What changed in this filing

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Item 1A. Risk Factors

2024-07-22 compared with 2023-07-25 · 67 added, 54 removed, 282 unchanged (30% 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 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.

Recent inflationary conditions and high interest rates, geopolitical conflicts as further discussed below and increasing diplomatic and trade friction between the U.S.

and China, 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 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 and conflict and unrest in the Middle East could continue to create global economic 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, 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.

Although none of our operations are in Russia, Ukraine or the Middle East, 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 credit losses 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.

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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.

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.

We operate in a competitive, fragmented market, and we compete for clients and consultants with a variety of organizations that offer similar services.

Our principal competitors include:

consulting firms;

local, regional, national and international accounting and other traditional professional services firms;

independent contractors;

traditional and internet-

based staffing firms;

and the in-house or former in-house resources of our clients.

The competition is likely to increase in the future due to the expected growth of the market and the relatively few barriers to entry.

We cannot provide assurance that we will be able to compete effectively against existing or future competitors.

Many of our competitors have significantly greater financial resources, greater revenues and greater name recognition, which may afford them an advantage in attracting and retaining clients and consultants and in offering pricing concessions.

Some of our competitors in certain markets do not provide medical insurance or other benefits to their consultants, thereby allowing them to potentially charge lower rates to clients.

In addition, our competitors may be able to respond more quickly to changes in companies’ needs and developments in the professional services industry.

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

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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.

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

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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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.

We operate in a competitive, fragmented market, and we compete for clients and consultants with a variety of organizations that offer similar services.

Our principal competitors include:

consulting firms;

local, regional, national and international accounting and other traditional professional services firms;

independent contractors;

traditional and internet-based staffing firms;

and the in-house or former in-house resources of our clients.

The competition is likely to increase in the future due to the expected growth of the market and the relatively few barriers to entry.

We cannot provide assurance that we will be able to compete effectively against existing or future competitors.

Some of our competitors in certain markets do not provide medical insurance or other benefits to their consultants, thereby allowing them to potentially charge lower rates to clients.

In addition, our competitors may be able to respond more quickly to changes in companies’ needs and developments in the professional services industry.

Risks Related to Human Capital Resources

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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 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.

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 AI 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.

As technology continues to evolve, more tasks currently performed by people have been and may continue to be replaced by automation, robotics, machine learning, AI and other technological advances outside of our control.

These technological changes may (i) reduce demand for our services, (ii) enable the development of competitive products or services, or (iii) enable our current customers to reduce or bypass the use of our services, particularly in lower-skill job categories.

Additionally, rapid changes in AI and generative AI which involves the use of advanced algorithms and machine learning techniques to create content, generate ideas, or simulate human-like behaviors and block chain-based technology are increasing the competitiveness landscape.

We may not be successful in anticipating or responding to these changes and there can be no assurance that we can integrate other technologies we use with AI or that material additional monetary and time expenditures will not be required.

In addition, demand for our services could be further reduced by advanced technologies being deployed by our competitors.

If we are not able to replace the revenue from our expired client contracts, either through follow-on contracts or new contracts for those requirements or for other requirements, our revenue and operating results may be adversely affected.

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We may be unable to realize the level of the anticipated benefits that we expect from our restructuring initiatives, which may adversely impact our business and results of operations.

In response to changes in industry and market conditions, we have undertaken in the past, and may undertake in the future, restructuring, reorganization, or other strategic initiatives and business transformation plans to realign our resources with our growth strategies, operate more efficiently and control costs.

In response to changes in industry and market conditions, we have undertaken in the past, and from time to time expect to undertake in the future, restructuring, reorganization, or other strategic initiatives and business transformation plans to realign our resources with our growth strategies, operate more efficiently and control costs.

For example, in fiscal 2024, we initiated a cost reduction plan, including a reduction in force (the "U.S.

Restructuring Plan”) intended to reduce costs and streamline operations.

The successful implementation of our restructuring activities may from time to time require us to effect business and asset dispositions, workforce reductions, management restructurings, decisions to limit investments in or otherwise exit businesses, office consolidations and closures, and other actions, each of which may depend on a number of factors that may not be within our control.

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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.

For example, in fiscal 2025, we plan to reorganize our business by forming multiple discrete operational business units.

We plan to make management organizational changes and implement new reporting modules and processes to provide discrete information to manage the business.

There can be no assurance that such reorganization will be beneficial to the Company or that such reorganization will not adversely affect our business, competitive position, operating results or 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 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.

One of our primary areas of focus in recent years is digital expansion, which includes the launching of Project Phoenix, our multi-year technological modernization initiative that requires significant enterprise-wide effort replacing or upgrading core system as well as 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 CloudGo.

With our recent acquisition of Reference Point LLC, we continue 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.

These investments require significant capital expenditures.

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

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.

We have worked to focus investment dollars in high-growth core markets for greater impact and to shift to a virtual operating model in certain other markets.

In 2024, we initiated the U.S.

Restructuring Plan, intended to reduce costs and streamline operations.

In the first quarter of fiscal 2025 we announced a decision to reorganize the Company’s business by forming multiple discrete operational business units.

There can be no assurance we will be able to maintain or expand our market presence in our current locations, successfully enter other markets or locations or successfully operate our business virtually without a physical presence in all our markets.

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Our failure to be successful in addressing these risks or other problems encountered in connection with our past or future acquisitions could cause us to fail to realize the anticipated benefits of such acquisitions, incur unanticipated liabilities and harm our business generally.

Our recent rebranding efforts may not be successful.

In addition, we may be unable to adequately protect our intellectual property rights, including our brand name.

We may be unable to adequately protect our intellectual property rights, including our brand name.

We believe establishing, maintaining and enhancing the RGP and Resources Global Professionals brand names are important to our business.

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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.

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.

In addition, we rely on information 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 cybersecurity incidents, interruptions in our operations and system failures, and any loss or breach of data and interruptions or delays in our business or that of our clients, or both, resulting from such incidents, interruptions or failures could have a material impact on our business and operations and materially adversely affect our revenue, profits and operating results.

The breadth and complexity of our information systems increases the potential risk of security incidents.

Despite our implementation of and periodic updates to 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.

Cybersecurity incidents may involve the covert introduction of malware to computers and networks, and the use of techniques or processes that change frequently, including from emerging technologies, such as advanced forms of machine learning, AI and quantum computing, 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.

Cybersecurity 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 cybersecurity 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, we expect to continue to be subject to cybersecurity incidents and attacks and there is no assurance that similar incidents or attacks, or new cybersecurity threats will not arise that, will not cause material impacts in the future.

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, 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.

We review and update our systems and have implemented processes and procedures to protect against cybersecurity 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, has also increased our vulnerability to risks related to our hardware and software systems, including risks of phishing and other cybersecurity attacks.

Our systems may be subject to additional risk introduced by software that we license from third parties.

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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.

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.

While we maintain insurance coverage for cybersecurity incidents that we believe is 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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Our employees may have access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuse or improper disclosure of which could result in legal liability.

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.

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

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Laws and regulations in this area are evolving and generally becoming more stringent.

For example, the European General Data Protection Regulation (the “GDPR”) requires us to meet stringent requirements regarding (i) our access, use, disclosure, transfer, protection, or otherwise processing of personal data;

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 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.

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

Under the GDPR and the United Kingdom’s version of the GDPR, information 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 and California Privacy Rights Act of 2020 provide individuals similar rights with respect to the processing of their personal data.

In addition to California, Colorado, Virginia, Utah and Connecticut, previously enacted comprehensive privacy legislation and in 2023 and 2024, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, New Jersey, New Hampshire, Oregon, Rhode Island, Tennessee and Texas enacted such laws.

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.

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Privacy and data protection law requirements also confer a private right of action in some countries, including under the GDPR.

As these laws continue to evolve, we may be required to make changes to our systems, services, solutions and/or products to enable us and/or our clients to meet the new legal requirements, including by taking on more onerous obligations in our contracts, limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solution offerings in certain locations.

Changes in these laws, or the interpretation and application thereof, may also increase our potential exposure through significantly higher potential penalties for non-compliance.

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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.

Nonetheless, we cannot assure our stakeholders that our policies, procedures and related training programs will ensure full compliance with all applicable legal requirements.

Illegal or improper conduct by our executive officers, directors, employees, consultants or independent contractors, or others who are subject to our policies and procedures could damage our reputation in the U.S.

Illegal or improper conduct by our executive officers, directors, employees, consultants or independent contractors, or others who are subject to our policies and procedures could

damage our reputation in the U.S.

and internationally, which could adversely affect our existing client relationships or adversely affect our ability to attract and retain new clients, or lead to litigation or governmental or regulatory proceedings in the U.S.

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due to the labor laws, tax regulations and customs of the international markets we serve.

However, changes to foreign laws governing the definition or classification of independent contractors, or judicial decisions regarding independent contractor classification, could require classification of consultants as employees.

as employees.

Such reclassification could have an adverse effect on our business and results of operations, could require us to pay significant retroactive wages, taxes and penalties, and could force us to change our contractor business model in the foreign jurisdictions affected.

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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.

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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The failure to pay the quarterly dividend, reduction of the quarterly dividend rate or the discontinuance of the quarterly dividend could adversely affect the trading price of our common stock.

UNRESOLVED STAFF COMMENTS.

Not applicable.

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