What changed in this filing

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Item 1A. Risk Factors

2023-07-25 compared with 2022-07-28 · 56 added, 46 removed, 280 unchanged (27% of the section changed)

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We are exposed to the risk of an economic downturn or deterioration of general macroeconomic conditions, including slower growth or recession, inflation, or decreases in consumer spending power or confidence, which could have a significant impact on our business, financial condition, and results of operations.

Recent events, including the Pandemic, the military incursion by Russia into Ukraine, inflationary conditions and rising interest rates, have caused disruptions in the U.S.

Recent events, including increasing diplomatic and trade friction between the U.S.

and China, the military incursion by Russia into Ukraine, and inflationary conditions and rising interest rates, have caused disruptions in the U.S.

and global economy, and uncertainty regarding general economic conditions within some regions and countries in which we operate, including concerns about a potential U.S.

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Deterioration of or prolonged uncertainty related to the global economy or tightening credit markets could cause some of our clients to experience liquidity problems or other financial difficulties and could further reduce the demand for our services and adversely affect our business in the future.

The recent military incursion by Russia into Ukraine could adversely impact the global economy and cause an increase in inflation and market uncertainty in a manner that could adversely affect our operations.

The military incursion by Russia into Ukraine could adversely impact the global economy and cause an increase in inflation and market uncertainty in a manner that could adversely affect our operations.

Wars divert international trade and capital flows, disrupt global supply chains, delay companies’ investment and hiring and erode consumer confidence, and periods of elevated geopolitical risks have historically been associated with negative effects on global economic activity.

Although none of our operations are in Russia or Ukraine, the continuation or further escalation of geopolitical tensions could impact other markets where we do business, including Europe and Asia Pacific, or cause negative global economic effects which may adversely affect our business, financial condition, and results of operations.

In addition, the use of professional services consultants on a project-by-project basis could decline for non-economic reasons, including due to clients utilizing their own internal employees, due to competitive reasons, due to a lack of qualified consultants and for the other reasons described elsewhere in this Item 1A.

In the event of a reduction in the demand for our consultants, our financial results would suffer.

Although none of our operations are in Russia or Ukraine, the continuation or further escalation of geopolitical tensions, or future instances of political unrest in other geographies, could impact other markets where we do business, including Europe and Asia Pacific, or cause negative global economic effects which may adversely affect our business, financial condition, and results of operations.

Economic deterioration at one or more of our clients may also affect our allowance for doubtful accounts and collectability of accounts receivable.

Our estimate of losses resulting from our clients’ failure to make required payments for services rendered has historically been within our expectations and the provisions established.

While our overall receivable collections have not been severely impacted by the Pandemic, we cannot guarantee we will continue to experience the same credit loss rates we have in the past.

While our overall receivable collections have not been severely impacted by the softening economy or other geopolitical events, we cannot guarantee we will continue to experience the same credit loss rates we have in the past.

A significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and cash flows and additional allowances for anticipated losses may be required.

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Although the additional tax valuation allowances and the impairment of long-lived assets and goodwill are non-cash expenses, they could materially affect our future financial results and financial condition.

Our business is subject to risks arising from epidemic diseases or pandemics, such as the ongoing Pandemic.

The Pandemic or other public health epidemics or pandemics pose the risk that we or our employees and partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to the spread of the virus or due to shutdowns or other measures that are requested or mandated by governmental authorities.

Governmental measures intended to reduce the spread of the Pandemic have affected, and similar measures that may be taken in the future to combat the Pandemic or any other pandemic or epidemic may affect, how we operate, including, among other things, by reducing demand for or delaying client decisions to procure our services, or by resulting in cancellations of existing projects.

Any surge in the Pandemic or any future pandemic or epidemic could also result in a decline in productivity, which may adversely impact our ability to continue to efficiently serve our clients.

In addition, in connection with the Pandemic, the overall financial condition of some of our clients has been adversely impacted, at least for periods of time.

If these conditions continue or if the financial condition of any of our clients is negatively impacted in the future by the Pandemic or any other pandemic or epidemic, the ability of these clients to pay outstanding receivables owed to us may be adversely affected.

While current impacts to our business and employees resulting from the ongoing Pandemic are not material, the full extent to which the Pandemic may impact our business and financial results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact, the impacts of new variants of the virus, and the timing, distribution, efficacy and public acceptance of vaccines and other treatments for COVID-19.

Bank failures or other events affecting financial institutions could adversely affect our and our clients’ liquidity and financial performance.

We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks, which exceed the FDIC insurance limits.

We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or other similar agencies.

The failure of a bank, or events involving limited liquidity, defaults, non-performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or concerns or rumors about such events, may lead to disruptions in access to our bank deposits or otherwise adversely impact our liquidity and financial performance.

There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S.

or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.

Our clients, including those of our clients that are banks, may be similarly adversely affected by any bank failure or other event affecting financial institutions.

Any resulting adverse effects to our clients’ liquidity or financial performance could reduce the demand for our services or affect our allowance for doubtful accounts and collectability of accounts receivable.

These additional allowances could materially affect our future financial results.

In addition, instability, liquidity constraints or other distress in the financial markets, including the effects of bank failures, defaults, non-performance or other adverse developments that affect financial institutions, could impair the ability of one or more of the banks participating in our current or any future credit agreement from honoring their commitments.

This could have an adverse effect on our business if we were not able to replace those commitments or to locate other sources of liquidity on acceptable terms.

Our business is subject to risks arising from epidemic diseases, pandemics, or other public health emergencies.

Public health epidemics or pandemics pose the risk that we or our employees and partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to the spread of the virus or due to shutdowns or other measures that are requested or mandated by governmental authorities.

Governmental measures that are intended to reduce the spread or otherwise combat a pandemic or epidemic may affect how we operate, including, among other things, by reducing demand for or delaying client decisions to procure our services, or by resulting in cancellations of existing projects.

A future pandemic, epidemic, or other public health emergency could also result in a decline in productivity, which may adversely impact our ability to continue to efficiently serve our clients.

In addition, in connection with the Pandemic, the overall financial condition of some of our clients was adversely impacted, at least for periods of time.

If the financial condition of any of our clients is negatively impacted in the future by a pandemic or epidemic, the ability of these clients to pay outstanding receivables owed to us may be adversely affected.

The market for professional services is highly competitive, and if we are unable to compete effectively against our competitors, our business and operating results could be adversely affected.

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The success of our business is dependent on our ability to secure new projects from clients or to renew expired contracts with clients.

For example, our business is likely to be materially adversely affected if we are unable to secure new client projects because of improvements in our competitors’ service offerings, because of a change in government regulatory requirements, because of an economic downturn decreasing the demand for outsourced professional services, or for other reasons.

For example, our business is likely to be materially adversely affected if we are unable to secure new client projects because of improvements in our competitors’ service offerings, because of our customers’ use of technology or artificial intelligence instead of external experts, because of a change in government regulatory requirements, because of an economic downturn decreasing the demand for outsourced professional services, or for other reasons.

New impediments to our ability to secure projects from clients may develop over time, such as the increasing use by large clients of in-house procurement groups that manage their relationship with service providers.

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Further, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and proficiency, adverse effects on employee morale, loss of key employees and/or other retention issues during transitional periods.

Reorganization and restructuring can impact a significant amount of management and other employees’ time and focus, which may divert attention from operating and growing our business.

Reorganization and restructuring can impact a significant amount of management and other employees’ time and focus, which may divert attention from

operating and growing our business.

Further, upon completion of any restructuring initiatives, our business may not be more efficient or effective than prior to the implementation of the plan and we may be unable to achieve anticipated operating enhancements or cost reductions, which would adversely affect our business, competitive position, operating results and financial condition.

Our recent digital expansion and technology transformation efforts may not be successful, which could adversely impact our growth and profitability.

One of our primary areas of focus for fiscal 2022 and fiscal 2023 is digital expansion, which includes the further development and expanded launch of HUGO, our human cloud platform aimed at introducing a new way for clients and talent alike to engage with us and expanding go-to-market penetration for the business that we acquired from Veracity.

One of our primary areas of focus in recent years is digital expansion, which includes the further development and expanded launch of HUGO, our human cloud platform aimed at introducing a new way for clients and talent alike to engage with us and expanding go-to-market penetration for the business that we acquired from Veracity.

We are also making investments in the transformation of our technology systems to keep up with technological changes that impact the needs of our clients, the delivery of our services and the efficiency of our back-office operations.

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With this initiative, we seek to provide borderless solutions, anytime, anywhere, bringing the best talent to meet our clients’ business needs, based on workload, not zip code.

We also began upgrading to a new cloud-based enterprise-wide operating and Enterprise Resource Planning (“ERP”) system.

We also began upgrading to a new cloud-based enterprise-wide operating and Enterprise Resource Planning system.

The continued success of these initiatives requires adjusting and strengthening our business operations, financial and talent management systems, procedures, controls and compliance, which may increase our total operating costs and adversely impact our profitability and growth.

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We may not be able to grow our business, manage our growth or sustain our current business.

Historically, we have grown by opening new offices and by increasing the volume of services provided through existing offices.

Beginning late in fiscal 2017, we embarked on several new strategic initiatives, including the implementation of a new operating model to be more center-led instead of geographically focused, to drive growth and scale.

In 2020, we undertook restructuring efforts in North America, APAC and Europe to analyze our physical geographic footprint and real estate spend in those areas.

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We rely on trademark registrations and common law trademark rights to protect the distinctiveness of our brand.

In fiscal 2020, we launched a significant global rebranding initiative, and in fiscal 2022 we continued our global rebranding with the introduction of our new tagline ― Dare to Work Differently.

In fiscal 2020, we launched a significant global rebranding initiative, and in fiscal 2023 we continued our global rebranding with our new tagline ― Dare to Work Differently.

However, there can be no assurance that our rebranding initiative will result in a positive return on investment.

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The management of our business is aided by the uninterrupted operation of our computer and telecommunication systems.

These systems are vulnerable to security breaches, natural disasters or other catastrophic events, computer viruses, ransomware attacks, or other interruptions or damage stemming from power outages, equipment failure or unintended or unauthorized usage by employees.

These systems are vulnerable to security breaches, cyber or other security incidents, natural disasters or other catastrophic events, or other interruptions or damage stemming from power outages, equipment failure or unintended or unauthorized usage by employees.

In addition, we rely on information technology systems to process, transmit and store electronic information and to communicate among our locations around the world and with our clients, partners and consultants.

From time to time, we experience interruptions in our operations and system failures, and any loss of data and interruptions or delays in our business or that of our clients, or both, resulting from such interruptions or failures could have a material impact on our business and operations and materially adversely affect our revenue, profits and operating results.

In addition, the breadth and complexity of this infrastructure increases the potential risk of security incidents.

Security incidents, including ransomware attacks, cyber-attacks or cyber-intrusions by computer hackers, foreign governments, cyber terrorists or others with grievances against the industry in which we operate or us in particular, may disable or damage the proper functioning of our networks and systems and result in a significant disruption of our business and potentially significant payments to restore the networks and systems.

We review and update our systems and have implemented processes and procedures to protect against security incidents and unauthorized access to our data.

The breadth and complexity of this infrastructure increases the potential risk of security incidents.

Despite our implementation of security controls, our systems and networks are vulnerable to computer viruses, malware, worms, hackers and other security issues, including physical and electronic break-ins, router disruption, sabotage or espionage, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), impersonation of authorized users, and coordinated denial-of-service attacks.

Cyber security incidents may involve the covert introduction of malware to computers and networks, and the use of techniques or processes that change frequently, may be disguised or difficult to detect, or are designed to remain dormant until a triggering event, and may continue undetected for a period of time.

Cyber incidents have in the past resulted from, and may in the future result from, social engineering or impersonation of authorized users, and may also result from efforts to discover and exploit any design flaws, bugs, security vulnerabilities or security weaknesses, intentional or unintentional acts by employees or other insiders with access privileges, intentional acts of vandalism or fraud by third parties and sabotage.

For example, in the past we have experienced cyber security incidents resulting from unauthorized access to our systems, which to date have not had a material impact on our business or results of operations;

however, there is no assurance that similar incidents will not cause material impacts in the future.

We review and update our systems and have implemented processes and procedures to protect against security incidents and unauthorized access to our data, although we cannot provide assurances that these efforts will be successful.

In addition, the transition of our workforce to a hybrid work environment, where our employees are often working remotely, could also increase our vulnerability to risks related to our hardware and software systems, including risks of phishing and other cybersecurity attacks.

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If these events occur, our ability to attract new clients or talent may be impaired or we may be subjected to damages or penalties.

While we maintain insurance coverage for cybersecurity incidents that we believe are appropriate for our operations, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost.

we maintain insurance coverage for cybersecurity incidents that we believe are appropriate for our operations, our insurance coverage may not cover all potential claims against us, may require us to meet a deductible or may not continue to be available to us at a reasonable cost.

In addition, system-wide or local failures of these information technology systems could have a material adverse effect on our business, financial condition, results of operations or cash flows.

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The collection, hosting, transfer, disclosure, use, storage and security of personal information required to provide our services is subject to federal, state and foreign data privacy laws.

These laws, which are not uniform, do one or more of the following:

regulate the collection, transfer (including in some cases, the transfer outside the country of collection), processing, storage, use and disclosure of personal information, and require notice to individuals of privacy practices;

These laws, (“Privacy and Data Protection Requirements”) which are not uniform, do one or more of the following:

give individuals certain access, correction and deletion rights with respect to their personal information;

and prevent the use or disclosure of personal information for secondary purposes such as marketing.

and prevent the use or disclosure of personal information, or require providing opt-outs for the use and disclosure of personal information, for secondary purposes such as marketing.

Under certain circumstances, some of these laws require us to provide notification to affected individuals, data protection authorities and/or other regulators in the event of a data breach.

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and (ii) the ability of data subjects to exercise their related various rights such as to access, correct or delete their personal data.

Under the GDPR, data transfers from the European Union to the United States are generally prohibited unless certain measures are followed.

The 2018 California Consumer Privacy Act (“CCPA”), which went into effect in January 2020, now imposes similar requirements.

New privacy laws in California, Colorado, Connecticut, Utah and Virginia will take effect in 2023, with others likely to follow.

Several privacy bills have also been introduced in Congress.

Under the GDPR and the United Kingdom’s version of the GDPR, data transfers from the European Union and the United Kingdom to the United States are generally prohibited unless certain measures are followed.

The 2018 California Consumer Privacy Act (“CCPA”) imposes similar requirements.

New privacy laws in California, Colorado, Connecticut, Utah and Virginia have either taken effect or will take effect in 2023, and new privacy laws recently enacted in Iowa, Indiana, Montana, Tennessee and Texas will take effect over the next few years.

There is also the possibility of federal privacy legislation and increased enforcement by the Federal Trade Commission under its power to regulate unfair and deceptive trade practices.

Key markets in the Asia Pacific region have also recently adopted GDPR-like legislation, including China’s new Personal Information Protection Law.

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These policies require strict compliance with U.S.

and local laws and regulations applicable to our business operations, including those laws and regulations prohibiting improper payments to government officials.

and local laws and regulations applicable to our business operations,

including those laws and regulations prohibiting improper payments to government officials.

In addition, as a corporation whose securities are registered under the Exchange Act and publicly traded on the Nasdaq Stock Market, our executive officers, outside directors, employees, consultants and independent contractors are required to comply with the prohibitions against insider trading of our securities.

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If we fail to meet our contractual obligations, we could be subject to legal liability or damage to our reputation, which could adversely affect our business, operating results and financial condition.

While we are not currently subject to any client-related legal claims which we believe are material, it remains possible, because of the nature of our business, we may be involved in litigation in the future that could materially affect our future financial results.

While we are not currently subject to any client-related legal claims which we believe are material, it remains possible, because of the nature of our business, that we may be involved in litigation in the future that could materially affect our future financial results.

Claims brought against us could have a serious negative effect on our reputation and on our business, financial condition and results of operations.

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 provide that the authorized number of directors may be changed only by resolution of the Board of Directors.

The terms of our New Credit Facility impose operating and financial restrictions on us, which may limit our ability to respond to changing business and economic conditions.

We currently have a $175.0 million senior secured loan (the “New Credit Facility”) which matures on November 12, 2026.

We are subject to various operating covenants under the New Credit Facility which restrict our ability to, among other things, incur liens, incur additional indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets.

The New Credit Facility also requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.

Any failure to comply with these covenants may constitute a breach under the New Credit Facility, which could result in the acceleration of all or a substantial portion of any outstanding indebtedness and termination of revolving credit commitments under the New Credit Facility.

Our inability to maintain our New Credit Facility could materially and adversely affect our liquidity and our business.

Our New Credit Facility bears a variable rate of interest that is based on the Secured Overnight Financing Rate (“SOFR”) which may have consequences for us that cannot be reasonably predicted and may adversely affect our liquidity, financial condition, and earnings.

Borrowings under our New Credit Facility bear interest at a rate per annum of either, at our election, (i) Term SOFR (as defined in the credit agreement evidencing the New Credit Facility (the “New Credit Agreement”)) plus a margin or (ii) the Base Rate (as defined in the New Credit Agreement), plus a margin, with the applicable margin depending on our consolidated leverage ratio.

Although SOFR has been endorsed by the Alternative Reference Rates Committee as its preferred replacement for the London Interbank Offered Rate (“LIBOR”), it remains uncertain whether or when SOFR or other alternative reference rates will be widely accepted by lenders as the replacement for LIBOR.

This may, in turn, impact the liquidity of the SOFR loan market, and SOFR itself.

The terms of our Credit Facility impose operating and financial restrictions on us, which may limit our ability to respond to changing business and economic conditions.

We currently have a $175.0 million senior secured loan (the “Credit Facility”) which matures on November 12, 2026.

We are subject to various operating covenants under the Credit Facility which restrict our ability to, among other things, incur liens, incur additional indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets.

The Credit Facility also requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.

Any failure to comply with these covenants may constitute a breach under the Credit Facility, which could result in the acceleration of all or a substantial portion of any outstanding indebtedness and termination of revolving credit commitments under the Credit Facility.

Our inability to maintain our Credit Facility could materially and adversely affect our liquidity and our business.

Our Credit Facility bears a variable rate of interest that is based on the Secured Overnight Financing Rate (“SOFR”) which may have consequences for us that cannot be reasonably predicted and may adversely affect our liquidity, financial condition, and earnings.

Borrowings under our Credit Facility bear interest at a rate per annum of either, at our election, (i) Term SOFR (as defined in the credit agreement evidencing the Credit Facility (the “Credit Agreement”)) plus a margin or (ii) the Base Rate (as defined in the Credit Agreement), plus a margin, with the applicable margin depending on our consolidated leverage ratio.

Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data.

Additionally, our New Credit Agreement includes a credit adjustment on SOFR due to LIBOR representing an unsecured lending rate while SOFR represents a secured lending rate.

It is possible that the volatility of and uncertainty around SOFR as a LIBOR replacement rate and the applicable credit adjustment would result in higher borrowing costs for us, and would adversely affect our liquidity, financial condition, and earnings.

Additionally, our Credit Agreement includes a credit adjustment on SOFR due to LIBOR representing an unsecured lending rate while SOFR represents a secured lending rate.

It is possible that the volatility of SOFR and the applicable credit adjustment could result in higher borrowing costs for us, and could adversely affect our liquidity, financial condition, and earnings.

We may be unable to or elect not to pay our quarterly dividend payment.

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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-K

Item 1A. Risk Factors