positions. So, I would argue there's very little impact on how well our revenue-producing roles are supported based on what we did principally at corporate services.

Andrew Steinerman, Analyst

Thank you, Keith.

Operator, Operator

And the next question will come from Manav Patnaik with Barclays.

Manav Patnaik, Analyst

You have previously mentioned a preference for being a bit slow in cutting costs. I'm interested in hearing any direct feedback from your clients regarding this. Although there are varying predictions from economists, has there been any noticeable change in your clients' behavior that influenced your decision to take this action now?

Keith Waddell, CEO

The change in behavior reflected a continuation of the cautiousness we noted previously, and we had seen some improvements since our last call. Post-election, business confidence surged, leading to better discussions with our clients. We felt optimistic about our forecast for the first quarter, expecting it to align with the fourth quarter. However, that outlook shifted due to uncertainty regarding trade policies. It had been a couple of years since we adjusted corporate overhead costs, and we were experiencing negative leverage. Given the renewed economic uncertainty, it seemed likely that these challenges would persist longer than we had anticipated. As a result of these factors, we decided it was necessary to implement cost-saving measures, while ensuring that revenue-generating roles remained unaffected.

Manav Patnaik, Analyst

Okay. Fair enough. And then just a quick follow-up. I know you did some M&A recently. Just curious if you could help us with the contribution either in the quarter or for the rest of the year?

Keith Waddell, CEO

And so Protiviti acquired a small consulting firm in France that specializes in financial services. They have about 50 consultants. So, it's a very small transaction, but one we're excited about. It adds capabilities that we didn't otherwise have. They're in Paris.

Operator, Operator

And the next question will come from Stephanie Moore with Jefferies.

Stephanie Moore, Analyst

Hi, good afternoon. Thank you. Maybe sticking with the topic of Protiviti here. Can you talk a little bit about maybe the pipeline of projects or underlying demand environment that you're seeing within Protiviti? If you've seen any of your clients that may have paused projects or delayed the start of projects just given this underlying uncertain environment? Thank you.

Keith Waddell, CEO

Well, as to the pipeline, the pipeline is up year-on-year. The weighted pipeline weighted for probability of success is up year-on-year. That said, we did see during the first quarter some delays, some pauses related to particularly financial services client engagements, but all of that has been factored in, in the guidance we're giving for the second quarter. But yes, Protiviti has certainly been impacted somewhat by the macroeconomic uncertainty that has been exacerbated in the last few months. But that said, they still managed to grow year-on-year.

Stephanie Moore, Analyst

Absolutely, that's helpful. I have a clarification regarding the Q2 outlook. I'm trying to get a sense of the underlying demand environment. I believe you mentioned what it was in March, and it seems to have improved year-over-year from March to April. Am I interpreting this correctly? Is there something we should consider from a year-over-year comparison? Or has demand turned a bit more favorable in the first few weeks of April? Thank you.

Keith Waddell, CEO

Well, it's just factual that for two or three weeks, I guess, in April for perm that it's stronger than it had been, and it's stronger than contract. But it's three weeks, and we've talked many times; post-quarter perm results are much less predictive of full quarter results than is the case in contract. But that said, we did begin the quarter in perm more strongly than we did in contract, and that's a good thing.

Stephanie Moore, Analyst

Thank you. Appreciate it.

Operator, Operator

And your next question will come from Kartik Mehta with Northcoast Research.

Kartik Mehta, Analyst

This might be an odd question, I realize that, but you talked about the uncertainty in the economy. I know you talked about when things turn, they could turn quickly. And it seems like we get a new headline every day. So, I'm wondering, if things do turn quickly, how quickly could you ramp back up? And how quickly would that impact margins? Or how do you see the business trending if something like that happens?

Keith Waddell, CEO

We believe that we can quickly rebound. As I mentioned earlier, we have not affected our revenue-generating segments with our cost measures and have maintained more revenue sources than the revenues would typically suggest. We previously discussed the potential for a 20% to 30% increase based on past productivity levels. Additionally, we are noticing early success with our technology, particularly in using AI to guide our recruiters to clients with the highest likelihood of conversion. This has resulted in fewer calls needed to secure client meetings, and when we do meet clients, our conversion rates to job orders have improved compared to before we implemented this technology. I believe this contributes to our potential growth, providing a kind of digital labor that enhances our capabilities beyond the human workforce we retained relative to initial revenue expectations. I'm quite optimistic about our ability to capitalize on the discussed growth opportunities. With lower unemployment, it becomes more challenging for clients to recruit on their own, which benefits us. There is also significant pent-up demand, as job openings remain high. Currently, our churn is quite low. To highlight this, it's important to note that the job figures released each month are net totals, which reflect hires minus separations or quits. For instance, in June 2023, there were 257,000 jobs added, supported by 6.5 million hires and 6.3 million separations. Fast forward to last month, we noted 228,000 net job openings, which is similar to June 2023, but with only 5.5 million hires and 5.3 million separations, resulting in a million fewer hires and a million fewer separations compared to the same net job figures. This signifies a meaningful change in churn. As clients and candidates regain confidence, we expect more hires, quits, and overall churn, which would be beneficial for our business as we move forward.

Kartik Mehta, Analyst

And then, Keith, I know you've talked about this in the past, but just wanted to get your perspective, again, technology impacting the business, whether it's LinkedIn or apps people are using to find help. Has that impacted your business, especially your small business customers?

Keith Waddell, CEO

I would say the job boards and the aggregators have been around a long time. LinkedIn has been around a long time. The freelance platforms have been around a long time. We consider all of them frenemies because on the one hand, we compete at some level. On the other hand, we also use their technologies and our own sourcing efforts. And I would argue that none of them have recently moved the needle and changed the calculus in a significant way as to whether a small business owner decides to use a recruiting firm like Robert Half or not. So, those options have been there for long periods of time. And I don't think, relatively speaking, they're any more attractive than they were. They've gotten better, and we've gotten better.

Kartik Mehta, Analyst

Thank you very much.

Operator, Operator

And the next question comes from George Tong with Goldman Sachs.

George Tong, Analyst

Hi, thanks. Good afternoon. You mentioned client and job seeker caution is elongating decision cycles and subduing hiring activity and new project starts. Can you talk about how this was reflected in weekly sequential revenue trends over the course of the quarter?

Keith Waddell, CEO

Well, if you remember last quarter, we said the first couple of weeks were holiday impacted. The third, we kind of return to what we had seen the prior quarter, which had been flat, I believe, for 23 straight weeks. So, we were getting back to what we expected, but then started at least early February, the weekly started to drift down. But then by March, they flattened out at that somewhat lower level. So, on a weekly sequential basis, as we said in our prepared remarks, the month of March and the first two weeks of April are essentially flat. On a relative to the entire first quarter, that's down about 1.5%. The guidance we gave was more conservative and assumes down 4%. And so again, on a weekly basis, flat for the most recent six weeks, so it stabilized at a 1.5% lower level than we saw on average for the prior quarter.

George Tong, Analyst

Got it. That's helpful. And then can you talk a little bit about how much of an impact do you think job displacements by AI is having on the business? Specifically, how much of the revenue decline you're seeing now, you would attribute to cyclical factors versus AI?

Keith Waddell, CEO

Well, as it relates to AI-driven tools today that impact accounting and finance, which is our major sector, I would say there's very little impact. The revenue impacts we've seen are because of client cautiousness, that leads to less hiring that I just talked about, which in turn leads to candidate caution, which leads to fewer candidate quits that I just talked about. So, less churn due to client and candidate caution, and therefore, cyclical factors, I think, are by and large, the essential reason why not just ours, but the entire industry revenues have been impacted. I'd say further on this issue of displacement, and I'm sure you've heard this as well, there's this concept of Jevons Paradox that says when resources become more efficient because of AI or otherwise, the cost of using it decreases and at lower cost, in fact, leads to increased consumption and usage. And so I think in the terms of AI, offsetting the apparent impact, there will be displacement will be the potential impact; there will be more usage because the unit costs are less. I look at our own internal IT projects. If the thought of it costs me less to modify/develop software for Robert Half, my guess is I might use more rather than less because it's less costly to do. So, I think there's some credibility to Jevons Paradox. You form your own opinion, I'm sure you already have.

George Tong, Analyst

Got it. Very helpful. Thank you.

Operator, Operator

And we'll take a question from Kevin McVeigh with UBS.

Kevin McVeigh, Analyst

Great. Thanks so much. Keith, I wanted to clarify one thing about the restructuring. I want to make sure I understood you correctly. Did you mention there was $0.17 in Q1, and was there an additional charge for Protiviti? Or was all of that from the first quarter? Is there a Q2 charge for Protiviti in the Q2 guidance?

Keith Waddell, CEO

It's all in the first quarter. It's all in the first quarter. It just happened a few weeks apart.

Kevin McVeigh, Analyst

Got it. Okay. So, it was all in one. And as you think about that.

Keith Waddell, CEO

We accrued all that Protiviti did in April for the first quarter.

Kevin McVeigh, Analyst

Got it. Got it. And that $0.17, much of it in the core versus Protiviti, is there any way to think about that?

Keith Waddell, CEO

Well, you were breaking up. So, it was $9 million staffing, $8 million Protiviti in cost. And then the resulting savings are $80 million, and it was 42.5% and 37.5% between the two. And then that $80 million is about $0.54 in share savings.

Kevin McVeigh, Analyst

Is that annual? Do you start to see that in the second half of this year? Or any idea of how that $80 million comes in?

Keith Waddell, CEO

We anticipate $20 million in savings each quarter. We expect to realize $18 million of that in the second quarter, followed by $20 million in both the third and fourth quarters. This will happen immediately, but the portion related to Protiviti occurred before and around mid-April. Therefore, we project savings of $18 million in Q2 and $20 million in both Q3 and Q4 as a result of the cost actions.

Kevin McVeigh, Analyst

So, the $0.36 to $0.46 already includes about how much cost savings in that.

Keith Waddell, CEO

It includes the $18 million; the $36 million to $46 or the $41 million at midpoint includes $18 million in savings.

Kevin McVeigh, Analyst

Okay. So, without that $18 million, it would have been obviously that much lower, EPS?

Keith Waddell, CEO

That's right. But I mean, the other observation I would make, inclusive of the savings, our sequential progression between quarters one and two is one of the better progressions we've had historically.

Kevin McVeigh, Analyst

Yes. No, I get it.

Keith Waddell, CEO

If you consider a full quarter's benefit for Protiviti, its margins would essentially return to the levels seen a year ago.

Kevin McVeigh, Analyst

Great. So, the $18 million, was that taxed at the regular rate? I'm just trying to understand the benefits.

Keith Waddell, CEO

Well, the tax provision is a little wonky. But if you take the $18 million and you tax effect it, I get $0.12, and I'm looking at the team here, you take 67% of it at a 33% tax rate, which gives you 12%, and it's essentially 100 million shares. So, I call it $0.12.

Kevin McVeigh, Analyst

$0.12 benefit in Q2 from the restructuring. It's very helpful. Thank you. Thank you very much.

Operator, Operator

And next is Jeff Silber with BMO Capital Markets.

Unidentified Analyst, Analyst

Hey, thank you. This is Ryan on for Jeff. I was just wondering if you have any comments on the competitive environment. I was wondering how you're bearing compared to big four on Protiviti and then just related to the other temp agencies and contract solutions.

Keith Waddell, CEO

Well, I guess we would observe on the big four side, the competitive environment has stabilized. We're not seeing the crazy pricing that we had seen nine, 12, 15 months ago. On the Talent Solutions side, most of our competitors are local and regional. And we haven't seen much change in that throughout this period of client candidate cautiousness is, which we're now going on for almost three years. So, I would argue not much change in the competitive environment and if anything, more rational, particularly as it relates to the big four than it had been.

Unidentified Analyst, Analyst

Got it. Thank you.

Operator, Operator

And our next question is from Trevor Romeo with William Blair.

Trevor Romeo, Analyst

Hi. Thank you for taking the questions. Just a couple of quick ones, I guess, on the Talent Solutions business. One was just kind of wanted to ask about, I guess, how the mix is evolving between high skilled and more sort of operational roles right now. Are you still seeing I guess, relative resilience in the higher-skilled roles? And then as it relates to the up-catch or the full-time engagement professionals, anything you'd call out in terms of demand or interest in those arrangements?

Keith Waddell, CEO

Yes, I'd say we continue to move up the skill curve. That's particularly true in technology. If you look at our segments, technology has done better for two or three, four quarters in a row. Much of that involves going from infrastructure and operations positions to software and applications positions. There's a meaningful bill rate difference. You'll note on the bill rate side, we went from plus 3s to the low plus 4s this quarter year-on-year bill rate increases. Much of that is this skill mix impact, particularly as it relates to technology. On the FTAP side, the issue with FTAP because we pay them for benefits, the cost per hour for those people is much higher than for our core contractors, and that higher price has put some pressure on the volumes in that business. But particularly, returning to how well we will participate in the upside, FTAP becomes a big part of the upside; clients will be more willing to pay those prices at that time as they've proven in the past. And that's good for margins, that's good for bill rates, that's good for length of assignment, that's good for everything.

Trevor Romeo, Analyst

And could you just remind us how big a portion of your mix are the FTAPs at this point?

Keith Waddell, CEO

It's roughly 20% of our contract business. I'm measuring hours versus dollars; it changes a little bit, but it's in that range.

Trevor Romeo, Analyst

Okay, thank you. That's helpful. And just one quick one on the international business. It just looks like the Talent Solutions; the trend got a little bit worse in the first quarter. Could you just talk through kind of what you're seeing in Europe or any other countries?

Keith Waddell, CEO

Well, I guess I would argue that more of the differential between the growth rates in U.S. versus non-U.S. relate to the year-ago comps than they do to current performance. And so, as an example, a year ago in U.S., we were down 19%. A year ago, illicitly we were down 10%. And so clearly, illicitly has a tougher comp. And that same differential plays out when you look at this quarter versus a year ago. So, I would argue that that's more about comps. And I would further say that you certainly read a lot about the negativity as it relates to tariffs in Europe, but I can tell you our people are particularly excited about the opportunities in the second half of the year that come from this infrastructure and defense spending that's slated to happen, particularly in Germany. And so we are already aggressively and proactively positioning ourselves for that. So, our people in Europe and particularly our people in Germany are quite excited about that opportunity.

Trevor Romeo, Analyst

Okay, very helpful. Thank you.

Keith Waddell, CEO

Okay. So that was our last question. Thank you very much for joining us.

Operator, Operator

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. You can also dial in to the conference call replay. Dial-in details and the confirmation code are contained in the company's press release issued earlier today.