0000315213-26-000026
SEC filingQ1 revenue and profitability declined year-over-year due to lower volumes across segments, partially offset by higher bill rates and fees.
Consolidated revenue for the first quarter of 2026 was $1.30 billion, a decrease of 3.8% compared to $1.35 billion in the same period last year. The decline was primarily driven by lower volumes across all segments, partially offset by higher average bill rates and fees. In contract talent solutions, revenue decreased due to a reduction in hours worked by engagement professionals, while higher average bill rates provided some mitigation. Protiviti revenue also declined, reflecting fewer billable hours, partially offset by increased average hourly bill rates. Permanent placement talent solutions revenue decreased as a result of fewer placements, though higher average fees per placement partially offset the decline.
Gross profit for the quarter was $479.9 million, down 3.8% from $499.0 million in the prior year, yielding a gross margin of 36.9%. The gross margin remained relatively stable as pricing gains helped offset the impact of lower volumes. Gross margin dollars for Protiviti represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. Similarly, gross margin dollars for contract talent solutions represent revenues less costs of services, which include payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses.
Operating income for the first quarter was $36.9 million, a decrease of 5.1% from $38.9 million in the prior year. The decline in operating income was driven by the decrease in gross profit, partially offset by reductions in selling, general and administrative expenses. Since operating income is defined as gross margin less selling, general and administrative expenses, the year-over-year change is explained by the factors previously discussed.
Net cash used in operating activities was $112.3 million in the first quarter of 2026, compared to $59.3 million used in the same period last year. The increase in cash outflows was primarily due to higher working capital requirements and bonus payments. Capital expenditures decreased to $8.5 million from $12.4 million in the prior year, reflecting disciplined spending. Free cash flow, defined as operating cash flow less capital expenditures, was negative $120.8 million. Capital expenditures for cloud computing arrangements are included in cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows.
Net income for the quarter was $13.8 million, down 20.5% from $17.4 million in the prior year, with diluted earnings per share of $0.14 compared to $0.17. The decline in net income was driven by lower operating income.
Historically, demand for permanent placement talent solutions is even more sensitive to economic and labor market conditions than demand for contract talent solutions, and this is expected to continue. The Company continues to focus on cost discipline and operational efficiency to navigate the current macroeconomic environment.