What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-01 · 102 added, 117 removed, 206 unchanged (52% of the section changed)

16 unchanged sentences

changes in macroeconomic and market conditions and market volatility, including interest rates and the effect on the credit markets and access to capital;

the impact of global economic and geopolitical conditions, including inflation, recession and the COVID-19 pandemic;

the impact of global economic and geopolitical conditions, including inflation, and recession;

our ability to carry out our strategic initiatives and manage associated costs;

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our ability to grow or sustain revenue from individual customers;

our ability to attract and retain a professional staff of research analysts and consultants as well as experienced sales personnel upon whom we are dependent, especially in light of increasing labor competition;

our ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures;

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Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.

As of June 30, 2023 we had approximately 20,104 employees globally, an increase of 11.7% from June 30, 2022.

As of September 30, 2023 we had approximately 20,253 employees globally, an increase of 6.4% from September 30, 2022.

Recent Events

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Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations.

On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law in the United States.

The statute includes a 15% corporate alternative minimum tax on U.S.

corporations with adjusted financial statement income in excess of $1.0 billion which is effective for taxable years beginning after December 31, 2022.

The statute also includes a 1% excise tax on publicly traded U.S.

corporations for the value of any of its stock that is repurchased by the corporation, excluding certain excepted repurchases.

We do not expect it will have a material impact on our future U.S.

tax expense, cash taxes and effective tax rate.

We also do not expect it to have a material impact on the amount of potential future share repurchases.

In February 2023, we completed the sale of a non-core business, TalentNeuron, for approximately $161.1 million after considerations of post-close adjustments.

TalentNeuron was included in the Company’s Research segment.

$156.1 million cash was received from the sale during the six months ended June 30, 2023.

We recognized a pre-tax gain of $135.4 million on the sale of TalentNeuron, which is included in Gain from sale of divested operation in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2023.

For the three months ended June 30, 2023, post-close adjustments were settled and resulted in a $3.9 million reduction to the gain.

In May 2023, we entered into an amendment of the 2020 Credit Agreement that replaced the interest rate benchmark from LIBOR to Term Secured Overnight Financing Rate (“SOFR”).

After the amendment, interest is accrued on outstanding balances under the credit facility and payable monthly at a rate of the one month Term SOFR plus 10 basis points and the applicable margin.

Prior to the amendment, interest was accrued at a rate of the one month LIBOR plus the applicable margin.

Additionally, in May 2023, in conjunction with the amendment of the 2020 credit agreement, we entered into an amendment of our interest rate swap contract.

Under the amended agreement, we pay a base fixed rate of 2.98% and in return receive a floating Term SOFR base rate on 30-day notional borrowings.

Prior to the amendment, we paid a base fixed rate of 3.04% and in return received a floating Eurodollar base rate on 30-day notional borrowings.

$156.1 million cash was received from the sale during the nine months ended September 30, 2023.

BUSINESS MEASUREMENTS

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EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION

The fundamentals of our strategy include a focus on creating actionable insights for executives and their teams, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

We had total revenues of $1.5 billion during the second quarter of 2023, an increase of 9% compared to the second quarter of 2022.

During the second quarter of 2023, revenues for Research increased by 6%, Conferences revenue increased by 49%, and Consulting revenues increased by 5%, compared to the second quarter of 2022.

The fundamentals of our strategy include a focus on creating actionable insight for executives and their teams, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

We had total revenues of $1.4 billion during the third quarter of 2023, an increase of 6% compared to the third quarter of 2022.

During the third quarter of 2023, revenues for Research increased by 6%, Conferences revenue decreased by 26%, and Consulting revenues increased by 24%, compared to the third quarter of 2022.

For a more complete discussion of our results by segment, see Segment Results below.

For the second quarter of 2023 and 2022, we had net income of $198.0 million and $204.9 million, respectively, and diluted income per share of $2.48 and $2.53, respectively.

Cash provided by operating activities was $600.5 million and $583.4 million during the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, we had $1.2 billion of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on our revolving credit facility.

For the third quarter of 2023 and 2022, we had net income of $180.0 million and $173.5 million, respectively, and diluted income per share of $2.26 and $2.17, respectively.

Cash provided by operating activities was $931.4 million and $898.3 million during the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, we had $1.2 billion of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on our revolving credit facility.

For a more complete discussion of our cash flows and financial position, see the Liquidity and Capital Resources section below.

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The table below presents an analysis of selected line items and period-over-period changes in our interim Condensed Consolidated Statements of Operations for the periods indicated (in thousands).

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Increase (Decrease) Increase

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Increase (Decrease) Increase

Total revenues $ 1,408,784 $ 1,331,868 $ 76,916 6 %

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Acquisition and integration charges 4,463 1,331 3,132 235

Gain from sale of divested operation

3,906 — 3,906 nm

Operating income 244,417 253,418 (9,001) (4)

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Net income $ 180,009 $ 173,545 $ 6,464 4 %

nm = not meaningful.

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Increase (Decrease) Increase

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Increase (Decrease) Increase

Total revenues $ 4,320,838 $ 3,971,129 $ 349,709 9 %

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nm = not meaningful.

Total revenues for the three months ended June 30, 2023 were $1.5 billion, an increase of $126.7 million, or 9% compared to the same period in 2022 on a reported basis and 10% excluding the foreign currency impact.

Total revenues for the six months

ended June 30, 2023 were $2.9 billion, an increase of $272.8 million, or 10% compared to the same period in 2022 on a reported basis and 12% excluding the foreign currency impact.

Total revenues for the three months ended September 30, 2023 were $1.4 billion, an increase of $76.9 million, or 6% compared to the same period in 2022 on a reported basis and 5% excluding the foreign currency impact.

Total revenues for the nine months ended September 30, 2023 were $4.3 billion, an increase of $349.7 million, or 9% compared to the same period in 2022

on a reported basis and 10% excluding the foreign currency impact.

Refer to the section of this MD&A below entitled “Segment Results” for a discussion of revenues and results by segment.

Cost of services and product development was $487.4 million during the three months ended June 30, 2023, an increase of $62.9 million compared to the same period in 2022, or 15% both on a reported basis and excluding the foreign currency impact.

The increase in Cost of services and product development was primarily due to increased compensation costs as a result of higher headcount, and increased conference related expenses, due to the return to in-person destination conferences.

Cost of services and product development as a percent of revenues was 32% and 31% for the three months ended June 30, 2023 and 2022, respectively.

Cost of services and product development was $922.6 million during the six months ended June 30, 2023, an increase of $121.0 million compared to the same period in 2022, or 15% on a reported basis and 16% excluding the foreign currency impact.

The increase was primarily due to the same factors that caused the year-over-year quarterly increase.

Cost of services and product development as a percent of revenues was 32% and 30% for the six months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expense was $680.2 million during the three months ended June 30, 2023, an increase of $75.3 million compared to the same period in 2022, or 12% on a reported basis and 14% excluding the foreign currency impact.

The increase in SG&A expense during the three months ended June 30, 2023 was primarily as a result of higher personnel expenses due to increased headcount.

SG&A expense was $1.3 billion during the six months ended June 30, 2023, an increase of $114.4 million compared to the same period in 2022, or 9% on a reported basis and 11% excluding the foreign currency impact.

The increase was primarily due to the same factors that caused the year-over-year quarterly increase.

The number of quota-bearing sales associates in Global Technology Sales increased by 13% to 3,664 and in Global Business Sales, adjusted for the sale of our TalentNeuron business, increased by 15% to 1,150 compared to June 30, 2022.

On a combined basis, the total number of quota-bearing sales associates increased by 14% when compared to June 30, 2022.

SG&A expense as a percent of revenues was 45% and 44% during the three months ended June 30, 2023 and 2022, respectively.

SG&A expense as a percent of revenues was 46% for both of the six months ended June 30, 2023 and 2022.

Depreciation increased by 4% and 3% during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

The increase for the three and six months ended June 30, 2023 was primarily due to increased computer equipment and software additions in 2022, partially offset by a reduction in leasehold improvements depreciation as a result of the impairment losses recorded during calendar year 2022.

Amortization of intangibles decreased by 7% and 9% during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to intangible assets divested as part of the sale of our TalentNeuron business.

Acquisition and integration charges decreased by $0.3 million and $1.2 million during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

Cost of services and product development was $450.8 million during the three months ended September 30, 2023, an increase of $34.0 million compared to the same period in 2022, or 8% on a reported basis and 7% excluding the foreign currency impact.

The increase in Cost of services and product development was primarily due to increased compensation costs as a result of higher headcount.

Cost of services and product development as a percent of revenues was 32% and 31% for the three months ended September 30, 2023 and 2022, respectively.

Cost of services and product development was $1.4 billion during the nine months ended September 30, 2023, an increase of $155.0 million compared to the same period in 2022, or 13% both on a reported basis and excluding the foreign currency impact.

The increase in Cost of services and product development for the nine months ended September 30, 2023 was primarily due to increased compensation costs as a result of higher headcount, as well as increased conference related expenses, due to the return to in-person destination conferences.

Cost of services and product development as a percent of revenues was 32% and 31% for the nine months ended September 30, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expense was $660.5 million during the three months ended September 30, 2023, an increase of $47.5 million compared to the same period in 2022, or 8% on a reported basis and 7% excluding the foreign currency impact.

The increase in SG&A expense during the three months ended September 30, 2023 was primarily a result of higher personnel expenses due to increased headcount.

SG&A expense was $2.0 billion during the nine months ended September 30, 2023, an increase of $161.9 million compared to the same period in 2022, or 9% on a reported basis and 10% excluding the foreign currency impact.

The increase was primarily due to the same factor that caused the year-over-year quarterly increase.

The number of quota-bearing sales associates in Global Technology Sales increased by 5% to 3,630 and in Global Business Sales, adjusted for the sale of our TalentNeuron business, increased by 10% to 1,149 compared to September 30, 2022.

On a combined basis, the total number of quota-bearing sales associates increased by 6% when compared to September 30, 2022.

SG&A expense as a percent of revenues was 47% and 46% during the three months ended September 30, 2023 and 2022, respectively.

SG&A expense as a percent of revenues was 46% for both of the nine months ended September 30, 2023 and 2022.

Depreciation increased by 7% and 5% during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The increase for the three and nine months ended September 30, 2023 was primarily due to increased computer equipment and software additions in 2022, partially offset by a reduction in leasehold improvements depreciation as a result of the impairment losses recorded during calendar year 2022.

Amortization of intangibles decreased by 2% and 6% during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to intangible assets divested as part of the sale of our TalentNeuron business.

Acquisition and integration charges increased by $3.1 million and $2.0 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

Gain from sale of divested operation was attributable to the sale of our TalentNeuron business in February 2023.

We recognized a pre-tax gain of $135.4 million for the six months ended June 30, 2023.

For the three months ended June 30, 2023, post-close adjustments were settled and resulted in a $3.9 million reduction to the gain.

Operating income was $283.1 million and $297.1 million during the three months ended June 30, 2023 and 2022, respectively.

Operating income was $691.1 million and $514.4 million during the six months ended June 30, 2023 and 2022, respectively.

The decrease in operating income for the three months ended June 30, 2023 as compared to the prior year period was primarily due to an increase in cost of services and product development and selling, general and administrative expenses, partially offset by increased revenue.

The increase in operating income for the six months ended June 30, 2023 as compared to the prior year period was primarily due to the gain from sale of divested operation, as well as increased revenue, partially offset by an increase in cost of services and product development and selling, general and administrative expenses.

Interest expense, net decreased by $5.2 million and $9.2 million during the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

The decrease for the three months ended June 30, 2023 was due to increased interest income, partially offset by higher interest expense on our term loan.

The decrease for the six months ended June 30, 2023 was primarily due to the same factors that caused the year-over-year quarterly increase, as well as lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022.

Gain on event cancellation insurance claims of $3.1 million during the six months ended June 30, 2023 reflected proceeds related to 2020 conference cancellation insurance claims.

We recognized a pre-tax gain of $135.4 million for the nine months ended September 30, 2023.

Operating income was $244.4 million and $253.4 million during the three months ended September 30, 2023 and 2022, respectively.

Operating income was $935.5 million and $767.8 million during the nine months ended September 30, 2023 and 2022, respectively.

The decrease in operating income for the three months ended September 30, 2023 as compared to the prior year period was primarily due to an increase in cost of services and product development and selling, general and administrative expenses, partially offset by increased revenue.

The increase in operating income for the nine months ended September 30, 2023 as compared to the prior year period was primarily due to the gain from sale of divested operation, as well as increased revenue, partially offset by an increase in cost of services and product development and selling, general and administrative expenses.

Interest expense, net decreased by $8.5 million and $17.6 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The decrease for the three months ended September 30, 2023 was due to increased interest income, partially offset by higher interest expense on our term loan.

The decrease for the nine months ended September 30, 2023 was primarily due to the same factors that caused the year-over-year quarterly increase, as well as lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022.

Gain on event cancellation insurance claims of $3.1 million during the nine months ended September 30, 2023 reflected proceeds related to 2020 conference cancellation insurance claims.

Other income, net for the periods presented herein included the net impact of foreign currency gains and losses from our hedging activities.

Other income, net for the three and six months ended June 30, 2023 also included gains of $6.5 million and $5.1 million, respectively, on de-designated interest rate swaps.

Other income, net for the three and six months ended June 30, 2022 also included gains of $10.7 million and $40.5 million, respectively, on de-designated interest rate swaps.

The provision for income taxes was $66.1 million and $71.0 million for the three months ended June 30, 2023 and 2022, respectively, and $151.6 million and $113.6 million for the six months ended June 30, 2023 and 2022, respectively.

The effective income tax rate was 25.0% and 25.7% for the three months ended June 30, 2023 and 2022, respectively, and 23.5% and 23.1% for the six months ended June 30, 2023 and 2022, respectively.

The decrease in the effective income tax rate during the three months ended June 30, 2023 as compared to the same period in 2022 was primarily due to higher tax benefits from stock-based compensation.

The increase in the year to date effective income tax rate was primarily due to the sale of our TalentNeuron business.

Net income for the three months ended June 30, 2023 and 2022 was $198.0 million and $204.9 million, respectively, while net income for the six months ended June 30, 2023 and 2022 was $493.8 million and $377.4 million, respectively.

Our diluted net income per share during the three months ended June 30, 2023 decreased by $0.05, while it increased by $1.57 for the six months ended June 30, 2023, compared to the same period in 2022 .

The decrease in net income during the three months ended June 30, 2023 as compared to the prior year period was primarily due to an increase in operating expenses, partially offset by an increase in revenue.

The increase i n net income during the six months ended June 30, 2023 was primarily the result of the gain from sale of divested operations, as well as increased revenue, partially offset by increased operating expenses, a lower gain from de-designated interest rate swaps and higher income tax expense .

Other income, net for the three and nine months ended September 30, 2023 also included gains of $2.5 million and $7.7 million, respectively, on de-designated interest rate swaps.

Other income, net for the three and nine months ended September 30, 2022 also included gains of $11.2 million and $51.7 million, respectively, on de-designated interest rate swaps.

The provision for income taxes was $44.5 million and $58.5 million for the three months ended September 30, 2023 and 2022, respectively, and $196.0 million and $172.1 million for the nine months ended September 30, 2023 and 2022, respectively.

The effective income tax rate was 19.8% and 25.2% for the three months ended September 30, 2023 and 2022, respectively.

The decrease in the effective income tax rate was primarily due to the favorable impact of a foreign tax credit notice issued by the IRS as well as the expiration of statutes for uncertain tax positions in the three months ended September 30, 2023 as compared to the same period in 2022.

The effective income tax rate was 22.5% and 23.8% for the nine months ended September 30, 2023 and 2022, respectively.

The decrease in the year to date effective income tax rate in 2023 was primarily due to the impact of valuation allowance releases and the expiration of statutes for uncertain tax positions in the nine months ended September 30, 2023 as compared to the same period in 2022.

The 2023 decrease was partially offset by an increase in the effective income tax rate for the sale of the TalentNeuron business.

Net income for the three months ended September 30, 2023 and 2022 was $180.0 million and $173.5 million, respectively, while net income for the nine months ended September 30, 2023 and 2022 was $673.8 million and $551.0 million, respectively.

Our diluted net income per share during the three months ended September 30, 2023 increased by $0.09, while it increased by $1.67 for the nine months ended September 30, 2023, compared to the same period in 2022 .

The increase in net income during the three months ended September 30, 2023 as compared to the prior year period was primarily due to an increase in revenue and lower income tax expense, partially offset by an increase in operating expenses.

The increase in net income during the nine months ended September 30, 2023 was primarily the result of the gain from sale of divested operations, as well as increased revenue, partially offset by increased operating expenses, a lower gain from de-designated interest rate swaps and higher income tax expense.

SEGMENT RESULTS

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Research, Conferences and Consulting.

As Of And For The Three Months Ended June 30, 2023 As Of And For The Three Months Ended June 30, 2022 Increase

As Of And For The Three Months Ended September 30, 2023 As Of And For The Three Months Ended September 30, 2022 Increase

(Decrease) Percentage

(Decrease) As Of And For The Six Months Ended June 30, 2023 As Of And For The Six Months Ended June 30, 2022 Increase

(Decrease) As Of And For The Nine Months Ended September 30, 2023 As Of And For The Nine Months Ended September 30, 2022 Increase

(Decrease) Percentage

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(3) Contract values are on a foreign exchange neutral basis.

Contract values as of June 30, 2022 have been calculated using the same foreign currency rates as 2023.

(4) Contract value as of June 30, 2022 excludes the TalentNeuron business sold in February 2023.

Research revenues i ncreased by $65.6 million during the three months ended June 30, 2023 compared to the same period in 2022, or 6% on a reported basis and 7% excluding the foreign currency impact.

For the six months ended June 30, 2023, research revenue increased by $146.4 million compared to the same period in 2022 or 6% on a reported basis and 8% excluding the foreign currency impact.

The segment gross contribution margin was 73% and 74% for the three months ended June 30, 2023 and 2022 , respectively, and 74% for both the six months ended June 30, 2023 and 2022 ,.

Contract values as of September 30, 2022 have been calculated using the same foreign currency rates as 2023.

(4) Contract value as of September 30, 2022 excludes the TalentNeuron business sold in February 2023.

Research revenues i ncreased by $70.9 million during the three months ended September 30, 2023 compared to the same period in 2022, or 6% on a reported basis and 5% excluding the foreign currency impact.

For the nine months ended September 30, 2023, research revenue increased by $217.3 million compared to the same period in 2022 or 6% on a reported basis and 7% excluding the foreign currency impact.

The increase in revenues during 2023 was primarily due to strong Research contract value growth in 2022.

Contract value increased to $4.6 billion at June 30, 2023, or 9% compared to June 30, 2022 excluding the foreign currency impact.

Global Technology Sales (“GTS”) contract value increased by 7% at June 30, 2023 when compared to June 30, 2022.

The segment gross contribution margin was 73% and 74% for the three months ended September 30, 2023 and 2022 , respectively, and 74% for both the nine months ended September 30, 2023 and 2022 .

The decrease in gross contribution margin was primarily due to an increase in personnel expenses to support future growth, partially offset by an increase in revenue.

Contract value increased to $4.7 billion at September 30, 2023, or 8% compared to September 30, 2022 excluding the foreign currency impact.

Global Technology Sales (“GTS”) contract value increased by 7% at September 30, 2023 when compared to September 30, 2022.

The increase in GTS contract value was primarily due to new business from new and existing clients.

GTS contract value increased by at least high single-digits for nearly all enterprise sizes and the majority of sectors.

GTS contract value increased by at least high single-digits for the majority of enterprise sizes and sectors.

Global Business Sales (“GBS”) contract value increased by 14% year-over-year, also primarily driven by new business from new and existing clients.

The majority of our GBS practices achieved double-digit growth rates, with all enterprise sizes and nearly all sectors growing double-digits year-over-year.

GTS client retention was 84% and 86% as of June 30, 2023 and 2022, respectively, while wallet retention was 102% and 107%, respectively.

GBS client retention was 88% for both June 30, 2023 and 2022, while wallet retention was 109% and 115%, respectively.

The majority of our GBS practices achieved double-digit growth rates, with nearly all enterprise sizes and sectors growing double-digits year-over-year.

GTS client retention was 83% and 86% as of September 30, 2023 and 2022, respectively, while wallet retention was 102% and 107%, respectively.

GBS client retention was 88% and 89% for September 30, 2023 and 2022, respectively, while wallet retention was 108% and 114%, respectively.

The decrease in GTS and GBS wallet retention was largely due to lower levels of incremental spending by existing clients compared to the same period in 2022.

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Increase

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Increase

(Decrease) Percentage

(Decrease) Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Increase

(Decrease) Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Increase

(Decrease) Percentage

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Number of destination conferences attendees (2) 9,808 14,619 (4,811) (33) % 45,453 32,990 12,463 38 %

nm = not meaningful.

(1) Dollars in thousands.

1 unchanged sentence

Single day, local meetings are excluded.

Conferences revenues increased by $55.4 million during the three months ended June 30, 2023 compared to the same period in 2022.

Conferences revenues increased by $109.7 million during the six months ended June 30, 2023 compared to the same period in 2022.

The increase in revenues for the three and six months ended June 30, 2023 was primarily due to the return to in-person destination conferences, beginning in the second quarter of 2022.

We held 17 and 27 in-person destination conferences during the three and six months ended June 30, 2023, respectively.

We held 6 in-person destination conferences during both the three and six months ended June 30, 2022, and 8 and 13 virtual conferences during the three and six months ended June 30, 2022, respectively.

Gross contribution increased to $98.5 million during the three months ended June 30, 2023 compared to $73.5 million in the same period last year.

Gross contribution increased to $125.2 million during the six months ended June 30, 2023 compared to $70.7 million in the same period last year.

The increase in gross contribution was primarily the result of the return to in-person destination conferences noted above.

As Of And For The Three Months Ended June 30, 2023 As Of And For The Three Months Ended June 30, 2022 Increase

Conferences revenues decreased by $19.8 million during the three months ended September 30, 2023 compared to the same period in 2022.

Conferences revenues increased by $89.8 million during the nine months ended September 30, 2023 compared to the same period in 2022.

The decrease in revenue for the three months ended September 30, 2023 was primarily due to holding fewer in-person destination conferences than in the third quarter of 2022, as a result of several conferences that were held in the third quarter of 2022 being held earlier in 2023.

The increase in revenues for the nine months ended September 30, 2023 was primarily due to the return to in-person destination conferences, beginning in the second quarter of 2022.

We held 9 and 36 in-person destination conferences during the three and nine months ended September 30, 2023, respectively.

We held 10 and 16 in-person destination conferences during the three and nine months ended September 30, 2022, respectively, and 3 and 16 virtual conferences during the three and nine months ended September 30, 2022, respectively.

Gross contribution decreased to $20.4 million during the three months ended September 30, 2023 compared to $40.3 million in the same period last year.

The decrease in gross contribution during the three months ended September 30, 2023 was primarily due to the decrease in revenue.

Gross contribution increased to $145.7 million during the nine months ended September 30, 2023 compared to $111.0 million in the same period last year.

The increase in gross contribution during the nine months ended September 30, 2023 was primarily the result of the return to in-person destination conferences noted above.

As Of And For The Three Months Ended September 30, 2023 As Of And For The Three Months Ended September 30, 2022 Increase

(Decrease) Percentage

(Decrease) As Of And For The Six Months Ended June 30, 2023 As Of And For The Six Months Ended June 30, 2022 Increase

(Decrease) As Of And For The Nine Months Ended September 30, 2023 As Of And For The Nine Months Ended September 30, 2022 Increase

(Decrease) Percentage

9 unchanged sentences

(2) Backlog is on a foreign exchange neutral basis.

Backlog as of June 30, 2022 has been calculated using the same foreign currency rates as 2023.

Consulting revenues increased by 5% during the three months ended June 30, 2023 compared to the same period in 2022 on a reported basis and 6% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 9% and a decrease in contract optimization revenue of 12%, each on a reported basis.

Contract optimization revenue may vary significantly and, as such, revenues for the second quarter of 2023 may not be indicative of results for the remainder of 2023 or beyond.

The segment gross contribution margin was 37% and 42% for the three months ended June 30, 2023 and 2022, respectively.

The decrease in gross contribution margin during the second quarter of 2023 was primarily due to increased personnel expense related to higher headcount.

For the six months ended June 30, 2023, Consulting revenues increased 7% compared to the same period in 2022 on a reported basis and 10% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 5% and an increase in contract optimization revenue of 17%, each on a reported basis.

The segment gross contribution margin for the three and six months ended June 30, 2023 decreased by 4 points compared to the same period in 2022.

The decrease in gross contribution margin for the six months ended June 30, 2023 was also primarily due to increased personnel expense related to higher headcount.

Backlog increased by $24.8 million, or 17%, from June 30, 2022 to June 30, 2023, excluding the foreign currency impact.

Backlog as of September 30, 2022 has been calculated using the same foreign currency rates as 2023.

Consulting revenues increased by 24% during the three months ended September 30, 2023 compared to the same period in 2022 on a reported basis and 23% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 10% and an increase in contract optimization revenue of 98%, each on a reported basis.

Contract optimization revenue may vary significantly and, as such, revenues for the third quarter of 2023 may not be indicative of results for the remainder of 2023 or beyond.

The segment gross contribution margin was 37% and 35% for the three months ended September 30, 2023 and 2022, respectively.

The increase in gross contribution margin during the third quarter of 2023 was primarily due to the increase in revenue, partially offset by increased personnel expense related to higher headcount.

For the nine months ended September 30, 2023, Consulting revenues increased 12% compared to the same period in 2022 on a reported basis and 14% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 7% and an increase in contract optimization revenue of 39%, each on a reported basis.

The segment gross contribution margin for the nine months ended September 30, 2023 decreased by 2 points compared to the same period in 2022.

The decrease in gross contribution margin for the nine months ended September 30, 2023 was also primarily due to increased personnel expense related to higher headcount, partially offset by the increase in revenue.

Backlog increased by $24.1 million, or 15%, from September 30, 2022 to September 30, 2023, excluding the foreign currency impact.

LIQUIDITY AND CAPITAL RESOURCES

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Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations.

At June 30, 2023, we had $1.2 billion of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on the revolving credit facility under our 2020 Credit Agreement.

At September 30, 2023, we had $1.2 billion of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on the revolving credit facility under our 2020 Credit Agreement.

We believe that the Company has adequate liquidity to meet its currently anticipated needs for both the next twelve months and the foreseeable future.

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Our cash and cash equivalents are held in numerous locations throughout the world with 52% held outside the U.S.

at June 30, 2023.

at September 30, 2023.

We intend to reinvest substantially all of our accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.

The table below summarizes the changes in our cash balances for the periods indicated (in thousands).

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Increase

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Increase

Cash provided by operating activities $ 931,407 $ 898,313 $ 33,094

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Ending cash and cash equivalents and restricted cash $ 1,249,955 $ 528,687 $ 721,268

Cash provided by operating activities was $600.5 million and $583.4 million during the six months ended June 30, 2023 and 2022, respectively.

The year-over-year increase was primarily due to increased operating income, excluding the gain from sale of divested operation, partially offset by increased income tax payments, in part as a result of the gain on sale of divested operation in 2023.

Cash provided by (used in) investing activities was $109.4 million and $(38.4) million during the six months ended June 30, 2023 and 2022, respectively.

Cash provided by operating activities was $931.4 million and $898.3 million during the nine months ended September 30, 2023 and 2022, respectively.

The year-over-year increase was primarily due to increased operating income, excluding the gain from sale of divested operation and strong collections, partially offset by increased income tax payments, in part as a result of the gain on sale of divested operation in 2023.

Cash provided by (used in) investing activities was $77.1 million and $(74.6) million during the nine months ended September 30, 2023 and 2022, respectively.

The increase from 2022 to 2023 was the result of the proceeds received from the sale of our TalentNeuron business in February 2023, partially offset by increased capital expenditures primarily due to higher capitalized software and IT infrastructure additions.

Cash used in financing activities was $228.7 million and $920.5 million during the six months ended June 30, 2023 and 2022, respectively.

Cash used in financing activities was $434.0 million and $1.0 billion during the nine months ended September 30, 2023 and 2022, respectively.

During the 2023 period, we used $447.7 million of cash for share repurchases and paid a net $5.4 million in debt principal repayments.

During the 2022 period, we used $929.9 million of cash for share repurchases and repaid a net $2.7 million in debt principal repayments.

As of June 30, 2023, the Company had $2.5 billion of principal amount of debt outstanding, of which $4.2 million is to be repaid in the remainder of fiscal year 2023.

During the 2022 period, we used $1.0 billion of cash for share repurchases and repaid a net $4.0 million in debt principal repayments.

As of September 30, 2023, the Company had $2.5 billion of principal amount of debt outstanding, of which $2.4 million is to be repaid in the remainder of fiscal year 2023.

Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations.

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OFF BALANCE SHEET ARRANGEMENTS

From January 1, 2023 through June 30, 2023, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.

From January 1, 2023 through September 30, 2023, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis