What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-30 compared with 2023-11-03 · 106 added, 146 removed, 162 unchanged (61% of the section changed)

14 unchanged sentences

Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:

the impact of general economic conditions, including inflation (and related monetary policy by governments in response to inflation), on economic activity and our operations;

the impact of general economic conditions, including inflation (and related monetary policy by governments in response to inflation), recession, and national elections in a number of large countries on economic activity and our operations;

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, and recession;

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

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our ability to enforce and protect our intellectual property rights;

our ability to keep pace with technological developments in artificial intelligence;

additional risks associated with international operations, including foreign currency fluctuations;

the impact on our business resulting from changes in international conditions, including those resulting from the war in Ukraine and current and future sanctions imposed by governments or other authorities;

the impact on our business resulting from changes in global geopolitical conditions, including those resulting from the conflict in the Middle East, the war in Ukraine and current and future sanctions imposed by governments or other authorities;

the impact of restructuring and other charges on our businesses and operations;

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our ability to meet ESG commitments;

the impact of changes in tax policy (including the Inflation Reduction Act of 2022) and heightened scrutiny from various taxing authorities globally;

the impact of changes in tax policy (including global minimum tax legislation) and heightened scrutiny from various taxing authorities globally;

changes to laws and regulations;

and other risks and uncertainties.

The potential fluctuations in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could provide an unreliable indication of future operating results A description of the risk factors associated with our business is included under “Risk Factors” in Item 1A.

A description of the risk factors associated with our business is included under “Risk Factors” in Item 1A.

of the 2023 Form 10-K, which is incorporated herein by reference.

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

Recent Events

Inflation rates, particularly in North America and Europe, have increased significantly in the past two years.

Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy.

However, if our costs, in particular personnel-related costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases in future periods.

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

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 nine months ended September 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 nine months ended September 30, 2023.

As of March 31, 2024 we had approximately 20,290 employees globally, an increase of 2.3% from March 31, 2023.

On March 26, 2024, we entered into a Credit Agreement (the “2024 Credit Agreement”) among us, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”).

The 2024 Credit Agreement provides for a $1.0 billion senior unsecured five-year revolving facility.

The facility may be increased, at the Company’s option and under certain conditions, by up to an additional $750 million in the aggregate.

The facility may be used for revolving loans, and up to $75.0 million may be used for letters of credit.

The revolving loans may be borrowed, repaid and re-borrowed until March 26, 2029, at which time all amounts borrowed must be repaid, subject to customary extension mechanics.

On March 26, 2024, the Company borrowed $274.4 million under the 2024 Credit Agreement.

The initial borrowing was used to repay the outstanding amounts under the 2020 Credit Agreement.

Additional amounts borrowed under the 2024 Credit Agreement will be used for working capital needs and general corporate purposes of the Company and its subsidiaries, including the funding of acquisitions and investments, payment of capital expenditures and the repurchase of shares.

For additional information, see Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements.

BUSINESS MEASUREMENTS

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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.

We had total revenues of $1.5 billion during the first quarter of 2024, an increase of 5% compared to the first quarter of 2023.

During the first quarter of 2024, revenues for Research increased by 4%, Conferences revenue increased by 8%, and Consulting revenues increased by 6%, compared to the first quarter of 2023.

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

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 the first quarter of 2024 and 2023, we had net income of $210.5 million and $295.8 million, respectively, and diluted income per share of $2.67 and $3.68, respectively.

Cash provided by operating activities was $188.8 million and $164.7 million during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had $1.2 billion of cash and cash equivalents and approximately $0.7 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 September 30, 2023 Three Months Ended September 30, 2022 Increase (Decrease) Increase

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

Costs and expenses:

Cost of services and product development 450,841 416,837 34,004 8

Selling, general and administrative 660,527 613,031 47,496 8

Depreciation 24,547 22,882 1,665 7

Amortization of intangibles 23,989 24,369 (380) (2)

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

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

Interest expense, net (21,820) (30,286) (8,466) (28)

Other income, net 1,877 8,930 (7,053) (79)

Provision for income taxes 44,465 58,517 (14,052) (24)

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

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

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Increase (Decrease) Increase

Total revenues $ 1,472,926 $ 1,408,869 $ 64,057 5 %

5 unchanged sentences

Acquisition and integration charges 460 1,368 (908) (66)

Gain from sale of divested operation (135,410) — (135,410) nm

Gain from sale of divested operation

— (139,316) 139,316 nm

Operating income 273,885 407,957 (134,072) (33)

1 unchanged sentence

Gain on event cancellation insurance claims — 3,077 (3,077) nm

Other income, net 5,086 46,684 (41,598) (89)

Other income (expense), net 4,891 (2,366) 7,257 nm

Provision for income taxes 49,012 85,494 (36,482) (43)

1 unchanged sentence

nm = not meaningful.

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.

Total revenues for the three months ended March 31, 2024 were $1.5 billion, an increase of $64.1 million, or 5% compared to the same period in 2023 on both a reported basis and 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 $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 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 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.

Cost of services and product development was $459.4 million during the three months ended March 31, 2024, an increase of $24.3 million compared to the same period in 2023, or 6% on a reported basis and 5% excluding the foreign currency impact.

The increase in Cost of services and product development was primarily due to increased compensation costs associated with merit increases.

Cost of services and product development as a percent of revenues was 31% for both the three months ended March 31, 2024 and 2023.

Selling, general and administrative (“SG&A”) expense was $689.8 million during the three months ended March 31, 2024, an increase of $32.7 million compared to the same period in 2023, or 5% on a reported basis and excluding the foreign currency impact.

The increase in SG&A expense during the three months ended March 31, 2024 was primarily a result of higher personnel expenses due to increased headcount and merit increases.

This increase was partially offset by lower charges associated with the impairment of right-of-use assets and other long-lived assets.

The number of quota-bearing sales associates in Global Technology Sales decreased by 2% to 3,602 and in Global Business Sales, increased by 7% to 1,223 compared to March 31, 2023.

On a combined basis, the total number of quota-bearing sales associates was flat when compared to March 31, 2023.

SG&A expense as a percent of revenues was 47% during both the three months ended March 31, 2024 and 2023.

Depreciation increased by 10% during the three months ended March 31, 2024, compared to the same period in 2023.

The increase for the three months ended March 31, 2024 was primarily due to increased software additions during the last twelve months.

Amortization of intangibles increased by 1% during the three months ended March 31, 2024, compared to the same period in 2023.

Acquisition and integration charges decreased by $0.9 million during the three months ended March 31, 2024, compared to the same period in 2023.

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

We recognized a pre-tax gain of $139.3 million during the three months ended March 31, 2023.

Operating income was $273.9 million and $408.0 million during the three months ended March 31, 2024 and 2023, respectively.

The decrease in operating income for the three months ended March 31, 2024 as compared to the prior year period was primarily due to the gain from sale of divested operation recognized during the three months ended March 31, 2023 and increases in cost of services and product development and selling, general and administrative expenses, partially offset by increased revenue.

Interest expense, net decreased by $8.2 million during the three months ended March 31, 2024, compared to the same period in 2023.

The decrease for the three months ended March 31, 2024 was due to increased interest income, primarily as a result of higher cash balances than the prior year.

Gain on event cancellation insurance claims of $3.1 million during the three months ended March 31, 2023 reflected proceeds related to 2020 conference cancellation insurance claims.

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

Other income (expense), net for the three months ended March 31, 2024 also included a gain of $4.5 million on de-designated interest rate swaps.

Other income (expense), net for the three months ended March 31, 2023 included a loss of $1.4 million on de-designated interest rate swaps.

The provision for income taxes was $49.0 million and $85.5 million for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate was 18.9% and 22.4% for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate was higher in the prior year primarily due to the impact of the sale of the TalentNeuron business.

Net income for the three months ended March 31, 2024 and 2023 was $210.5 million and $295.8 million, respectively.

Our diluted net income per share during the three months ended March 31, 2024 decreased by $1.01.

The decrease in net income during the three months ended March 31, 2024 was primarily due to the gain from sale of divested operation recognized during the three months ended March 31, 2023 and increased operating expenses, partially offset by an increase in revenue and lower income tax expense.

SEGMENT RESULTS

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Research, Conferences and Consulting.

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

As Of And For The Three Months Ended March 31, 2024 As Of And For The Three Months Ended March 31, 2023 Increase

(Decrease) Percentage

2 unchanged sentences

Gross contribution (1) $ 944,570 $ 899,514 $ 45,056 5 %

Gross contribution margin 73 % 74 % (1) point — 74 % 74 % 0 point —

Gross contribution margin 74 % 74 % 0 point —

Business Measurements :

Contract Value (1), (3) $ 4,870,000 $ 4,554,000 $ 316,000 7 %

Global Technology Sales (2):

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Contract value (1), (3)

Client retention 88 % 89 % (1) point —

$ 1,113,000 $ 991,000 $ 122,000 12 %

Client retention 87 % 89 % (2) points —

Wallet retention 107 % 110 % (3) points —

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

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.

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

(Decrease) Percentage

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

Contract values as of March 31, 2023 have been calculated using the same foreign currency rates as 2024.

Research revenues i ncreased by $51.0 million during the three months ended March 31, 2024 compared to the same period in 2023, or 4% on a reported basis and excluding the foreign currency impact.

The increase in revenues during 2024 was primarily due to Research contract value growth in 2023.

The segment gross contribution margin was 74% for both the three months ended March 31, 2024 and 2023 .

Contract value increased to $4.9 billion at March 31, 2024, or 7% compared to March 31, 2023 excluding the foreign currency impact.

The majority of industry sectors grew high single-digit rates or faster.

The higher growth sectors were the energy, manufacturing and public sectors.

Global Technology Sales (“GTS”) contract value increased by 5% at March 31, 2024 when compared to March 31, 2023.

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

GTS contract value increased by high single-digit rates or faster for the majority of enterprise sizes and half of industry sectors.

Global Business Sales (“GBS”) contract value increased by 12% year-over-year, also primarily driven by new business from existing clients.

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

GTS client retention was 83% and 85% as of March 31, 2024 and 2023, respectively, while wallet retention was 101% and 104%, respectively.

GBS client retention was 87% and 89% for March 31, 2024 and 2023, respectively, while wallet retention was 107% and 110%, respectively.

The decrease in GTS and GBS wallet retention was largely due to lower levels of spending by existing clients compared to the same period in 2023.

GTS client and wallet retention were also affected by a slowdown in tech vendor spending and higher levels of tech vendor spending in the prior year period.

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Increase

(Decrease) Percentage

2 unchanged sentences

Gross contribution (1) $ 23,255 $ 26,788 $ (3,533) (13) %

Gross contribution margin 36 % 52 % (16) points — 50 % 55 % (5) points —

Gross contribution margin 33 % 41 % (8) points —

Business Measurements:

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(1) Dollars in thousands.

(2) Includes both virtual and in-person conferences.

(2) Single day, local meetings are excluded.

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

Conferences revenues increased by $5.4 million during the three months ended March 31, 2024 compared to the same period in 2023.

The increase in revenue for the three months ended March 31, 2024 was primarily due to holding two more in-person destination conferences than in the first quarter of 2023.

We held 12 and 10 in-person destination conferences during the three months ended March 31, 2024 and 2023, respectively.

Gross contribution decreased to $23.3 million during the three months ended March 31, 2024 compared to $26.8 million in the same period last year.

The decrease in gross contribution during the three months ended March 31, 2024 was primarily due to an increase in conference-related expenses and increased headcount, partially offset by an increase in revenue.

As Of And For The Three Months Ended March 31, 2024 As Of And For The Three Months Ended March 31, 2023 Increase

(Decrease) Percentage

2 unchanged sentences

Gross contribution (1) $ 54,287 $ 50,808 $ 3,479 7 %

Gross contribution margin 37 % 35 % 2 points — 38 % 40 % (2) points —

Gross contribution margin 40 % 40 % 0 point —

Business Measurements:

1 unchanged sentence

Billable headcount 948 904 44 5 %

Consultant utilization 64 % 66 % (2) points — 65 % 70 % (5) points —

Consultant utilization 66 % 67 % (1) point —

(1) Dollars in thousands.

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

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.

Backlog as of March 31, 2023 has been calculated using the same foreign currency rates as 2024.

Consulting revenues increased by 6% during the three months ended March 31, 2024 compared to the same period in 2023 on a reported basis and 7% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 12% and a decrease in contract optimization revenue of 13%, each on a reported basis.

Contract optimization revenue may vary significantly and, as such, revenues for the first quarter of 2024 may not be indicative of results for the remainder of 2024 or beyond.

The segment gross contribution margin was 40% for both the three months ended March 31, 2024 and 2023.

Backlog increased by $27.0 million, or 17%, from March 31, 2023 to March 31, 2024, 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 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.

At March 31, 2024, we had $1.2 billion of cash and cash equivalents and approximately $706.7 million of available borrowing capacity on the revolving credit facility under our 2024 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 49% held outside the U.S.

at September 30, 2023.

at March 31, 2024.

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).

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

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Increase

Cash provided by operating activities $ 188,836 $ 164,679 $ 24,157

Cash provided by (used in) investing activities 77,112 (74,570) 151,682

Cash (used in) provided by investing activities (24,660) 137,611 (162,271)

Cash used in financing activities (219,681) (101,292) (118,389)

Net increase (decrease) in cash and cash equivalents and restricted cash 574,495 (189,687) 764,182

Effects of exchange rates (23,139) (42,228) 19,089

Net (decrease) increase in cash and cash equivalents and restricted cash (55,505) 200,998 (256,503)

Effects of exchange rates on cash and cash equivalents (27,693) (5,485) (22,208)

Beginning cash and cash equivalents and restricted cash 1,319,599 698,599 621,000

Ending cash and cash equivalents and restricted cash $ 1,236,401 $ 894,112 $ 342,289

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 $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 $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.

Cash provided by operating activities was $188.8 million and $164.7 million during the three months ended March 31, 2024 and 2023, respectively.

The year-over-year increase was primarily due to increased operating income, excluding the 2023 gain from sale of divested operation.

Cash (used in) provided by investing activities was $(24.7) million and $137.6 million during the three months ended March 31, 2024 and 2023, respectively.

The decrease from 2023 to 2024 was the result of the proceeds received from the sale of the TalentNeuron business in February 2023.

Cash used in financing activities was $219.7 million and $101.3 million during the three months ended March 31, 2024 and 2023, respectively.

We used $225.1 million and $106.9 million of cash for share repurchases during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the Company had $2.5 billion of principal amount of debt outstanding.

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

From time to time, the Company may seek to retire or repurchase its outstanding debt through various methods including open market repurchases, negotiated block transactions, or otherwise, all or some of which may be effected through Rule 10b5-1 plans.

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OFF BALANCE SHEET ARRANGEMENTS

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.

From January 1, 2024 through March 31, 2024, 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