ROBERT HALF INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (in thousands, except share amounts) June 30, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 542,805 $ 574,426 Accounts receivable, net 907,947 714,163 Employee deferred compensation trust assets 458,581 406,634 Other current assets 143,896 147,515 Total current assets 2,053,229 1,842,738 Property and equipment, net 98,368 109,817 Right-of-use assets 243,031 262,688 Other intangible assets, net 4,428 5,594 Goodwill 223,239 223,055 Noncurrent deferred income taxes 119,073 113,532 Total assets $ 2,741,368 $ 2,557,424 LIABILITIES Accounts payable and accrued expenses $ 146,215 $ 130,770 Accrued payroll and benefit costs 463,772 397,877 Employee deferred compensation plan obligations 481,454 435,121 Income taxes payable 25,203 4,015 Notes payable 122 239 Current operating lease liabilities 79,546 78,604 Total current liabilities 1,196,312 1,046,626 Noncurrent operating lease liabilities 201,457 223,869 Other liabilities 84,349 81,640 Total liabilities 1,482,118 1,352,135 Commitments and Contingencies (Note J) STOCKHOLDERS’ EQUITY Preferred stock, $ 0.001 par value; authorized 5,000,000 shares; none issued — — Common stock, $ 0.001 par value; authorized 260,000,000 shares; issued and outstanding 111,970,042 shares and 113,127,501 shares 112 113 Additional paid-in capital 1,208,056 1,179,972 Accumulated other comprehensive income (loss) ( 9,092 ) ( 4,732 ) Retained earnings 60,174 29,936 Total stockholders’ equity 1,259,250 1,205,289 Total liabilities and stockholders’ equity $ 2,741,368 $ 2,557,424 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 2 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Service revenues $ 1,580,581 $ 1,108,326 $ 2,978,961 $ 2,615,017 Costs of services 915,709 691,791 1,752,378 1,584,094 Gross margin 664,872 416,535 1,226,583 1,030,923 Selling, general and administrative expenses 488,093 407,213 911,155 850,081 (Income) loss from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I) ( 27,810 ) ( 48,927 ) ( 39,797 ) ( 8,551 ) Amortization of intangible assets 576 330 1,152 668 Interest expense (income), net 151 ( 105 ) 105 ( 1,062 ) Income before income taxes 203,862 58,024 353,968 189,787 Provision for income taxes 54,649 11,828 94,157 53,676 Net income $ 149,213 $ 46,196 $ 259,811 $ 136,111 Net income per share: Basic $ 1.35 $ .41 $ 2.34 $ 1.20 Diluted $ 1.33 $ .41 $ 2.32 $ 1.20 Shares: Basic 110,861 112,865 111,141 113,026 Diluted 111,889 113,121 112,191 113,489 Dividends declared per share $ .38 $ .34 $ .76 $ .68 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 3 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 COMPREHENSIVE INCOME (LOSS): Net income $ 149,213 $ 46,196 $ 259,811 $ 136,111 Other comprehensive income (loss): Foreign currency translation adjustments, net of tax 4,398 6,534 ( 4,439 ) ( 7,166 ) Foreign defined benefit plans, net of tax 39 — 79 — Total other comprehensive income (loss) 4,437 6,534 ( 4,360 ) ( 7,166 ) Total comprehensive income (loss) $ 153,650 $ 52,730 $ 255,451 $ 128,945 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 4 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except per share amounts) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shares Par Value Balance at December 31, 2020 113,128 $ 113 $ 1,179,972 $ ( 4,732 ) $ 29,936 $ 1,205,289 Net income — — — — 110,598 110,598 Other comprehensive income (loss) — — — ( 8,797 ) — ( 8,797 ) Dividends declared ($ .38 per share) — — — — ( 43,300 ) ( 43,300 ) Net issuances of restricted stock 602 1 ( 1 ) — — — Stock-based compensation — — 14,182 — — 14,182 Repurchases of common stock ( 1,048 ) ( 1 ) — — ( 80,272 ) ( 80,273 ) Balance at March 31, 2021 112,682 $ 113 $ 1,194,153 $ ( 13,529 ) $ 16,962 $ 1,197,699 Net income — — — — 149,213 149,213 Other comprehensive income (loss) — — — 4,437 — 4,437 Dividends declared ($ .38 per share) — — — — ( 42,720 ) ( 42,720 ) Net issuances of restricted stock 5 — — — — — Stock-based compensation — — 13,903 — — 13,903 Repurchases of common stock ( 717 ) ( 1 ) — — ( 63,281 ) ( 63,282 ) Balance at June 30, 2021 111,970 $ 112 $ 1,208,056 $ ( 9,092 ) $ 60,174 $ 1,259,250 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shares Par Value Balance at December 31, 2019 115,120 $ 115 $ 1,127,487 $ ( 19,986 ) $ 36,067 $ 1,143,683 Net income — — — — 89,915 89,915 Adoption of accounting pronouncement — — — — ( 558 ) ( 558 ) Other comprehensive income (loss) — — — ( 13,700 ) — ( 13,700 ) Dividends declared ($ .34 per share) — — — — ( 39,441 ) ( 39,441 ) Net issuances of restricted stock 745 1 ( 1 ) — — — Stock-based compensation — — 13,525 — — 13,525 Repurchases of common stock ( 1,263 ) ( 1 ) — — ( 63,498 ) ( 63,499 ) Balance at March 31, 2020 114,602 $ 115 $ 1,141,011 $ ( 33,686 ) $ 22,485 $ 1,129,925 Net income — — — — 46,196 46,196 Other comprehensive income (loss) — — — 6,534 — 6,534 Dividends declared ($ .34 per share) — — — — ( 38,975 ) ( 38,975 ) Net issuances of restricted stock 33 — — — — — Stock-based compensation — — 13,035 — — 13,035 Repurchases of common stock 0 0 — — ( 9 ) ( 9 ) Balance at June 30, 2020 114,635 $ 115 $ 1,154,046 $ ( 27,152 ) $ 29,697 $ 1,156,706 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 5 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Six Months Ended June 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 259,811 $ 136,111 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for credit losses 4,733 6,713 Depreciation 27,715 31,509 Amortization of cloud computing implementation costs 13,353 7,569 Amortization of intangible assets 1,152 668 Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts ( 36,949 ) ( 7,091 ) Stock-based compensation 28,085 26,560 Deferred income taxes ( 5,524 ) ( 4,289 ) Changes in operating assets and liabilities: Accounts receivable ( 201,602 ) 153,913 Capitalized cloud computing implementation costs ( 16,236 ) ( 18,846 ) Accounts payable and accrued expenses 17,138 23,095 Accrued payroll and benefit cost 68,340 12,067 Employee deferred compensation plan obligations 46,236 7,485 Income taxes payable 22,110 43,723 Other assets and liabilities, net 5,110 6,755 Net cash flows provided by operating activities 233,472 425,942 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 16,114 ) ( 22,264 ) Investments in employee deferred compensation trusts ( 42,423 ) ( 49,098 ) Proceeds from employee deferred compensation trust redemptions 27,424 28,347 Net cash flows used in investing activities ( 31,113 ) ( 43,015 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable ( 117 ) ( 107 ) Repurchases of common stock ( 145,314 ) ( 69,977 ) Dividends paid ( 86,479 ) ( 78,916 ) Net cash flows used in financing activities ( 231,910 ) ( 149,000 ) Effect of exchange rate fluctuations ( 2,070 ) ( 2,920 ) Change in cash and cash equivalents ( 31,621 ) 231,007 Cash and cash equivalents at beginning of period 574,426 270,478 Cash and cash equivalents at end of period $ 542,805 $ 501,485 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non-cash items: Stock repurchases awaiting settlement $ 1,345 $ — Fund exchanges within employee deferred compensation trusts $ 63,154 $ 160,028 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 6 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 2021 Note A— Summary of Significant Accounting Policies Nature of Operations . Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps ® , Robert Half ® Finance & Accounting , OfficeTeam ® , Robert Half ® Technology , Robert Half ® Management Resources , Robert Half ® Legal , The Creative Group ® , and Protiviti ® . The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of contract, full-time, and senior-level project professionals in the fields of accounting and finance. OfficeTeam specializes in highly skilled contract, administrative support professionals. Robert Half Technology provides project and full-time technology professionals. Robert Half Legal provides contract, project, and full-time staffing of lawyers, paralegals and legal support personnel. The Creative Group provides creative, digital, marketing, advertising and public relations professionals. Protiviti is a global consulting firm that helps companies solve problems in finance, technology, operations, data, analytics, governance, risk and internal audit, and is a wholly-owned subsidiary of the Company. Revenues are predominantly derived from specialized staffing services. The Company operates in North America, South America, Europe, Asia and Australia. The Company is a Delaware corporation. Basis of Presentation. The unaudited Condensed Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). The comparative year-end Condensed Consolidated Statement of Financial Position data presented was derived from audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the periods presented have been included. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended December 31, 2020, included in its Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for a full year. Certain reclassifications have been made to prior year’s Condensed Consolidated Financial Statements to conform to the 2021 presentation. Principles of Consolidation. The Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As of June 30, 2021, such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions. We continue to monitor the global economic uncertainty as a result of coronavirus (“COVID-19”) to assess the impact on the Company’s results of operations, financial condition, and liquidity. We continue to face uncertainty in making the judgments and estimates needed to apply the Company’s significant accounting policies. Actual results and outcomes may differ from management’s estimates and assumptions. Service Revenues. The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. See Note C for further discussion of the revenue recognition accounting policy. 7 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Costs of Services. Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement staffing services consist of reimbursable expenses. Risk consulting and internal audit direct costs of services include professional staff payroll, contract labor payroll, payroll taxes and benefit costs, as well as reimbursable expenses. Advertising Costs. The Company expenses all advertising costs as incurred . Advertising costs were $ 11.8 million and $ 20.2 million for the three and six months ended June 30, 2021, respectively, and $ 6.7 million and $ 21.2 million for the three and six months ended June 30, 2020, respectively. (Income) Loss from Investments Held in Employee Deferred Compensation Trusts . Under the Company’s employee deferred compensation plans, employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trusts consistent with these directions. As realized and unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly. Changes in the Company’s deferred compensation obligations remain in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, costs of services. The value of the related investment trust assets also changes by an equal and offsetting amount, leaving no net cost to the Company. The Company’s income from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments. The following table presents the Company’s (income) loss from investments held in employee deferred compensation trusts (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Dividend income $ ( 2,556 ) $ ( 1,055 ) $ ( 2,848 ) $ ( 1,460 ) Realized and unrealized (gains) losses ( 25,254 ) ( 47,872 ) ( 36,949 ) ( 7,091 ) (Income) loss from investments held in employee deferred compensation trusts $ ( 27,810 ) $ ( 48,927 ) $ ( 39,797 ) $ ( 8,551 ) Comprehensive Income (Loss). Comprehensive income (loss) includes net income and certain other items that are recorded directly to stockholders’ equity. The Company’s only sources of other comprehensive income (loss) are foreign currency translation and foreign defined benefit plan adjustments. Fair Value of Financial Instruments. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market to measure fair value, summarized as follows: Level 1: observable inputs for identical assets or liabilities, such as quoted prices in active markets Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly Level 3: unobservable inputs in which there is little or no market data, which requires management’s best estimates and assumptions that market participants would use in pricing the asset or liability The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value because of their short-term nature. The Company holds mutual funds and money market funds to satisfy its obligations under its employee deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1). 8 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 The following table sets forth the composition of the underlying assets which comprise the Company’s deferred compensation trust assets (in thousands): Fair Value Measurements Using Balance at June 30, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market funds $ 62,623 $ 62,623 — — Mutual funds - bond 29,654 29,654 — — Mutual funds - stock 278,998 278,998 — — Mutual funds - blend 87,306 87,306 — — $ 458,581 $ 458,581 — — Fair Value Measurements Using Balance at December 31, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market funds $ 69,681 $ 69,681 — — Mutual funds - bond 27,282 27,282 — — Mutual funds - stock 234,667 234,667 — — Mutual funds - blend 75,004 75,004 — — $ 406,634 $ 406,634 — — Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring basis. The Company determines the fair value of these items using level 3 inputs. There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions. Allowance for Credit Losses. The Company is exposed to credit losses resulting from the inability of its customers to make required payments. The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, current business conditions and macro-economic trends. The Company considers risk characteristics of trade receivables based on asset type, size, term, and geographical locations to evaluate trade receivables on a collective basis. The Company applies credit loss estimates to these pooled receivables to determine expected credit losses. 9 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 The following table sets forth the activity in the allowance for credit losses from January 1, 2020, through June 30, 2021 (in thousands): Allowance for Credit Losses Balance as of January 1, 2020 $ 23,443 Charges to expense 4,200 Deductions ( 7,906 ) Other, including translation adjustments ( 120 ) Balance as of December 31, 2020 $ 19,617 Charges to expense 4,733 Deductions ( 3,111 ) Other, including translation adjustments ( 1,171 ) Balance as of June 30, 2021 $ 20,068 Internal-use Software. The Company capitalizes direct costs incurred in the development of internal-use software. Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets. All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the unaudited Condensed Consolidated Statements of Financial Position. Capitalized internal-use software development costs were $ 9.1 million and $ 19.5 million for the three and six months ended June 30, 2021, respectively, and $ 9.9 million and $ 22.9 million for the three and six months ended June 30, 2020, respectively. Goodwill and Intangible Assets . Goodwill and intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at the date of acquisition. Identifiable intangible assets are amortized over their lives, typically ranging from two to five years . Goodwill is not amortized, but is assessed at least annually for impairment, or on an as needed interim basis. Note B— New Accounting Pronouncements Recently Adopted Accounting Pronouncements None. Recently Issued Accounting Pronouncements Not Yet Adopted None. Note C— Revenue Recognition The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Service revenues as presented in the unaudited Condensed Consolidated Statements of Operations represent services rendered to customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues and equivalent amounts of reimbursable expenses are included in costs of services. Temporary and consultant staffing revenues. Temporary and consultant staffing revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s engagement professionals. The substantial majority of engagement professionals placed on assignment by the Company are the 10 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers. The Company records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers. Fees paid to Time Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services. Permanent placement staffing revenues. Permanent placement staffing revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment. The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90 -day guarantee period. These amounts are established based primarily on historical data and are recorded as liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates. Risk consulting and internal audit services revenues. Risk consulting and internal audit services are generally provided on a time-and-material basis or fixed-fee basis. Revenues earned under time-and-material arrangements and fixed-fee arrangements are recognized using a proportional performance method. Revenue is measured using cost incurred relative to total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost incurred represents work performed and thereby best depicts the transfer of control to the customer. Risk consulting and internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time. Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment for services provided to date. The Company periodically evaluates the need to provide for any losses on these projects, and losses are recognized when it is probable that a loss will be incurred. 11 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 The following table presents the Company’s service revenues disaggregated by line of business (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Accountemps $ 453,342 $ 331,542 $ 870,448 $ 821,426 OfficeTeam 263,192 136,299 483,665 376,278 Robert Half Technology 194,233 162,028 366,406 358,680 Robert Half Management Resources 210,550 165,031 393,878 376,908 Elimination of intersegment revenues (a) ( 143,036 ) ( 41,514 ) ( 246,840 ) ( 87,786 ) Temporary and consultant staffing 978,281 753,386 1,867,557 1,845,506 Permanent placement staffing 143,640 71,030 255,344 191,519 Risk consulting and internal audit services 458,660 283,910 856,060 577,992 Service revenues $ 1,580,581 $ 1,108,326 $ 2,978,961 $ 2,615,017 (a) Service revenues for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources include intersegment revenues, which represent revenues from services provided to the Company’s risk consulting and internal audit services segment in connection with the Company’s blended business solutions. Intersegment revenues for each line of business are aggregated and then eliminated as a single line. Payment terms in the Company’s contracts vary by the type of the Company’s customer and the services offered. The term between invoicing and when payment is due is not significant. Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of June 30, 2021, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $ 173.5 million. Of this amount, $ 162.9 million is expected to be recognized within the next twelve months . As of June 30, 2020, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $ 132.6 million. Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the unaudited Condensed Consolidated Statements of Financial Position. The following table sets forth the activity in contract liabilities from January 1, 2020, through June 30, 2021 (in thousands): Contract Liabilities Balance as of January 1, 2020 $ 12,948 Payments in advance of satisfaction of performance obligations 25,614 Revenue recognized ( 20,687 ) Other, including translation adjustments 377 Balance as of December 31, 2020 $ 18,252 Payments in advance of satisfaction of performance obligations 20,654 Revenue recognized ( 26,454 ) Other, including translation adjustments 730 Balance as of June 30, 2021 $ 13,182 12 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Note D— Other Current Assets Other current assets consisted of the following (in thousands): June 30, 2021 December 31, 2020 Prepaid expenses $ 94,445 $ 97,674 Other 49,451 49,841 Other current assets $ 143,896 $ 147,515 Note E— Property and Equipment, Net Property and equipment consisted of the following (in thousands): June 30, 2021 December 31, 2020 Computer hardware $ 158,546 $ 159,180 Computer software 253,399 250,585 Furniture and equipment 96,403 91,112 Leasehold improvements 163,948 164,807 Property and equipment, cost 672,296 665,684 Accumulated depreciation ( 573,928 ) ( 555,867 ) Property and equipment, net $ 98,368 $ 109,817 Note F— Leases The Company has operating leases for corporate and field offices, and certain equipment. The Company’s leases have remaining lease terms of 1 month to 9 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Operating lease expenses were $ 21.7 million and $ 43.2 million for the three and six months ended June 30, 2021, respectively, $ 20.0 million and $ 39.9 million for the three and six months ended June 30, 2020, respectively. Supplemental cash flow information related to leases consisted of the following (in thousands): Six Months Ended June 30, 2021 2020 Cash paid for operating lease liabilities $ 45,531 $ 41,539 Right-of-use assets obtained in exchange for new operating lease liabilities $ 8,467 $ 18,134 Supplemental balance sheet information related to leases consisted of the following: June 30, 2021 December 31, 2020 Weighted average remaining lease term for operating leases 4.3 years 4.5 years Weighted average discount rate for operating leases 2.5 % 2.6 % 13 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Future minimum lease payments under non-cancellable leases as of June 30, 2021, were as follows (in thousands): 2021 (excluding the six months ended June 30, 2021) $ 44,535 2022 77,929 2023 62,457 2024 49,823 2025 30,750 Thereafter 30,922 Less: Imputed interest ( 15,413 ) Present value of operating lease liabilities (a) $ 281,003 (a) Includes current portion of $ 79.5 million for operating leases. As of June 30, 2021, the Company had additional future minimum lease obligations totaling $ 3.8 million under operating leases that had not yet commenced. These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 6 years. Note G— Goodwill The following table sets forth the activity in goodwill from December 31, 2020, through June 30, 2021 (in thousands): Goodwill Temporary and consultant staffing Permanent placement staffing Risk consulting and internal audit services Total Balance as of December 31, 2020 $ 134,511 $ 26,180 $ 62,364 $ 223,055 Foreign currency translation adjustments 70 9 105 184 Balance as of June 30, 2021 $ 134,581 $ 26,189 $ 62,469 $ 223,239 The Company completed its annual assessment of the recoverability of goodwill during the quarter ended June 30, 2021, and determined there were no events or circumstances that would more likely than not reduce the fair value of the Company’s reporting units below their carrying value. Note H— Accrued Payroll and Benefit Costs Accrued payroll and benefit costs consisted of the following (in thousands): June 30, 2021 December 31, 2020 Payroll and benefits 387,972 311,169 Payroll taxes 56,358 67,712 Workers’ compensation 19,442 18,996 Accrued payroll and benefit costs $ 463,772 $ 397,877 The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $ 102.2 million of applicable payroll taxes as of June 30, 2021, of which $ 51.1 million is expected to be paid during the next 12 months and is included in accrued payroll and benefit costs and the remaining $ 51.1 million is included in other liabilities on the unaudited Condensed Consolidated Statements of Financial Position. Deferred payroll taxes payable was $ 102.2 million as of December 31, 2020. 14 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Note I— Employee Deferred Compensation Plan Obligations The Company provides various qualified defined contribution 401(k) plans covering eligible employees. The plans offer a savings feature with the Company matching employee contributions. Assets of this plan are held by an independent trustee for the sole benefit of participating employees. Nonqualified plans are provided for employees not eligible for the qualified plans. These plans include provisions for salary deferrals and Company matching and discretionary contributions. The asset value of the nonqualified plans was $ 458.6 million and $ 406.6 million as of June 30, 2021, and December 31, 2020, respectively. The Company holds these assets to satisfy the Company’s liabilities under its deferred compensation plans. The liability value for the nonqualified plans was $ 481.5 million and $ 435.1 million as of June 30, 2021, and December 31, 2020, respectively. The following table presents the Company’s compensation expense related to its qualified defined contribution plans and nonqualified plans (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Contribution expense $ 13,918 $ 6,730 $ 23,472 $ 12,301 Increase (decrease) in employee deferred compensation expense related to changes in the fair value of trust assets 27,810 48,927 39,797 8,551 $ 41,728 $ 55,657 $ 63,269 $ 20,852 The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material. Note J— Commitments and Contingencies On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which was subsequently amended on October 23, 2015. The complaint alleges that a putative class of current and former employees of the Company working in California since March 13, 2010 were denied compensation for the time they spent interviewing “for temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Private Attorney General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation. On April 6, 2018, Plaintiff Shari Dorff, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, County of Los Angeles. In addition to certain claims individual to Plaintiff Dorff, the complaint alleges that salaried recruiters based in California have been misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not 15 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation. The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial position or cash flows, litigation is subject to certain inherent uncertainties. Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred. In May 2021, the Company entered into an amendment (“Amendment No. 1”) to extend the maturity of its $ 100 million unsecured revolving credit facility (the “Credit Agreement”) to May 2024. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR, or an alternative base rate, plus an applicable margin. The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of June 30, 2021. There were no borrowings under the Credit Agreement as of June 30, 2021. Note K— Stockholders’ Equity Stock Repurchase Program. As of June 30, 2021, the Company is authorized to repurchase, from time to time, up to 8.4 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. The number and the cost of common stock shares repurchased during the six months ended June 30, 2021 and 2020, are reflected in the following table (in thousands): Six Months Ended June 30, 2021 2020 Common stock repurchased (in shares) 1,514 983 Common stock repurchased $ 124,210 $ 51,477 Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable statutory withholding taxes. The number and the cost of repurchases related to employee stock plans made during the six months ended June 30, 2021 and 2020, are reflected in the following table (in thousands): Six Months Ended June 30, 2021 2020 Repurchases related to employee stock plans (in shares) 251 280 Repurchases related to employee stock plans $ 19,345 $ 12,031 The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Repurchase activity for the three and six months ended June 30, 2021 and 2020, is presented in the unaudited Condensed Consolidated Statements of Stockholders’ Equity. Repurchases of shares and issuances of dividends are applied first to the extent of retained earnings and any remaining amounts are applied to additional paid-in capital. 16 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 Note L— Net Income Per Share The calculation of net income per share for the three and six months ended June 30, 2021 and 2020, is reflected in the following table (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net income $ 149,213 $ 46,196 $ 259,811 $ 136,111 Basic: Weighted average shares 110,861 112,865 111,141 113,026 Diluted: Weighted average shares 110,861 112,865 111,141 113,026 Dilutive effect of potential common shares 1,028 256 1,050 463 Diluted weighted average shares 111,889 113,121 112,191 113,489 Net income per share: Basic $ 1.35 $ .41 $ 2.34 $ 1.20 Diluted $ 1.33 $ .41 $ 2.32 $ 1.20 Note M— Business Segments The Company has three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Operating segments are defined as components of the Company for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting and internal audit services segment provides business and technology risk consulting and internal audit services. The accounting policies of the segments are set forth in Note A—“Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The Company evaluates performance based on income before net interest expense (income), intangible assets amortization expense, and income taxes. 17 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) June 30, 2021 The following table provides a reconciliation of service revenues and segment income by reportable segment to consolidated results for the three and six months ended June 30, 2021 and 2020 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Service revenues Temporary and consultant staffing $ 978,281 $ 753,386 $ 1,867,557 $ 1,845,506 Permanent placement staffing 143,640 71,030 255,344 191,519 Risk consulting and internal audit services 458,660 283,910 856,060 577,992 $ 1,580,581 $ 1,108,326 $ 2,978,961 $ 2,615,017 Segment income Temporary and consultant staffing $ 94,010 $ 28,390 $ 169,688 $ 122,154 Permanent placement staffing 30,599 ( 248 ) 48,234 10,663 Risk consulting and internal audit services 79,980 30,107 137,303 56,576 Combined segment income 204,589 58,249 355,225 189,393 Amortization of intangible assets 576 330 1,152 668 Interest expense (income), net 151 ( 105 ) 105 ( 1,062 ) Income before income taxes $ 203,862 $ 58,024 $ 353,968 $ 189,787 Service revenues presented above are shown net of eliminations of intersegment revenues. Intersegment revenues between temporary and consultant staffing segment and risk consulting and internal audit services segment were $ 143.0 million and $ 246.8 million for the three and six months ended June 30, 2021, respectively, and $ 41.5 million and $ 87.8 million for the three months and six months ended June 30, 2020, respectively. Revenue and direct costs related to the intersegment activity are reflected in the risk consulting and internal audit segment, including the costs of candidate payroll, fringe benefits and incremental recruiter compensation. Note N— Subsequent Events On August 3, 2021, the Company announced the following: Quarterly dividend per share $ .38 Declaration date August 3, 2021 Record date August 25, 2021 Payment date September 15, 2021 18