What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-04 · 232 added, 106 removed, 192 unchanged (64% of the section changed)

5 unchanged sentences

These risks and uncertainties include, but are not limited to, the following:

changes to or new interpretations of U.S.

or international tax regulations, the global financial and economic situation;

changes to or new interpretations of United States of America ("U.S.") or international tax regulations, the global financial and economic situation;

the duration and impact of the COVID-19 pandemic and efforts to mitigate its spread;

changes in levels of unemployment and other economic conditions in the United States or foreign countries where the Company does business, or in particular regions or industries;

changes in levels of unemployment and other economic conditions in the U.S.

or foreign countries where the Company does business, or in particular regions or industries;

reduction in the supply of candidates for contract employment or the Company’s ability to attract candidates;

29 unchanged sentences

and technology, which includes the former Robert Half ® Technology.

The Company reported another very strong quarter driven by a robust demand environment across the globe.

During the first quarter of 2022, service revenues were $1.81 billion, an increase of 29.8% from the prior year.

The Company reported another very strong quarter which reflects a robust global labor market and demand environment, although reported results were unfavorably impacted by currency exchange rates as the U.S.

dollar strengthened against the Euro and British pound.

During the first half of 2022, service revenues were $3.68 billion, an increase of 23.5% from the prior year.

Net income increased 32.4% to $344 million and diluted net income per share increased 34.5% to $3.12.

The Company's permanent placement talent solutions led the way, achieving year-over-year revenue growth of 67 percent.

Contract talent solutions and Protiviti also continued to post very strong results, growing year-over-year revenues by 30 percent and 19 percent, respectively.

The future of work continues to evolve as remote and hybrid work models gain wider acceptance, and the swift recovery across global labor markets has significantly increased the demand for the Company's services.

More than ever before, clients are willing to recruit from outside their geographic region to access deeper talent pools and lower price points than may be available locally.

Job candidates also benefit from the broader experiences and wider selection of jobs derived from out-of-market engagements.

This remote work environment increasingly plays to the Company's strengths and presents an unparalleled opportunity to capitalize on a structural shift in how companies source talent.

Protiviti reported double-digit revenue gains.

Internal audit and blended solutions with contract talent solutions reported the strongest growth.

The Company continues to see positive results in the collaboration between Protiviti and contract talent, which pairs Protiviti's world-class consulting talent with contract talent solutions's deep operational resources to provide a cost-effective solution to clients' skills and scalability needs.

Protiviti's pipeline continues to be very strong.

The Company’s talent solutions led the way, with permanent placement and contract talent solutions achieving year-over-year revenue growth of 51.5% and 24.3%, respectively.

Protiviti also performed strong, growing year-over-year revenues by 13.2%.

Remote and hybrid working models are here to stay and provide the Company with a significant opportunity to capitalize on the structure shift in how companies source talent.

This plays to the Company’s numerous strengths, including its global brand, office network, candidate database and AI-driven technologies.

Demand for the Company’s contract talent solutions, permanent placement talent solutions, and consulting talent is largely dependent upon general economic and labor trends both domestically and abroad.

The United States economic backdrop and labor trends for the first quarter of 2022 remained conducive to growth for the Company as the unemployment rate decreased from 3.9% in December 2021 to 3.6% at the end of the first quarter of 2022.

In the United States, the number of job openings exceeded the number of hires at the end of March 2022, creating competition for skilled talent that increases the Company's value to clients.

economic backdrop and labor trends for the first half of 2022 remained conducive to growth for the Company as the unemployment rate decreased from 3.9% in December 2021 to 3.6% at the end of the second quarter of 2022 .

In the U.S., job openings and quit rates remain elevated and only modestly below all-time highs.

labor market remains robust, with significant demand due to talent shortages across professional disciplines.

We monitor various economic indicators and business trends in all of the countries in which we operate to anticipate demand for the Company’s services.

We evaluate these trends to determine the appropriate level of investment, including personnel, which will best position the Company for success in the current and future global macroeconomic environment.

The Company monitors various economic indicators and business trends in all of the countries in which it operates to anticipate demand for the Company’s services.

These trends are evaluated to determine the appropriate level of investment, including personnel, which will best position the Company for success in the current and future global macroeconomic environment.

The Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth trends and productivity metrics.

We have limited visibility into future revenues not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements.

Accordingly, we typically assess headcount and other investments on at least a quarterly basis.

During the first quarter of 2022, the Company increased headcount across all segments when compared to prior year-end levels.

Visibility into future revenues is limited not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements.

Accordingly, the Company’s headcount and other investments are typically assessed on at least a quarterly basis.

During the first half of 2022, the Company increased headcount across all segments when compared to prior year-end levels.

Critical Accounting Policies and Estimates

The Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments and are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

There were no material changes to the Company’s critical accounting policies or estimates for the three months ended March 31, 2022.

There were no material changes to the Company’s critical accounting policies or estimates for the six months ended June 30, 2022.

Recent Accounting Pronouncements

3 unchanged sentences

contract talent solutions, permanent placement talent solutions, and Protiviti.

The contract talent solutions segment provides specialized engagement professionals in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields.

The permanent placement talent solutions segment provides full-time personnel in the accounting, finance, administrative and office, legal, and information technology fields.

The contract talent solutions and permanent placement talent solutions segments provide specialized engagement professionals and full-time personnel, respectively, for finance and accounting, technology, marketing and creative, legal, administrative and customer support roles.

The Protiviti segment provides business and technology risk consulting and internal audit services.

1 unchanged sentence

Because of the inherent difficulty in predicting economic trends, future demand for the Company’s services cannot be forecast with certainty.

The Company's global brand, office network, candidate database and advanced AI-driven technologies allows the Company to successfully recruit the necessary talent for its clients to thrive and grow amid the Great Reshuffle, as professionals continue to change jobs at record levels and companies across the globe struggle to navigate unprecedented employee turnover.

Global labor markets remain very robust.

In the U.S., this is seen in the elevated levels of job openings and quits rates, as well as low initial unemployment claims and a low unemployment rate.

As a result of this very strong demand environment, coupled with the Company's unique ability to successfully secure hard-to-find candidates for its clients, the Company continues to see its talent solutions results recovering at a faster pace than experienced in the past.

The Company’s talent solutions business has 316 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 65 offices in 23 states and 13 foreign countries.

Non-GAAP Financial Measures

The financial results of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the SEC.

The financial results of the Company are prepared in conformity with accounting principles generally accepted in the U.S.

(“GAAP”) and the rules of the SEC.

To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with the following non-GAAP measures:

18 unchanged sentences

The Company provides these measures because they are used by management to review its operational results.

Combined segment income is income before income taxes adjusted for interest income, net and amortization of intangible assets.

Combined segment income is income before income taxes adjusted for net interest (income) expense, net and amortization of intangible assets.

The Company provides combined segment income because it is how management evaluates segment performance.

5 unchanged sentences

“Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on the Company’s results of operations and financial condition.

Three Months Ended March 31, 2022 and 2021

The Company’s revenues were $1.81 billion for the three months ended March 31, 2022, increasing by 29.8% compared to $1.40 billion for the three months ended March 31, 2021.

Three Months Ended June 30, 2022 and 2021

The Company’s revenues were $1.86 billion for the three months ended June 30, 2022, increasing by 17.9% compared to $1.58 billion for the three months ended June 30, 2021.

Revenues from U.S.

operations increased 31.7% to $1.42 billion (78.0% of total revenue) for the three months ended March 31, 2022, compared to $1.07 billion (76.8% of total revenue) for the three months ended March 31, 2021.

Revenues from foreign operations increased 23.4% to $400 million (22.0% of total revenue) for the three months ended March 31, 2022, compared to $324 million (23.2% of total revenue) for the three months ended March 31, 2021.

The economic recovery in the United States and abroad contributed to the broad-based demand for the Company’s talent solutions and business consulting services.

operations increased 20.2% to $1.47 billion (78.8% of total revenue) for the three months ended June 30, 2022, compared to $1.22 billion (77.2% of total revenue) for the three months ended June 30, 2021.

Revenues from international operations increased 10.0% to $396 million (21.2% of total revenue) for the three months ended June 30, 2022, compared to $360 million (22.8% of total revenue) for the three months ended June 30, 2021.

Contributing factors for each reportable segment are discussed below in further detail.

Contract talent solutions revenues were $1.16 billion for the three months ended March 31, 2022, increasing by 30.0% compared to revenues of $889 million for the three months ended March 31, 2021.

Contract talent solutions revenues were $1.16 billion for the three months ended June 30, 2022, increasing by 19.2% compared to revenues of $978 million for the three months ended June 30, 2021.

Key drivers of contract talent solutions revenues include average hourly bill rates and the number of hours worked by the Company’s engagement professionals on client engagements.

On an as adjusted basis, contract talent solutions revenues in the first quarter of 2022 increased 31.0% compared to the first quarter of 2021, primarily due to an increase in the number of hours worked by the Company's engagement professionals and a 9.1% increase in weighted average bill rates, adjusted for changes in the mix of revenues by functional specialization, currency and country.

In the U.S., revenues in the first quarter of 2022 increased 33.4% on both an as reported basis and an as adjusted basis, compared to the first quarter of 2021.

For the Company’s international operations, revenues for the first quarter of 2022 increased 18.5% on an as reported basis and increased 23.5% on an as adjusted basis, compared to the first quarter of 2021.

Permanent placement talent solutions revenues were $187 million for the three months ended March 31, 2022, increasing by 67.2% compared to revenues of $112 million for the three months ended March 31, 2021.

On an as adjusted basis, contract talent solutions revenues increased 21.3% for the second quarter of 2022, compared to the second quarter of 2021, primarily due to an increase in the number of hours worked by the Company’s engagement professionals and an 8.2% increase in weighted average bill rates, adjusted for changes in the mix of revenues by functional specialization, currency and country.

In the U.S., revenues in the second quarter of 2022 increased 22.7% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2021.

For the Company’s international

operations, revenues for the second quarter of 2022 increased 7.0% on an as reported basis, and increased 16.6% on an as adjusted basis compared to the second quarter of 2021.

Permanent placement talent solutions revenues were $200 million for the three months ended June 30, 2022, increasing by 39.3% compared to revenues of $144 million for the three months ended June 30, 2021.

Key drivers of permanent placement talent solutions revenues consist of the number of candidate placements and average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues increased 68.8% for the first quarter of 2022, compared to the first quarter of 2021, driven primarily by an increase in the number of placements.

In the U.S., revenues for the first quarter of 2022 increased 78.3% on both an as reported basis and an as adjusted basis, compared to the first quarter of 2021.

For the Company’s international operations, revenues for the first quarter of 2022 increased 44.7% on an as reported basis, and increased 50.0% on an as adjusted basis, compared to the first quarter of 2021.

On an as adjusted basis, permanent placement talent solutions revenues increased 42.6% for the second quarter of 2022, compared to the second quarter of 2021, driven by an increase in number of placements.

In the U.S., revenues for the second quarter of 2022 increased 44.3% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2021.

For the Company’s international operations, revenues for the second quarter of 2022 increased 28.0% on an as reported basis and 39.0% on an as adjusted basis, compared to the second quarter of 2021.

Historically, demand for permanent placement talent solutions is even more sensitive to economic and labor market conditions than demand for contract talent solutions and this is expected to continue.

Protiviti revenues were $472 million for the three months ended March 31, 2022, increasing by 18.9% compared to revenues of $397 million for the three months ended March 31, 2021.

Protiviti revenues were $497 million for the three months ended June 30, 2022, increasing by 8.4% compared to revenues of $459 million for the three months ended June 30, 2021.

Key drivers of Protiviti revenues are the billable hours worked by consultants on client engagements and average hourly bill rates.

On an as adjusted basis, Protiviti revenues increased 20.0% for the first quarter of 2022, compared to the first quarter of 2021, due primarily to an increase in billable hours.

In the U.S., revenues in the first quarter of 2022 increased 17.0% on both an as reported basis and an as adjusted basis, compared to the first quarter of 2021.

For the Company’s international operations, revenues in the first quarter of 2022 increased 26.2% on an as reported basis, and increased 32.3% on an as adjusted basis, compared to the first quarter of 2021.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the three months ended March 31, 2022, is presented in the following table:

On an as adjusted basis, Protiviti revenues increased 10.8% for the second quarter of 2022, compared to the second quarter of 2021, due primarily to an increase in billable hours.

In the U.S., revenues in the second quarter of 2022 increased 8.3% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2021.

For the Company’s international operations, revenues for the second quarter of 2022 increased 8.6% on an as reported basis and 20.6% on an as adjusted basis, compared to the second quarter of 2021.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the three months ended June 30, 2022, is presented in the following table:

Global United States International

14 unchanged sentences

Gross Margin.

The Company’s gross margin dollars were $772 million for the three months ended March 31, 2022, increasing by 37.4% compared to $562 million for the three months ended March 31, 2021.

The Company’s gross margin dollars were $816 million for the three months ended June 30, 2022, increasing by 22.7% compared to $665 million for the three months ended June 30, 2021.

Contributing factors for each reportable segment are discussed below in further detail.

4 unchanged sentences

and iii) conversion revenues, which are earned when a contract talent solutions position converts to a permanent position with the Company’s client.

Gross margin dollars for contract talent solutions were $462 million for the three months ended March 31, 2022, increasing 33.9% compared to $345 million for the three months ended March 31, 2021.

As a percentage of revenues, gross margin for contract talent solutions was 40.0% for the three months ended March 31, 2022, up from 38.8% for the three months ended March 31, 2021.

Gross margin dollars for contract talent solutions were $465 million for the three months ended June 30, 2022, increasing 19.8% compared to $388 million for the three months ended June 30, 2021.

As a percentage of revenues, gross margin for contract talent solutions was 39.9% in the second quarter of 2022, up from 39.7% in the second quarter of 2021.

Gross margin dollars for permanent placement talent solutions represent revenues less reimbursable expenses.

Gross margin dollars for permanent placement talent solutions were $200 million for the three months ended June 30, 2022, increasing 39.2% from $143 million for the three months ended June 30, 2021.

Because reimbursable expenses for permanent placement talent solutions are de minimis, gross margin dollars are substantially explained by revenues previously discussed.

Gross margin dollars for Protiviti represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes and benefit costs and reimbursable expenses.

The primary drivers of Protiviti’s gross margin are:

i) the relative composition and number of professional staff and their respective pay and bill rates;

and ii) staff utilization, which is the relationship of time spent on client engagements in proportion to the total time available for Protiviti’s staff.

Gross margin dollars for Protiviti were $151 million for the three months ended June 30, 2022, increasing 13.3% compared to $133 million for the three months ended June 30, 2021.

As a percentage of revenues, reported gross margin for Protiviti in the second quarter of 2022 was 30.4%, up from 29.1% in the second quarter of 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 28.1% in the second quarter of 2022, down from 30.0% in the second quarter of 2021.

The year-over-year decrease in adjusted gross margin percentage was due primarily to higher staff resource costs including continued expansion of headcount.

Selling, General and Administrative Expenses.

The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs.

The Company’s selling, general and administrative expenses were $509 million for the three months ended June 30, 2022, increasing 4.4% from $488 million for the three months ended June 30, 2021.

As a percentage of revenues, the Company’s reported selling, general and administrative expenses were 27.3% in the second quarter of 2022, down from 30.9% in the second quarter of 2021.

As a percentage of revenues, the Company’s adjusted selling, general and administrative expenses were 30.3% in the second quarter of 2022, up from 29.4% in the second quarter of 2021.

Contributing factors for each reportable segment are discussed below in further detail.

Selling, general and administrative expenses for contract talent solutions were $284 million for the three months ended June 30, 2022, decreasing 9.8% from $315 million for the three months ended June 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 24.4% in the second quarter of 2022, down from 32.2% in the second quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.4% in the second quarter of 2022, down from 30.1% in the second quarter of 2021 due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $156 million for the three months ended June 30, 2022, increasing by 35.0% compared to $115 million for the three months ended June 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 77.9% in the second quarter of 2022, down from 80.4% in the second quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 81.4% in the second quarter of 2022, up from 78.6% in the second quarter of 2021 due primarily to higher staff compensation costs.

Selling, general and administrative expenses for Protiviti were $69 million for the three months ended June 30, 2022, increasing by 20.7% compared to $58 million for the three months ended June 30, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 14.0% in the second quarter of 2022, up from 12.5% in the second quarter of 2021 due primarily to an increase in variable overhead costs.

A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the three months ended June 30, 2022 and 2021 is presented in the following table (in thousands):

Three Months Ended June 30, Relationships

2022 2021 2022 2021 2022 2021

Reported Adjustments Adjusted (1) Reported Adjustments Adjusted (1) Reported Adjusted

SERVICE REVENUES:

Finance and accounting $ 810,910 $ — $ 810,910 $ 663,892 $ — $ 663,892 43.5 % 41.9 % 43.5 % 41.9 %

Administrative and customer support 274,141 — 274,141 263,192 — 263,192 14.7 % 16.7 % 14.7 % 16.7 %

Technology 218,190 — 218,190 194,233 — 194,233 11.7 % 12.3 % 11.7 % 12.3 %

Elimination of intersegment

(137,548) — (137,548) (143,036) — (143,036) (7.3 %) (9.0 %) (7.3 %) (9.0 %)

Contract talent solutions 1,165,693 — 1,165,693 978,281 — 978,281 62.6 % 61.9 % 62.6 % 61.9 %

Permanent placement talent solutions 200,096 — 200,096 143,640 — 143,640 10.7 % 9.1 % 10.7 % 9.1 %

Protiviti 497,038 — 497,038 458,660 — 458,660 26.7 % 29.0 % 26.7 % 29.0 %

Total $ 1,862,827 $ — $ 1,862,827 $ 1,580,581 $ — $ 1,580,581 100.0 % 100.0 % 100.0 % 100.0 %

GROSS MARGIN:

Contract talent solutions $ 464,853 $ — $ 464,853 $ 388,070 $ — $ 388,070 39.9 % 39.7 % 39.9 % 39.7 %

Permanent placement talent solutions 199,664 — 199,664 143,454 — 143,454 99.8 % 99.9 % 99.8 % 99.9 %

Protiviti 151,030 (11,413) 139,617 133,348 4,153 137,501 30.4 % 29.1 % 28.1 % 30.0 %

Total $ 815,547 $ (11,413) $ 804,134 $ 664,872 $ 4,153 $ 669,025 43.8 % 42.1 % 43.2 % 42.3 %

SELLING GENERAL AND

ADMINISTRATIVE EXPENSE:

Contract talent solutions $ 284,090 $ 47,196 $ 331,286 $ 315,114 $ (21,054) $ 294,060 24.4 % 32.2 % 28.4 % 30.1 %

Permanent placement talent solutions 155,900 7,013 162,913 115,458 (2,603) 112,855 77.9 % 80.4 % 81.4 % 78.6 %

Protiviti 69,404 — 69,404 57,521 — 57,521 14.0 % 12.5 % 14.0 % 12.5 %

Total $ 509,394 $ 54,209 $ 563,603 $ 488,093 $ (23,657) $ 464,436 27.3 % 30.9 % 30.3 % 29.4 %

OPERATING/SEGMENT INCOME:

Contract talent solutions $ 180,763 $ (47,196) $ 133,567 $ 72,956 $ 21,054 $ 94,010 15.5 % 7.5 % 11.5 % 9.6 %

Permanent placement talent solutions 43,764 (7,013) 36,751 27,996 2,603 30,599 21.9 % 19.5 % 18.4 % 21.3 %

Protiviti 81,626 (11,413) 70,213 75,827 4,153 79,980 16.4 % 16.5 % 14.1 % 17.4 %

Total $ 306,153 $ (65,622) $ 240,531 $ 176,779 $ 27,810 $ 204,589 16.4 % 11.2 % 12.9 % 12.9 %

(Income) loss from investments held in

employee deferred compensation trusts

65,622 (65,622) — (27,810) 27,810 — 3.5 % (1.7 %) 0.0 % 0.0 %

Amortization of intangible assets 416 — 416 576 — 576 0.0 % 0.0 % 0.0 % 0.0 %

Interest (income) expense, net (718) (718) 151 — 151 0.0 % 0.0 % 0.0 % 0.0 %

Income before income taxes $ 240,833 $ — $ 240,833 $ 203,862 $ — $ 203,862 12.9 % 12.9 % 12.9 % 12.9 %

(1) Changes in the Company’s deferred compensation obligations are included in selling, general and administrative expense or, in the case of Protiviti, costs of services, while the related investment (income) loss is presented separately.

The non-GAAP financial measures shown in the table above are adjusted to reclassify investment (income) loss from investments held in employee deferred compensation trusts to the same line item, which includes the corresponding change in obligation.

These adjustments have no impact to income before income taxes.

(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 employee deferred compensation obligation to employees changes accordingly.

Changes in the Company’s deferred compensation obligations noted above remain in selling, general and administrative, or in the case of Protiviti, costs of services.

The value of the related investment trust assets also changes by the equal and offsetting amount, leaving no net costs to the Company.

The Company’s (income) loss from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

The Company’s (income) loss from investments held in employee deferred compensation trusts was a loss of $66 million and income of $28 million for the three months ended June 30, 2022 and 2021, respectively.

The loss from trust investments was due to negative market returns in the second quarter of 2022.

Income Before Income Taxes and Segment Income.

The Company’s total income before income taxes was $241 million, or 12.9% of revenues, for the three months ended June 30, 2022, up from $204 million or 12.9% of revenues, for the three months ended June 30, 2021.

Combined segment income was $241 million, or 12.9% of revenues, for the three months ended June 30, 2022, up from $205 million, or 12.9% of revenues, for the three months ended June 30, 2021.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended

Income before income taxes $ 240,833 $ 203,862

Interest (income) expense, net (718) 151

Amortization of intangible assets 416 576

Combined segment income $ 240,531 $ 204,589

Contract talent solutions segment income was $134 million, or 11.5% of applicable revenues, for the three months ended June 30, 2022, up from $94 million, or 9.6% of applicable revenues, for the three months ended June 30, 2021.

Permanent placement talent solutions segment income was $37 million, or 18.4% of applicable revenues, for the three months ended June 30, 2022, up from $31 million, or 21.3% of applicable revenues, for the three months ended June 30, 2021.

Protiviti segment income was $70 million, or 14.1% of applicable revenues, for the three months ended June 30, 2022, down from $80 million, or 17.4% of applicable revenues, for the three months ended June 30, 2021.

Provision for income taxes .

The provision for income taxes was 27.0% and 26.8% for the three months ended June 30, 2022 and 2021, respectively.

Six Months Ended June 30, 2022 and 2021

The Company’s revenues were $3.68 billion for the six months ended June 30, 2022, increasing by 23.5% compared to $2.98 billion for the six months ended June 30, 2021.

Revenues from U.S.

operations increased 25.6% to $2.88 billion (78.4% of total revenue) for the six months ended June 30, 2022, compared to $2.30 billion (77.1% of total revenue) for the six months ended June 30, 2021.

Revenues from international operations increased 16.4% to $795 million (21.6% of total revenue) for the six months ended June 30, 2022, compared to $683 million (22.9% of total revenue) for the six months ended June 30, 2021.

Contributing factors for each reportable segment are discussed below in further detail.

Contract talent solutions revenues were $2.32 billion for the six months ended June 30, 2022, increasing by 24.3% compared to revenues of $1.87 billion for the six months ended June 30, 2021.

Key drivers of contract talent solutions revenues include average hourly bill rates and the number of hours worked by the Company’s engagement professionals on client engagements.

On an as adjusted basis, contract talent solutions revenues in the first half of 2022 increased 25.9% compared to the first half of 2021, primarily due to an increase in the number of hours worked by the Company’s engagement professionals and an 8.7% increase in weighted average bill rates, adjusted for changes in the mix of revenues by functional specialization, currency and country.

In the U.S., revenues in the first half of 2022 increased 27.8% on both an as reported basis and an as adjusted basis, compared to the first half of 2021.

For the Company’s international operations, revenues for the first half of 2022 increased 12.5% on an as reported basis and increased 19.9% on an as adjusted basis, compared to the first half of 2021.

Permanent placement talent solutions revenues were $387 million for the six months ended June 30, 2022, increasing by 51.5% compared to revenues of $255 million for the six months ended June 30, 2021.

Key drivers of permanent placement talent solutions revenues consist of the number of candidate placements and average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues increased 54.1% for the first half of 2022, compared to the first half of 2021, driven primarily by an increase in the number of placements.

In the U.S., revenues for the first half of 2022 increased 58.8% on both an as reported basis and an as adjusted basis, compared to the first half of 2021.

For the Company’s international operations, revenues for the first half of 2022 increased 35.6% on an as reported basis, and increased 44.0% on an as adjusted basis, compared to the first half of 2021.

Protiviti revenues were $969 million for the six months ended June 30, 2022, increasing by 13.2% compared to revenues of $856 million for the six months ended June 30, 2021.

Key drivers of Protiviti revenues are the billable hours worked by consultants on client engagements and average hourly bill rates.

On an as adjusted basis, Protiviti revenues increased 15.1% for the first half of 2022, compared to the first half of 2021, due primarily to an increase in billable hours.

In the U.S., revenues in the first half of 2022 increased 12.3% on both an as reported basis and an as adjusted basis, compared to the first half of 2021.

For the Company’s international operations, revenues in the first half of 2022 increased 16.8% on an as reported basis, and increased 26.0% on an as adjusted basis, compared to the first half of 2021.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the six months ended June 30, 2022, is presented in the following table:

Global United States International

Contract talent solutions

As Reported 24.3 % 27.8 % 12.5 %

Billing Days Impact -0.1 % 0.0 % -0.1 %

Currency Impact 1.7 % ― 7.5 %

As Adjusted 25.9 % 27.8 % 19.9 %

Permanent placement talent solutions

As Reported 51.5 % 58.8 % 35.6 %

Billing Days Impact -0.1 % 0.0 % -0.1 %

Currency Impact 2.7 % ― 8.5 %

As Adjusted 54.1 % 58.8 % 44.0 %

As Reported 13.2 % 12.3 % 16.8 %

Billing Days Impact -0.1 % 0.0 % -0.1 %

Currency Impact 2.0 % ― 9.3 %

As Adjusted 15.1 % 12.3 % 26.0 %

Gross Margin.

The Company’s gross margin dollars were $1.59 billion for the six months ended June 30, 2022, increasing by 29.4% compared to $1.23 billion for the six months ended June 30, 2021.

Contributing factors for each reportable segment are discussed below in further detail.

Gross margin dollars for contract talent solutions represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses.

The key drivers of gross margin are:

i) pay-bill spreads, which represent the differential between wages paid to engagement professionals and amounts billed to clients;

ii) fringe costs, which are primarily composed of payroll taxes and benefit costs;

and iii) conversion revenues, which are earned when a contract talent solutions position converts to a permanent position with the Company’s client.

Gross margin dollars for contract talent solutions were $927 million for the six months ended June 30, 2022, increasing 26.4% compared to $733 million for the six months ended June 30, 2021.

As a percentage of revenues, gross margin for contract talent solutions was 39.9% for the six months ended June 30, 2022, up from 39.2% for the six months ended June 30, 2021.

This year-over-year improvement in gross margin percentage was attributable to expanding pay-bill spreads and higher conversion revenues.

Gross margin dollars for permanent placement talent solutions represent revenues less reimbursable expenses.

Gross margin dollars for permanent placement talent solutions were $186 million for the three months ended March 31, 2022, increasing 67.2% from $111 million for the three months ended March 31, 2021.

Gross margin dollars for permanent placement talent solutions were $386 million for the six months ended June 30, 2022, increasing 51.4% from $255 million for the six months ended June 30, 2021.

Because reimbursable expenses for permanent placement talent solutions are de minimis, gross margin dollars are substantially explained by revenues previously discussed.

1 unchanged sentence

The primary drivers of Protiviti’s gross margin are:

i) the relative composition of and number of professional staff and their respective pay and bill rates;

i) the relative composition and number of professional staff and their respective pay and bill rates;

and ii) staff utilization, which is the relationship of time spent on client engagements in proportion to the total time available for Protiviti’s staff.

Gross margin dollars for Protiviti were $124 million for the three months ended March 31, 2022, increasing 17.3% compared to $105 million for the three months ended March 31, 2021.

As a percentage of revenues, reported gross margin for Protiviti in the first quarter of 2022 was 26.2%, down from 26.5% in the first quarter of 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 25.3% the first quarter of 2022, down from 26.9% in the first quarter of 2021.

Gross margin dollars for Protiviti were $275 million for the six months ended June 30, 2022, increasing 15.1% compared to $239 million for the six months ended June 30, 2021.

As a percentage of revenues, reported gross margin for Protiviti in the first half of 2022 was 28.3%, up from 27.9% in the first half of 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 26.8% the first half of 2022, down from 28.6% in the first half of 2021.

The year-over-year decrease in adjusted gross margin percentage was due to lower staff utilization rates and a significant increase in headcount.

1 unchanged sentence

The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs.

The Company’s selling, general and administrative expenses were $514 million for the three months ended March 31, 2022, increasing 21.5% from $423 million for the three months ended March 31, 2021.

As a percentage of revenues, the Company’s reported selling, general and administrative expenses were 28.3% for the first quarter of 2022, down from 30.3% the first quarter of 2021.

As a percentage of revenues, the Company’s adjusted selling, general and administrative expenses were 29.8% in the first quarter of 2022, up from 29.5% in the first quarter of 2021, due primarily to the higher mix of permanent placement talent solutions revenues.

The Company’s selling, general and administrative expenses were $1.02 billion for the six months ended June 30, 2022, increasing 12.3% from $911 million for the six months ended June 30, 2021.

As a percentage of revenues, the Company’s reported selling, general and administrative expenses were 27.8% for the first half of 2022, down from 30.6% the first half of 2021.

As a percentage of revenues, the Company’s adjusted selling, general and administrative expenses were 30.0% in the first half of 2022, up from 29.4% in the first half of 2021, due primarily to the higher mix of permanent placement talent solutions revenues.

Contributing factors for each reportable segment are discussed below in further detail.

Selling, general and administrative expenses for contract talent solutions were $305 million for the three months ended March 31, 2022, increasing 9.6% from $279 million for the three months ended March 31, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 26.4% in the first quarter of 2022, down from 31.3% in the first quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.4% in the first quarter of 2022, down from 30.3% in the first quarter of 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $146 million for the three months ended March 31, 2022, increasing by 54.2% compared to $95 million for the three months ended March 31, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 78.3% in the first quarter of 2022, down from 84.9% in the first quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 79.8% in the first quarter of 2022, down from 83.9% in the first quarter of 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for Protiviti were $63 million for the three months ended March 31, 2022, increasing by 26.1% compared to $50 million for the three months ended March 31, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 13.3% in the first quarter of 2022, up from 12.5% in the first quarter of 2021, due primarily to an increase in variable overhead costs.

A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the three months ended March 31, 2022 and 2021 is presented in the following table (in thousands):

Three Months Ended March 31, Relationships

Selling, general and administrative expenses for contract talent solutions were $589 million for the six months ended June 30, 2022, decreasing 0.7% from $594 million for the six months ended June 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 25.4% in the first half of 2022, down from 31.8% in the first half of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.4% in the first half of 2022, down from 30.2% in the first half of 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $302 million for the six months ended June 30, 2022, increasing by 43.6% compared to $210 million for the six months ended June 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 78.1% in the first half of 2022, down from 82.4% in the first half of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 80.7% in the first half of 2022, down from 81.0% in the first half of 2021.

Selling, general and administrative expenses for Protiviti were $132 million for the six months ended June 30, 2022, increasing by 23.2% compared to $107 million for the six months ended June 30, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 13.6% in the first half of 2022, up from 12.5% in the first half of 2021, due primarily to an increase in variable overhead costs.

A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the six months ended June 30, 2022 and 2021 is presented in the following table (in thousands):

Six Months Ended June 30, Relationships

2022 2021 2022 2021 2022 2021

30 unchanged sentences

Amortization of intangible assets 833 — 833 1,152 — 1,152 0.0 % 0.0 % 0.0 % 0.0 %

Interest income, net (166) (166) (45) — (45) 0.0 % 0.0 % 0.0 % 0.0 %

Interest (income) expense, net (884) (884) 105 — 105 0.0 % 0.0 % 0.0 % 0.0 %

Income before income taxes $ 468,233 $ — $ 468,233 $ 353,968 $ — $ 353,968 12.7 % 11.9 % 12.7 % 11.9 %

8 unchanged sentences

The Company’s (income) loss from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

The Company’s (income) loss from investments held in employee deferred compensation trusts was a loss of $30 million for the three months ended March 31, 2022, compared to income of $12 million for the three months ended March 31, 2021.

The loss from trust investments was due to negative market returns in the first quarter of 2022.

The Company’s (income) loss from investments held in employee deferred compensation trusts was a loss of $96 million for the six months ended June 30, 2022, compared to income of $40 million for the six months ended June 30, 2021.

The loss from trust investments was due to negative market returns in the first half of 2022.

Income Before Income Taxes and Segment Income.

The Company’s total income before income taxes was $227 million, or 12.5% of revenues, for the three months ended March 31, 2022, up from $150 million or 10.7% of revenues, for the three months ended March 31, 2021.

Combined segment income was $228 million, or 12.5% of revenues, for the three months ended March 31, 2022, up from $151 million, or 10.8% of revenues, for the three months ended March 31, 2021.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended

The Company’s total income before income taxes was $468 million, or 12.7% of revenues, for the six months ended June 30, 2022, up from $354 million or 11.9% of revenues, for the six months ended June 30, 2021.

Combined segment income was $468 million, or 12.7% of revenues, for the six months ended June 30, 2022, up from $355 million, or 11.9% of revenues, for the six months ended June 30, 2021.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended

Income before income taxes $ 468,233 $ 353,968

Interest income, net (166) (45)

Interest (income) expense, net (884) 105

Amortization of intangible assets 833 1,152

Combined segment income $ 468,182 $ 355,225

Contract talent solutions segment income was $133 million, or 11.5% of applicable revenues for the three months ended March 31, 2022, up from $76 million, or 8.5% of applicable revenues for the three months ended March 31, 2021.

Permanent placement talent solutions segment income was $37 million, or 20.0% of applicable revenues in the first quarter of 2022, up from $18 million, or 15.9% of applicable revenues, in the first quarter of 2021.

Protiviti segment income was $57 million, or 12.1% of applicable revenues in the first quarter of 2022, compared to segment income of $57 million, or 14.4% of applicable revenues, in the first quarter of 2021.

Contract talent solutions segment income was $267 million, or 11.5% of applicable revenues for the six months ended June 30, 2022, up from $170 million, or 9.1% of applicable revenues for the six months ended June 30, 2021.

Permanent placement talent solutions segment income was $74 million, or 19.1% of applicable revenues in the first half of 2022, up from $48 million, or 18.9% of applicable revenues, in the first half of 2021.

Protiviti segment income was $127 million, or 13.1% of applicable revenues in the first half of 2022, compared to segment income of $137 million, or 16.0% of applicable revenues, in the first half of 2021.

Provision for income taxes .

The provision for income taxes was 26.0% and 26.3% for the three months ended March 31, 2022 and 2021, respectively.

The provision for income taxes was 26.5% and 26.6% for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

The change in the Company’s liquidity during the three months ended March 31, 2022 and 2021, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, investment in employee deferred compensation trusts, net of redemptions from employee deferred compensation trusts, repurchases of common stock, and payment of dividends.

Cash and cash equivalents were $550 million and $498 million at March 31, 2022 and 2021, respectively.

Operating activities provided cash flows of $69 million during the three months ended March 31, 2022, offset by $27 million and $110 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided cash flows of $68 million during the three months ended March 31, 2021, offset by $15 million and $124 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the three months ended March 31, 2022 was composed of net income of $168 million adjusted upward for non-cash items of $72 million, offset by net cash used in changes in working capital of $171 million.

Net cash provided by operating activities for the three months ended March 31, 2021 was composed of net income of $111 million adjusted upward for non-cash items of $33 million, offset by net cash used in changes in working capital of $76 million.

Investing activities—Cash used in investing activities for the three months ended March 31, 2022 was $27 million.

This was composed of capital expenditures of $15 million and investments in employee deferred compensation trusts of $34 million, partially offset by proceeds from employee deferred compensation trusts redemptions of $22 million.

Cash used in investing activities for the three months ended March 31, 2021 was $15 million.

The change in the Company’s liquidity during the six months ended June 30, 2022 and 2021, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, investment in employee deferred compensation trusts, net of redemptions from employee deferred compensation trusts, repurchases of common stock, and payment of dividends.

Cash and cash equivalents were $591 million and $543 million at June 30, 2022 and 2021, respectively.

Operating activities provided cash flows of $302 million during the six months ended June 30, 2022, offset by $55 million and $257 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided cash flows of $233 million during the six months ended June 30, 2021, offset by $31 million and $232 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the six months ended June 30, 2022, was composed of net income of $344 million adjusted upward for non-cash items of $176 million, offset by net cash used in changes in working capital of $218 million.

Net cash provided by operating activities for the six months ended June 30, 2021, was composed of net income of $260 million adjusted upward for non-cash items of $32 million, offset by net cash used in changes in working capital of $59 million.

Investing activities—Cash used in investing activities for the six months ended June 30, 2022, was $55 million.

This was composed of capital expenditures of $35 million and investments in employee deferred compensation trusts of $45 million,

partially offset by proceeds from employee deferred compensation trusts redemptions of $25 million.

Cash used in investing activities for the six months ended June 30, 2021, was $31 million.

This was composed of capital expenditures of $16 million and investments in employee deferred compensation trusts of $42 million, partially offset by proceeds from employee deferred compensation trusts redemptions of $27 million.

Capital expenditures, including $9.5 million for cloud computing arrangements, for the three months ended March 31, 2022, totaled $24.5 million, approximately 81% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

Capital expenditures, including $20 million for cloud computing arrangements, for the six months ended June 30, 2022, totaled $55 million, approximately 82.5% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

Capital expenditures for cloud computing arrangements are included in cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows.

1 unchanged sentence

The Company currently expects that 2022 capital expenditures will range from $95 million to $105 million, of which $75 million to $85 million relates to software initiatives and technology infrastructure, including capitalized costs related to implementation of cloud computing arrangements.

Financing activities—Cash used in financing activities for the three months ended March 31, 2022 was $110 million.

Financing activities—Cash used in financing activities for the six months ended June 30, 2022, was $257 million.

This included repurchases of $161 million in common stock and $96 million in dividends paid to stockholders.

Cash used in financing activities for the three months ended March 31, 2021 was $124 million.

Cash used in financing activities for the six months ended June 30, 2021, was $232 million.

This included repurchases of $146 million in common stock and $86 million in dividends paid to stockholders.

As of March 31, 2022, the Company is authorized to repurchase, from time to time, up to 6.7 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the three months ended March 31, 2022 and 2021, the Company repurchased 0.5 million shares, at a cost of $55 million, and 0.8 million shares, at a cost of $61 million, on the open market, respectively.

As of June 30, 2022, the Company is authorized to repurchase, from time to time, up to 5.8 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the six months ended June 30, 2022 and 2021, the Company repurchased 1.4 million shares, at a cost of $133 million, and 1.5 million shares, at a cost of $124 million, on the open market, respectively.

Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of exercise price and applicable statutory withholding taxes.

During the three months ended March 31, 2022 and 2021, such repurchases totaled 0.1 million shares, at a cost of $7 million, and 0.3 million shares, at a cost of $19 million, respectively.

During the six months ended June 30, 2022 and 2021, such repurchases totaled 0.3 million shares, at a cost of $33 million, and 0.3 million shares, at a cost of $19 million, respectively.

Repurchases of shares have been funded with cash generated from operations.

The Company’s working capital at March 31, 2022 included $550 million in cash and cash equivalents and $1.07 billion in accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company’s working capital at June 30, 2022, included $591 million in cash and cash equivalents and $1.09 billion in accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company expects that internally generated cash will be sufficient to support the working capital needs of the Company, the Company’s fixed payments, dividends, and other obligations on both a short-term and long-term basis.

3 unchanged sentences

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 March 31, 2022.

There were no borrowings under the Credit Agreement as of March 31, 2022.

On May 3, 2022, the Company announced a quarterly dividend of $.43 per share to be paid to all shareholders of record as of May 25, 2022.

The dividend will be paid on June 15, 2022.

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of June 30, 2022.

There were no borrowings under the Credit Agreement as of June 30, 2022.

On August 2, 2022, the Company announced a quarterly dividend of $0.43 per share to be paid to all shareholders of record as of August 25, 2022.

The dividend will be paid on September 15, 2022.

Material Cash Requirements from Contractual Obligations

As of March 31, 2022, the Company reported current and long-term operating lease liabilities of $86.3 million and $176.4 million, respectively.

These balances consist of the minimum rental commitments for April 2022 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancelable lease contracts executed as of March 31, 2022.

As of June 30, 2022, the Company reported current and long-term operating lease liabilities of $84 million and $166 million, respectively.

These balances consist of the minimum rental commitments for July 2022 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancellable lease contracts executed as of June 30, 2022.

The majority of these leases are for real estate.

4 unchanged sentences

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

There have been no material changes to the Company's contractual purchase obligations during the first quarter of 2022.

There have been no material changes to the Company’s contractual purchase obligations during the first half of 2022.

Employee Deferred Compensation Plan.

As of March 31, 2022, the Company reported deferred compensation plan obligations of $495.3 million in its accompanying Condensed Consolidated Statements of Financial Position.

As of June 30, 2022, the Company reported deferred compensation plan obligations of $440 million in its accompanying Condensed Consolidated Statements of Financial Position.

The balances are due to employees based upon elections they make at the time of deferring their funds.

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis