What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-08-03 · 268 added, 212 removed, 212 unchanged (69% of the section changed)

40 unchanged sentences

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

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.

The Company reported another quarter of year-over-year growth, over and above very strong growth reported in the prior year.

Global labor demand remains high, notwithstanding the increasingly uncertain economic outlook, although the sales cycle has lengthened.

Reported results were once again 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.

During the first three quarters of 2022, service revenues were $5.51 billion, an increase of 17.5% from the prior year.

Net income increased 18.5% to $510 million and diluted net income per share increased 20.8% to $4.65.

The Company’s talent solutions led the way, with permanent placement and contract talent solutions achieving year-over-year revenue growth of 38.2% and 18.4%, 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.

Protiviti also performed well, growing year-over-year revenues by 9.1%, and reached new all-time highs.

Remote and hybrid working models are expected to remain.

This structural shift in how companies source talent 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.

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.

economic backdrop and labor trends for the first three quarters of 2022 remained conducive to growth for the Company as the unemployment rate decreased from 3.9% in December 2021 to 3.5% at the end of the third quarter of 2022 .

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

Significant demand due to talent shortages persists across professional disciplines in the U.S., although general economic uncertainty is causing a lengthening of sales cycles as clients take more time to fill roles.

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.

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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.

During the first three quarters 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 six months ended June 30, 2022.

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

Recent Accounting Pronouncements

14 unchanged sentences

adjusted gross margin;

adjusted selling, general and administrative expense;

adjusted selling, general and administrative expenses;

segment income and combined segment income.

1 unchanged sentence

The Company provides “as adjusted” revenue growth calculations to remove the impact of these items.

These calculations show the year-over-year revenue growth rates for the Company’s functional specializations and segments on both a reported basis and also on an as adjusted basis for global, U.S., and international operations.

These calculations show the year-over-year revenue growth rates for the Company’s functional specializations and segments on both a reported basis and also on an as adjusted basis for global, U.S.

and international operations.

The Company has provided this data because it focuses on the Company’s revenue growth rates attributable to operating activities and aids in evaluating revenue trends over time.

7 unchanged sentences

adjusted gross margin;

adjusted selling, general and administrative expense;

adjusted selling, general and administrative expenses;

and segment income include gains and losses on investments held to fund the Company’s obligations under employee deferred compensation plans.

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 net interest (income) expense, net and amortization of intangible assets.

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

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

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“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 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.

Three Months Ended September 30, 2022 and 2021

Service Revenues.

The Company’s revenues were $1.83 billion for the three months ended September 30, 2022, increasing by 7.1% compared to $1.71 billion for the three months ended September 30, 2021.

Revenues from U.S.

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.

operations increased 10.0% to $1.47 billion (79.9% of total revenue) for the three months ended September 30, 2022, compared to $1.33 billion (77.8% of total revenue) for the three months ended September 30, 2021.

Revenues from international operations decreased 3.3% to $368 million (20.1% of total revenue) for the three months ended September 30, 2022, compared to $381 million (22.2% of total revenue) for the three months ended September 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 June 30, 2022, increasing by 19.2% compared to revenues of $978 million for the three months ended June 30, 2021.

Contract talent solutions revenues were $1.14 billion for the three months ended September 30, 2022, increasing by 8.1% compared to revenues of $1.05 billion for the three months ended September 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 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.

The increase in contract talent solutions revenues for the three months ended September 30, 2022, was primarily due to 10.3% increase in average bill rates, offset by a 2.2% decrease in the number of hours worked by the Company's engagement professionals.

On an as adjusted basis, contract talent solutions revenues increased 10.7% for the third quarter of 2022, compared to the third quarter of 2021.

In the U.S., revenues in the third quarter of 2022 increased 11.3% on both an as reported basis and on an as adjusted basis, compared to the third 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.

operations, revenues for the third quarter of 2022 decreased 3.2% on an as reported basis, and increased 8.7% on an as adjusted basis compared to the third quarter of 2021.

Permanent placement talent solutions revenues were $182 million for the three months ended September 30, 2022, increasing by 16.5% compared to revenues of $156 million for the three months ended September 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 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.

The increase in permanent placement staffing revenues for the three months ended September 30, 2022, was primarily due to a 9.2% increase in the number of placements and a 7.3% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues increased 20.3% for the third quarter of 2022, compared to the third quarter of 2021.

In the U.S., revenues for the third quarter of 2022 increased 22.4% on both an as reported basis and on an as adjusted basis, compared to the third quarter of 2021.

For the Company’s international operations, revenues for the third quarter of 2022 increased 2.9% on an as reported basis and 15.4% on an as adjusted basis, compared to the third 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 $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.

Protiviti revenues were $511 million for the three months ended September 30, 2022, increasing by 2.0% compared to revenues of $501 million for the three months ended September 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 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:

The increase in Protiviti revenues for the three months ended September 30, 2022, was primarily due to a 22.6% increase in average hourly bill rates, partially offset by a 20.6% decrease in billable hours.

The increase in hourly bill rates and decrease in billable hours for the three months ended September 30, 2022, was primarily due to an increase in the mix of full-time Protiviti consultants relative to contractors.

On an as adjusted basis, Protiviti revenues increased 4.8% for the third quarter of 2022, compared to the third quarter of 2021.

In the U.S., revenues in the third quarter of 2022 increased 4.1% on both an as reported basis and on an as adjusted basis, compared to the third quarter of 2021.

For the Company’s international operations, revenues for the third quarter of 2022 decreased 6.3% on an as reported basis and increased 7.3% on an as adjusted basis, compared to the third 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 September 30, 2022, is presented in the following table:

Global United States International

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Gross Margin .

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.

The Company’s gross margin dollars were $788 million for the three months ended September 30, 2022, up 8.6% from $725 million for the three months ended September 30, 2021.

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

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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 $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 contract talent solutions were $450 million for the three months ended September 30, 2022, up 6.7% from $421 million for the

three months ended September 30, 2021.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.4% in the third quarter of 2022, down from 40.0% in the third quarter of 2021.

This year-over-year decrease in gross margin percentage was primarily attributable to higher fringe costs.

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.

Gross margin dollars for permanent placement talent solutions were $182 million for the three months ended September 30, 2022, up 16.6% from $156 million for the three months ended September 30, 2021.

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

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

The primary drivers of Protiviti’s gross margin are:

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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

Gross margin dollars for Protiviti were $156 million for the three months ended September 30, 2022, up 5.6% from $148 million for the three months ended September 30, 2021.

As a percentage of revenues, reported gross margin dollars for Protiviti were 30.5% in the third quarter of 2022, up from 29.5% in the third quarter of 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 30.0% in the third quarter of 2022, up from 29.4% in the third quarter of 2021.

The year-over-year increase in adjusted gross margin percentage was due to the relative composition of and number of professional staff and their respective pay and bill rates.

The Company's gross margin by reporting segment is summarized as follows (in thousands):

Three Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Contract talent solutions

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 %

$ 449,579 $ 421,419 $ 449,579 $ 421,419 39.4 % 40.0 % 39.4 % 40.0 %

Permanent placement talent solutions

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

182,034 156,170 182,034 156,170 99.8 % 99.8 % 99.8 % 99.8 %

155,996 147,738 153,296 147,461 30.5 % 29.5 % 30.0 % 29.4 %

Total $ 787,609 $ 725,327 $ 784,909 $ 725,050 43.0 % 42.4 % 42.8 % 42.3 %

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the three months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

As Reported $ 449,579 39.4 % $ 182,034 99.8 % $ 155,996 30.5 % $ 787,609 43.0 %

Adjustments (1) — — — — (2,700) (0.5 %) (2,700) (0.2 %)

As Adjusted $ 449,579 39.4 % $ 182,034 99.8 % $ 153,296 30.0 % $ 784,909 42.8 %

Three Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

As Reported $ 421,419 40.0 % $ 156,170 99.8 % $ 147,738 29.5 % $ 725,327 42.4 %

Adjustments (1) — — — — (277) (0.1 %) (277) (0.1 %)

As Adjusted $ 421,419 40.0 % $ 156,170 99.8 % $ 147,461 29.4 % $ 725,050 42.3 %

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

The non-GAAP financial adjustments shown in the table above are to reclassify investment income from investments held in employee deferred compensation trusts to the same line item that includes the corresponding change in obligation.

These adjustments have no impact to income before income taxes.

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 $549 million for the three months ended September 30, 2022, up 10.7% from $496 million for the three months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses were 29.9% in the third quarter of 2022, up from 28.9% in the third quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses were 30.6% in the third quarter of 2022, up from 29.0% in the third 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 $319 million for the three months ended September 30, 2022, increasing by 2.7% from $310 million for the three months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 27.9% in the third quarter of 2022, down from 29.4% in the third quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.9% in the third quarter of 2022, down from 29.5% in the third quarter of 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $148 million for the three months ended September 30, 2022, increasing by 18.7% from $125 million for the three months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 81.3% in the third quarter of 2022, up from 79.9% in the third quarter of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement was 82.2% in the third quarter of 2022, up from 80.0% in the third quarter of 2021, due primarily to higher staff compensation costs.

Selling, general and administrative expenses for the Company’s Protiviti division were $82 million for the three months ended September 30, 2022, increasing by 35.2% from $61 million for the three months ended September 30, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti services were 16.0% in the third quarter of 2022, up from 12.1% in the third quarter of 2021, due primarily to operating expenditures returning to more normal levels.

The Company's selling, general and administrative expenses by reportable segment are summarized as follows:

(in thousands):

Three Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

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:

Administrative Expenses

Contract talent solutions

$ 318,462 $ 310,112 $ 329,531 $ 311,409 27.9 % 29.4 % 28.9 % 29.5 %

Permanent placement talent solutions

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

148,290 124,955 149,856 125,140 81.3 % 79.9 % 82.2 % 80.0 %

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.

81,827 60,509 81,827 60,509 16.0 % 12.1 % 16.0 % 12.1 %

Total $ 548,579 $ 495,576 $ 561,214 $ 497,058 29.9 % 28.9 % 30.6 % 29.0 %

The following tables provide reconciliations of the non-GAAP selling, general and administrative expenses to reported selling, general and administrative expenses for the three months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Selling, General and

Administrative Expenses

As Reported $ 318,462 27.9 % $ 148,290 81.3 % $ 81,827 16.0 % $ 548,579 29.9 %

Adjustments (1) 11,069 1.0 % 1,566 0.9 % — — 12,635 0.7 %

As Adjusted $ 329,531 28.9 % $ 149,856 82.2 % $ 81,827 16.0 % $ 561,214 30.6 %

Three Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Selling, General and

Administrative Expenses

As Reported $ 310,112 29.4 % $ 124,955 79.9 % $ 60,509 12.1 % $ 495,576 28.9 %

Adjustments (1) 1,297 0.1 % 185 0.1 % — — 1,482 0.1 %

As Adjusted $ 311,409 29.5 % $ 125,140 80.0 % $ 60,509 12.1 % $ 497,058 29.0 %

These adjustments have no impact to income before income taxes.

1 unchanged sentence

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.

As realized and unrealized investment gains and losses occur, the Company’s employee deferred compensation obligation to employees changes and adjustments are recorded in selling, general and administrative expenses, 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.

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 and is presented separately on the unaudited Condensed Consolidated Statements of Operations.

The Company’s loss from investments held in employee deferred compensation trusts was a loss of $15 million and $2 million for the three months ended September 30, 2022 and 2021, respectively.

The increased loss from trust investments was due to negative market returns in the third 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

The Company’s total income before income taxes was $226 million, or 12.3% of revenues, for the three months ended September 30, 2022, down from $228 million or 13.3% of revenues, for the three months ended September 30, 2021.

Combined segment income was $224 million, or 12.2% of revenues, for the three months ended September 30, 2022, down from $228 million, or 13.3% of revenues, for the three months ended September 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 September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30,

2022 % of Revenue 2021 % of Revenue

Income before income taxes $ 225,624 12.3 % $ 227,658 13.3 %

Interest (income) expense, net (718) 151

Interest income, net (2,346) (0.1 %) (238) 0.0 %

Amortization of intangible assets 417 0.0 % 572 0.0 %

Combined segment income $ 223,695 12.2 % $ 227,992 13.3 %

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.

Contract talent solutions segment income was $120 million, or 10.5% of applicable revenues, for the three months ended September 30, 2022, up from $110 million, or 10.4% of applicable revenues, for the three months ended September 30, 2021.

Permanent placement talent solutions segment income was $32 million, or 17.6% of applicable revenues, for the three months ended September 30, 2022, up from $31 million, or 19.8% of applicable revenues, for the three months ended September 30, 2021.

Protiviti segment income was $72 million, or 14.0% of applicable revenues, for the three months ended September 30, 2022, down from $87 million, or 17.3% of applicable revenues, for the three months ended September 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.

The provision for income taxes was 26.3% and 24.9% for the three months ended September 30, 2022 and 2021, respectively.

Nine Months Ended September 30, 2022 and 2021

Service Revenues.

The Company’s revenues were $5.51 billion for the nine months ended September 30, 2022, increasing by 17.5% compared to $4.69 billion for the nine months ended September 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.

operations increased 19.9% to $4.35 billion (78.9% of total revenue) for the nine months ended September 30, 2022, compared to $3.63 billion (77.3% of total revenue) for the nine months ended September 30, 2021.

Revenues from international operations increased 9.3% to $1.16 billion (21.1% of total revenue) for the nine months ended September 30, 2022, compared to $1.06 billion (22.7% of total revenue) for the nine months ended September 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.

Contract talent solutions revenues were $3.46 billion for the nine months ended September 30, 2022, increasing by 18.4% compared to revenues of $2.92 billion for the nine months ended September 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.

The increase in contract talent solutions revenues for the nine months ended September 30, 2022, was primarily due to 9.3% increase in average bill rates, and an 8.0% increase in the number of hours worked by the Company's engagement professionals.

On an as adjusted basis, contract talent solutions revenues in the first three quarters of 2022 increased 20.4% compared to the first three quarters of 2021.

In the U.S., revenues in the first three quarters of 2022 increased 21.8% on both an as reported basis and an as adjusted basis, compared to the first three quarters of 2021.

For the Company’s international operations, revenues for the first three quarters of 2022 increased 7.0% on an as reported basis and increased 16.0% on an as adjusted basis, compared to the first three quarters of 2021.

Permanent placement talent solutions revenues were $569 million for the nine months ended September 30, 2022, increasing by 38.2% compared to revenues of $412 million for the nine months ended September 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.

The increase in permanent placement staffing revenues for the nine months ended September 30, 2022, was primarily due to a 28.9% increase in the number of placements and a 9.3% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues increased 41.3% for the first three quarters of 2022, compared to the first three quarters of 2021.

In the U.S., revenues for the first three quarters of 2022 increased 44.8% on both an as reported basis and an as adjusted basis, compared to the first three quarters of 2021.

For the Company’s international operations, revenues for the first three quarters of 2022 increased 23.6% on an as reported basis, and increased 33.5% on an as adjusted basis, compared to the first three quarters 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.

Protiviti revenues were $1.48 billion for the nine months ended September 30, 2022, increasing by 9.1% compared to revenues of $1.36 billion for the nine months ended September 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:

The increase in Protiviti revenues for the nine months ended September 30, 2022, was primarily due to a 17.3% increase in average hourly bill rates, partially offset by a 8.3% decrease in billable hours.

The increase in hourly bill rates and decrease in billable hours for the nine months ended September 30, 2022, was primarily due to an increase in the mix of full-time Protiviti consultants relative to contractors.

On an as adjusted basis, Protiviti revenues increased 11.3% for the first three quarters of 2022, compared to the first three quarters of 2021.

In the U.S., revenues in the first three quarters of 2022 increased 9.3% on both an as reported basis and an as adjusted basis, compared to the first three quarters of 2021.

For the Company’s international operations, revenues in the first three quarters of 2022 increased 8.3% on an as reported basis, and increased 19.2% on an as adjusted basis, compared to the first three quarters 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 nine months ended September 30, 2022, is presented in the following table:

Global United States International

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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.

The Company’s gross margin dollars were $2.38 billion for the nine months ended September 30, 2022, up 21.7% from $1.95 billion for the nine months ended September 30, 2021.

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

3 unchanged sentences

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.

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

Gross margin dollars for contract talent solutions were $1.38 billion for the nine months ended September 30, 2022, up 19.2% from $1.15 billion for the nine months ended September 30, 2021.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in the first three quarters of 2022, up from 39.5% in the first three quarters of 2021.

This year-over-year improvement in gross margin percentage was primarily due to 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 $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.

Gross margin dollars for permanent placement talent solutions were $568 million for the nine months ended September 30, 2022, up 38.2% from $411 million for the nine months ended September 30, 2021 Because reimbursable expenses for permanent placement talent solutions are de minimis, the increase in gross margin dollars is substantially explained by the increase in revenues previously discussed.

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

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 $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 $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

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

SERVICE REVENUES:

Finance and accounting $ 1,612,600 $ — $ 1,612,600 $ 1,264,326 $ — $ 1,264,326 43.9 % 42.5 % 43.9 % 42.5 %

Administrative and customer support 559,047 — 559,047 483,665 — 483,665 15.2 % 16.2 % 15.2 % 16.2 %

Technology 431,517 — 431,517 366,406 — 366,406 11.7 % 12.3 % 11.7 % 12.3 %

Elimination of intersegment

i) the relative composition of 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 the Company’s Protiviti staff.

Gross margin dollars for Protiviti were $431 million for the nine months ended September 30, 2022, up 11.4% from $386 million for the nine months ended September 30, 2021.

As a percentage of revenues, reported gross margin dollars for Protiviti were 29.1% in the first three quarters of 2022, up from 28.5% in the first three quarters of 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 27.9% in the first three quarters of 2022, down from 28.9% in the first three quarters of 2021.

The year-over-year decrease in adjusted gross margin percentage was primarily due to lower staff utilization rates.

The Company's gross margin by reportable segment are summarized as follows:

(in thousands):

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Contract talent solutions

Permanent placement talent solutions 386,878 — 386,878 255,344 — 255,344 10.5 % 8.6 % 10.5 % 8.6 %

Protiviti 969,367 — 969,367 856,060 — 856,060 26.4 % 28.7 % 26.4 % 28.7 %

Total $ 3,677,661 $ — $ 3,677,661 $ 2,978,961 $ — $ 2,978,961 100.0 % 100.0 % 100.0 % 100.0 %

GROSS MARGIN:

Contract talent solutions $ 926,714 $ — $ 926,714 $ 733,003 $ — $ 733,003 39.9 % 39.2 % 39.9 % 39.2 %

$ 1,376,293 $ 1,154,420 $ 1,376,293 $ 1,154,420 39.8 % 39.5 % 39.8 % 39.5 %

Permanent placement talent solutions

Protiviti 274,566 (15,259) 259,307 238,629 5,842 244,471 28.3 % 27.9 % 26.8 % 28.6 %

568,147 411,122 568,147 411,122 99.8 % 99.8 % 99.8 % 99.8 %

430,562 386,367 412,603 391,932 29.1 % 28.5 % 27.9 % 28.9 %

Total $ 2,375,002 $ 1,951,909 $ 2,357,043 $ 1,957,474 43.1 % 41.6 % 42.8 % 41.7 %

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

As Reported $ 1,376,293 39.8 % $ 568,147 99.8 % $ 430,562 29.1 % $ 2,375,002 43.1 %

Adjustments (1) — — — — (17,959) (1.2 %) (17,959) (0.3 %)

As Adjusted $ 1,376,293 39.8 % $ 568,147 99.8 % $ 412,603 27.9 % $ 2,357,043 42.8 %

Nine Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

As Reported $ 1,154,420 39.5 % $ 411,122 99.8 % $ 386,367 28.5 % $ 1,951,909 41.6 %

Adjustments (1) — — — — 5,565 0.4 % 5,565 0.1 %

As Adjusted $ 1,154,420 39.5 % $ 411,122 99.8 % $ 391,932 28.9 % $ 1,957,474 41.7 %

These adjustments have no impact to income before income taxes.

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 $1.57 billion for the nine months ended September 30, 2022, up 11.8% from $1.41 billion for the nine months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses were 28.5% in the first three quarters of 2022, down from 30.0% in the first three quarters of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses were 30.2% in the first three quarters of 2022, up from 29.3% in the first three quarters of 2021.

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

Selling, general and administrative expenses for contract talent solutions were $908 million for the nine months ended September 30, 2022, increasing by 0.5% from $904 million for the nine months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 26.2% in the first three quarters of 2022, down from 30.9% in the first three quarters of 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.6% in the first three quarters of 2022, down from 29.9% in the first three quarters of 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $450 million for the nine months ended September 30, 2022, increasing by 34.3% from $335 million for the nine months ended September 30, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 79.1% in the first three quarters of 2022, down from 81.4% in the first three quarters of 2021.

As a percentage of revenues,

adjusted selling, general and administrative expenses for permanent placement talent solutions was 81.1% in the first three quarters of 2022, up from 80.6% in the first three quarters of 2021, due primarily to higher staff compensation costs.

Selling, general and administrative expenses for Protiviti were $214 million for the nine months ended September 30, 2022, increasing by 27.5% from $168 million for the nine months ended September 30, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 14.4% in the first three quarters of 2022, up from 12.4% in the first three quarters of 2021, due primarily to operating expenditures returning to more normal levels.

The Company's selling, general and administrative expenses by reportable segment are summarized as follows:

(in thousands):

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Selling, General and

ADMINISTRATIVE EXPENSE:

Contract talent solutions $ 589,424 $ 70,477 $ 659,901 $ 593,627 $ (30,312) $ 563,315 25.4 % 31.8 % 28.4 % 30.2 %

Permanent placement talent solutions 302,147 9,887 312,034 210,360 (3,643) 206,717 78.1 % 82.4 % 80.7 % 81.0 %

Protiviti 132,017 — 132,017 107,168 — 107,168 13.6 % 12.5 % 13.6 % 12.5 %

Total $ 1,023,588 $ 80,364 $ 1,103,952 $ 911,155 $ (33,955) $ 877,200 27.8 % 30.6 % 30.0 % 29.4 %

OPERATING/SEGMENT INCOME:

Administrative Expenses

Contract talent solutions

$ 907,886 $ 903,739 $ 989,432 $ 874,723 26.2 % 30.9 % 28.6 % 29.9 %

Permanent placement talent solutions

Protiviti 142,549 (15,259) 127,290 131,461 5,842 137,303 14.7 % 15.4 % 13.1 % 16.0 %

Total $ 563,805 $ (95,623) $ 468,182 $ 315,428 $ 39,797 $ 355,225 15.3 % 10.6 % 12.7 % 11.9 %

(Income) loss from investments held in

employee deferred compensation trusts

450,437 335,316 461,890 331,858 79.1 % 81.4 % 81.1 % 80.6 %

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

213,844 167,676 213,844 167,676 14.4 % 12.4 % 14.4 % 12.4 %

Total $ 1,572,167 $ 1,406,731 $ 1,665,166 $ 1,374,257 28.5 % 30.0 % 30.2 % 29.3 %

The following tables provide reconciliations of the non-GAAP selling, general and administrative expenses to reported selling, general and administrative expenses for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Selling, General and

Administrative Expenses

As Reported $ 907,886 26.2 % $ 450,437 79.1 % $ 213,844 14.4 % $ 1,572,167 28.5 %

Adjustments (1) 81,546 2.4 % 11,453 2.0 % — — 92,999 1.7 %

As Adjusted $ 989,432 28.6 % $ 461,890 81.1 % $ 213,844 14.4 % $ 1,665,166 30.2 %

Nine Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

$ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Selling, General and

Administrative Expenses

As Reported $ 903,739 30.9 % $ 335,316 81.4 % $ 167,676 12.4 % $ 1,406,731 30.0 %

Adjustments (1) (29,016) (1.0 %) (3,458) (0.8 %) — — (32,474) (0.7 %)

As Adjusted $ 874,723 29.9 % $ 331,858 80.6 % $ 167,676 12.4 % $ 1,374,257 29.3 %

These adjustments have no impact to income before income taxes.

1 unchanged sentence

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 $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.

The Company’s (income) loss from investments held in employee deferred compensation trusts was a loss of $111 million for the nine months ended September 30, 2022, compared to income of $38 million for the nine months ended September 30, 2021.

The loss from trust investments was due to negative market returns in 2022.

Income Before Income Taxes and Segment Income.

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

The Company’s total income before income taxes was $694 million, or 12.6% of revenues, for the nine months ended September 30, 2022, up from $582 million or 12.4% of revenues, for the nine months ended September 30, 2021.

Combined segment income was $692 million, or 12.6% of revenues, for the nine months ended September 30, 2022, up from $583 million, or 12.4% of revenues, for the nine months ended September 30, 2021.

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

Nine Months Ended September 30,

2022 % of Revenue 2021 % of Revenue

Income before income taxes $ 693,857 12.6 % $ 581,638 12.4 %

Interest (income) expense, net (884) 105

Interest income, net (3,230) 0.0 % (145) 0.0 %

Amortization of intangible assets 1,250 0.0 % 1,724 0.0 %

Combined segment income $ 691,877 12.6 % $ 583,217 12.4 %

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.

Contract talent solutions segment income was $387 million, or 11.2% of applicable revenues for the nine months ended September 30, 2022, up from $280 million, or 9.6% of applicable revenues for the nine months ended September 30, 2021.

Permanent placement talent solutions segment income was $106 million, or 18.7% of applicable revenues for the nine months ended September 30, 2022, up from $79 million, or 19.2% of applicable revenues, for the nine months ended September 30, 2021.

Protiviti segment income was $199 million, or 13.4% of applicable revenues for the nine months ended September 30, 2022, down from $224 million, or 16.5% of applicable revenues, for the nine months ended September 30, 2021.

Provision for income taxes .

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

The provision for income taxes was 26.5% and 26.0% for the nine months ended September 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

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.

The change in the Company’s liquidity during the nine months ended September 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 $593 million and $634 million at September 30, 2022 and 2021, respectively.

Operating activities provided cash flows of $481 million during the nine months ended September 30, 2022, offset by $72 million and $400 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided cash flows of $458 million during the nine months ended September 30, 2021, offset by $50 million and $341 million of net cash used in investing activities and financing activities, respectively.

Fluctuations in foreign currency exchange rates had the effect of decreasing reported cash and cash equivalents by $35 million during the nine months ended September 30, 2022, compared to a decrease of $8 million during the nine months ended September 30, 2021.

Operating activities—Net cash provided by operating activities for the nine months ended September 30, 2022, was composed of net income of $510 million adjusted upward for non-cash items of $224 million, offset by net cash used in changes in working capital of $253 million.

Net cash provided by operating activities for the nine months ended September 30, 2021, was composed of net income of $431 million adjusted upward for non-cash items of $49 million, offset by net cash used in changes in working capital of $22 million.

Investing activities—Cash used in investing activities for the nine months ended September 30, 2022, was $72 million.

This was composed of capital expenditures of $49 million and investments in employee deferred compensation trusts of $52 million, partially offset by proceeds from employee deferred compensation trusts redemptions of $29 million.

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.

Cash used in investing activities for the nine months ended September 30, 2021, was $50 million.

This was composed of capital expenditures of $25 million and investments in employee deferred compensation trusts of $56 million, partially offset by proceeds from employee deferred compensation trusts redemptions of $31 million.

Capital expenditures, including $30 million for cloud computing arrangements, for the nine months ended September 30, 2022, totaled $78 million, approximately 80.3% 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.

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The Company currently expects that 2022 capital expenditures will range from $90 million to $100 million, of which $70 million to $80 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 six months ended June 30, 2022, was $257 million.

Financing activities—Cash used in financing activities for the nine months ended September 30, 2022, was $400 million.

This included repurchases of $258 million in common stock and $142 million in dividends paid to stockholders.

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

Cash used in financing activities for the nine months ended September 30, 2021, was $341 million.

This included repurchases of $212 million in common stock and $129 million in dividends paid to stockholders.

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.

As of September 30, 2022, the Company is authorized to repurchase, from time to time, up to 4.7 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the nine months ended September 30, 2022 and 2021, the Company repurchased 2.5 million shares, at a cost of $219 million, and 2.3 million shares, at a cost of $200 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 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.

During the nine months ended September 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 $20 million, respectively.

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

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’s working capital at September 30, 2022, included $593 million in cash and cash equivalents and $1.10 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.

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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, 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.

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

There were no borrowings under the Credit Agreement as of September 30, 2022, or December 31, 2021.

On October 27, 2022, the Company announced a quarterly dividend of $0.43 per share to be paid to all shareholders of record as of November 25, 2022.

The dividend will be paid on December 15, 2022.

Material Cash Requirements from Contractual Obligations

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.

As of September 30, 2022, the Company reported current and long-term operating lease liabilities of $81 million and $151 million, respectively.

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

The majority of these leases are for real estate.

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“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 half of 2022.

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

Employee Deferred Compensation Plan.

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

As of September 30, 2022, the Company reported deferred compensation plan obligations of $435 million in its accompanying unaudited Condensed Consolidated Statements of Financial Position.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis