What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-10 compared with 2022-02-14 · 188 added, 158 removed, 151 unchanged (70% of the section changed)

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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;

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Executive Overview

The Company achieved record levels of service revenues and net income during 2021 due to a broad-based, global acceleration in demand for its staffing and business consulting services.

During 2022 the Company unified its family of Robert Half brands to focus on its key brand, Robert Half.

This simplifies the Company’s go-to-market brand structure for clients and candidates, provides leverage for greater brand awareness, and allows future flexibility to expand the Company’s existing functional specializations.

In connection with this process, the Company’s current financial statement disclosures reflect new names for its reportable segments, including contract talent solutions (formerly temporary and consultant staffing), permanent placement talent solutions (formerly permanent placement staffing) and Protiviti (formerly risk consulting and internal audit services).

What was previously referred to as staffing operations is now referred to as talent solutions.

The presentation of contract talent solutions includes functional specializations rather than the previously branded divisions.

The functional specializations are:

finance and accounting, which combines the former Accountemps ® and Robert Half ® Management Resources divisions;

administrative and customer support, which consists of the former OfficeTeam ® ;

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

The Company achieved record levels of service revenues and net income during 2022, and achieved new record levels for each.

Annual service revenues reached $7.24 billion in 2022, increasing 12.0% from the prior year.

Full-year 2021 net income increased 95.5% to $599 million and diluted net income per share increased 98.5% to $5.36.

The future of work increasingly includes flexible, hybrid and fully remote models and the Company can deliver deeper skills and more price-point choices to its clients by expanding candidate searches beyond local markets while leveraging its global office network and advanced AI-driven technologies.

The expanded acceptance of remote work creates significant opportunity for the Company.

It brings together the Company's numerous strengths, including its global brand, global office network, global candidate database, and advanced AI-driven technologies and data analytics at the scale needed to excel at out-of-market recruitment and placements.

This strengthens the Company's competitive position significantly since its traditionally toughest competitors, local and regional staffing firms, generally do not have these capabilities.

Protiviti continues to be a strong differentiator for the Company, with multiple years of consecutive growth and a highly diversified client base and suite of solution offerings.

Growth remains strong across internal audit, technology consulting, risk and compliance consulting, and business performance improvement.

Technology consulting is the largest solution group with particular strength in cybersecurity and privacy solutions as well as enterprise applications and data analytics.

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

Protiviti has also benefited from project work in the public sector resulting from various governmental stimulus programs.

Demand for the Company’s temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services is largely dependent upon general economic and labor trends both domestically and abroad.

The United States economic backdrop during 2021 was conducive to growth for the Company as real gross domestic product (“GDP”) increased 5.7% in 2021, compared to a decrease of 3.5% in 2020, while the unemployment rate declined from 6.7% in December 2020 to 3.9% in December 2021.

In the United States, the number of job openings exceeded the number of hires at the end of December 2021, creating competition for skilled talent that increases the Company's value to clients.

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.

Full-year 2022 net income was up 9.9% to $658 million and diluted net income per share increased 12.5% to $6.03.

All of our major practice areas — contract talent, permanent placement and Protiviti — reached all-time high revenues, over and above very strong growth reported in the prior year.

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

economic backdrop during 2022 was conducive to growth for the Company as real gross domestic product (“GDP”) increased 2.1% in 2022, compared to an increase of 5.7% in 2021, while the unemployment rate declined from 3.9% in December 2021, to 3.5% in December 2022.

Although recent metrics have come off all-time highs, talent shortages persist.

In the U.S., unemployment stands at a 50-year low and remains even lower for those with a college degree, where the rate is 1.9%.

Similar reports across the global also point to labor market resilience.

While there remains volatility in the macroeconomic environment, the Company is optimistic about its outlook for 2023.

Clients continue to hire, albeit at an even more measured pace, which has the effect of lengthening the sales cycle.

Longer term, the growth and margin prospects from an ongoing focus on services related to talent with higher level skills is encouraging.

In addition, the structural shift to remote work, particularly with higher skills, creates a new competitive advantage as it highlights the Company’s numerous strengths, including global brand, office network, candidate database and advanced AI-driven technologies.

The Company’s investments in innovation and technology position it to meaningfully improve the digital and recruiter experience for its clients and candidates and the internal productivity of its staff.

Reported results were unfavorably impacted by foreign currency exchange rates as the U.S.

dollar strengthened against the Euro, British pound, Australian Dollar and Canadian Dollar.

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.

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

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The Company derives its revenues from three segments:

temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services.

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

Revenues are recognized when promised goods or services are delivered to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

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The Company’s operations are subject to U.S.

federal, state and local, and foreign income taxes.

federal, state, local and foreign income taxes.

In establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions.

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Valuation allowances of $23.6 million and $24.2 million were recorded as of December 31, 2022, and 2021, respectively.

The valuation allowances recorded relate primarily to net operating losses in certain foreign operations.

The valuation allowances recorded relate primarily to net operating losses in certain international operations.

If such losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount of the related valuation reserve.

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The Company analyzes its operating results for three reportable segments:

temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services.

The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing, and web design fields.

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

The risk consulting and internal audit services segment provides internal audit, technology consulting, risk and compliance consulting, and business performance improvement services.

Demand for the Company’s temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services is largely dependent upon general economic and labor market conditions both domestically and abroad.

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

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

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

Demand for the Company’s services is largely dependent upon general economic and labor trends both domestically and abroad.

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

Results for the full year 2021 show that the recovery from the recent economic downturn has surpassed pre-pandemic levels and continues with strong momentum and continued broad-based demand for the Company's staffing and business consulting services.

The Company will continue to invest in its people, its technology, its brands and its business model to strengthen the ability to connect people to meaningful and exciting new work and provide clients with the talent and deep subject matter expertise they need to confidently compete and grow.

The Company’s temporary and permanent staffing business conducts placement activities through 321 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 64 offices in 24 states and 12 foreign countries.

The Company’s talent solutions business conducts placement activities through 317 offices in 42 states, the District of Columbia, and 18 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:

as adjusted revenue growth rates;

adjusted gross margin;

adjusted selling, general and administrative expense;

segment income and combined segment income.

Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates and billing days.

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 lines of business 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.

The Company expresses year-over-year revenue changes as calculated percentages using the same number of billing days and constant currency exchange rates.

In order to calculate constant currency revenue growth rates, as reported amounts are retranslated using foreign currency exchange rates from the prior year’s comparable period.

Management then calculates a global, weighted-average number of billing days for each reporting period based upon input from all countries and all lines of business.

In order to remove the fluctuations caused by comparable periods having different billing days, the Company calculates same billing day revenue growth rates by dividing each comparative period’s reported revenues by the calculated number of billing days for that period to arrive at a per billing day amount.

Same billing day growth rates are then calculated based upon the per billing day amounts.

The term “as adjusted” means that the impact of different billing days and currency fluctuations are removed from the revenue growth rate calculation.

combined segment income;

and as adjusted revenue growth rates.

The following measures:

adjusted gross margin;

adjusted selling, general and administrative expense;

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

adjusted gross margin and adjusted selling, general and administrative expenses 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 interest income, 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.

As adjusted revenue growth rates represent year-over-year revenue growth rates after removing the impacts on reported revenues from the changes in the number of billing days and foreign currency exchange rates.

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

The impacts from the changes in billing days and foreign currency exchange rates are calculated as follows:

• Billing days impact is calculated by dividing each comparative period’s reported revenues by the number of billing days for that period to arrive at a per billing day amount.

Same billing day growth rates are then calculated based on the per billing day amounts.

Management calculates a global, weighted-average number of billing days for each reporting period based upon inputs from all countries and all functional specializations and segments.

• Foreign currency impact is calculated by retranslating current period international revenues using foreign currency exchange rates from the prior year’s comparable period.

The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies may calculate such financial results differently.

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Refer to Item 7a.

“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.

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

Years ended December 31, 2022 and 2021

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operations increased 14.1% to $5.71 billion (78.9% of total revenue) for the year ended December 31, 2022, compared to $5.01 billion (77.5% of total revenue) for the year ended December 31, 2021.

Revenues from foreign operations increased 29.4% to $1.45 billion (22.5% of total revenue) for the year ended December 31, 2021, compared to $1.12 billion (22.0% of total revenue) for the year ended December 31, 2020.

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

Revenues from international operations increased 4.9% to $1.53 billion (21.1% of total revenue) for the year ended December 31, 2022, compared to $1.45 billion (22.5% of total revenue) for the year ended December 31, 2021.

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

Temporary and consultant staffing revenues were $4.04 billion for the year ended December 31, 2021, increasing by 16.1% compared to revenues of $3.48 billion for the year ended December 31, 2020.

Key drivers of temporary and consultant staffing 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, temporary and consultant staffing revenues increased 15.5% for 2021 compared to 2020, due primarily to an increase in the number of hours worked by the Company's engagement professionals and a 5.3% increase in weighted average bill rates, adjusted for changes in the mix of revenues by line of business, currency and country.

In the U.S., 2021 revenues increased 15.6% on an as reported basis, and increased 16.1% on an as adjusted basis, compared to 2020.

For the Company’s international operations, 2021 revenues increased 17.9% on an as reported basis, and increased 13.4% on an as adjusted basis, compared to 2020.

Permanent placement staffing revenues were $570 million for the year ended December 31, 2021, increasing by 54.0% compared to revenues of $370 million for the year ended December 31, 2020.

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

On an as adjusted basis, permanent placement staffing revenues increased 52.6% for 2021 compared to 2020, driven by increases in the number of placements and average fees earned per placement.

In the U.S., 2021 revenues increased 55.2% on an as reported basis, and increased 55.8% on an as adjusted basis, compared to 2020.

For the Company’s international operations, 2021 revenues increased 51.3% on an as reported basis, and increased 45.7% on an as adjusted basis, compared to 2020.

Historically, demand for permanent placement services is even more sensitive to economic and labor market conditions than demand for temporary and consultant staffing and this is expected to continue.

Risk consulting and internal audit services revenues were $1.85 billion for the year ended December 31, 2021, increasing by 46.9% compared to revenues of $1.26 billion for the year ended December 31, 2020.

Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill rates.

On an as adjusted basis, risk consulting and internal audit services revenues increased 46.2% for 2021 compared to 2020, driven primarily by an increase in billable hours.

In the U.S., 2021 revenues increased 45.1% on an as reported basis, and increased 45.6% on an as adjusted basis, compared to 2020.

For the Company’s international operations, 2021 revenues increased 54.0% on an as reported basis, and increased 48.6% on an as adjusted basis, compared to 2020.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the year ended December 31, 2021, is presented in the following table:

Contract talent solutions revenues were $4.53 billion for the year ended December 31, 2022, increasing by 12.2% compared to revenues of $4.04 billion for the year ended December 31, 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.

The increase in contract talent solutions revenues for 2022 was primarily due to a 9.5% increase in average bill rates and a 2.2% increase in the number of hours worked by the Company's engagement professionals.

On an as adjusted basis, contract talent solutions revenues increased 14.5% for 2022, compared to 2021.

In the U.S., 2022 revenues increased 14.7% on a reported basis, and increased 14.8% on an as adjusted basis, compared to 2021.

For the Company’s international operations, 2022 revenues increased 3.5% on a reported basis, and increased 13.2% on an as adjusted basis, compared to 2021.

Permanent placement talent solutions revenues were $725 million for the year ended December 31, 2022, increasing by 27.2% compared to revenues of $570 million for the year ended December 31, 2021.

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

The increase in permanent placement talent solutions revenues for 2022 was primarily due to an 18.6% increase in the number of placements and an 8.6% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues increased 30.5% for 2022 compared to 2021.

In the U.S., 2022 revenues increased 32.7% on a reported basis, and increased 32.9% on an as adjusted basis, compared to 2021.

For the Company’s international operations, 2022 revenues increased 15.0% on a reported basis, and increased 25.4% on an as adjusted basis, compared to 2021.

Historically, demand for permanent placement services 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 $1.98 billion for the year ended December 31, 2022, increasing by 6.9% compared to revenues of $1.85 billion for the year ended December 31, 2021.

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

The increase in Protiviti revenues for 2022 was primarily due to a 16.5% increase in average hourly bill rates, partially offset by a 9.6% decrease in billable hours.

The increase in hourly bill rates and decrease in billable hours for 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 9.3% for 2022 compared to 2021.

In the U.S., 2022 revenues increased 7.8% on a reported basis, and increased 7.9% on an as adjusted basis, compared to 2021.

For the Company’s international operations, 2022 revenues increased 3.4% on a reported basis, and increased 14.8% on an as adjusted basis, compared to 2021.

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

Global United States International

Temporary and consultant staffing

Contract talent solutions

As Reported 12.2 % 14.7 % 3.5 %

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As Adjusted 14.5 % 14.8 % 13.2 %

Permanent placement staffing

Permanent placement talent solutions

As Reported 27.2 % 32.7 % 15.0 %

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As Adjusted 30.5 % 32.9 % 25.4 %

Risk consulting and internal audit services

As Reported 6.9 % 7.8 % 3.4 %

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

Gross margin dollars for temporary and consultant staffing represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses.

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:

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

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 the Company’s temporary and consultant staffing division were $1.60 billion for the year ended December 31, 2021, up 21.8% from $1.31 billion for the year ended December 31, 2020.

As a percentage of revenues, gross margin dollars for temporary and consultant staffing were 39.6% in 2021, up from 37.8% in 2020.

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

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

Gross margin dollars for the Company’s permanent placement staffing division were $569 million for the year ended December 31, 2021, up 54.0% from $369 million for the year ended December 31, 2020.

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

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

The primary drivers of risk consulting and internal audit services gross margin are:

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

Gross margin dollars for contract talent solutions were $1.80 billion for the year ended December 31, 2022, up 12.8% from $1.60 billion for the year ended December 31, 2021.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in 2022, up from 39.6% in 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 $724 million for the year ended December 31, 2022, up 27.2% from $569 million for the year ended December 31, 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 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 risk consulting and internal audit services staff.

Gross margin dollars for the Company’s risk consulting and internal audit division were $528 million for the year ended December 31, 2021, up 59.9% from $330 million for the year ended December 31, 2020.

As a percentage of revenues, reported gross margin dollars for risk consulting and internal audit services were 28.5% in 2021, up from 26.2% in 2020.

As a percentage of revenues, adjusted gross margin dollars for risk consulting and internal audit services were 29.0% in 2021, up from 27.1% in 2020.

The year-over-year increase in gross margin percentage was due to higher staff utilization rates and 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 $566 million for the year ended December 31, 2022, up 7.2% from $528 million for the year ended December 31, 2021.

As a percentage of revenues, reported gross margin dollars for Protiviti were 28.6% in 2022, up from 28.5% in 2021.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 27.9% in 2022, down from 29.0% in 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 reporting segment is summarized as follows (in thousands):

Year Ended December 31, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Contract talent solutions

$ 1,804,029 $ 1,598,716 $ 1,804,029 $ 1,598,716 39.8 % 39.6 % 39.8 % 39.6 %

Permanent placement talent solutions

723,706 568,983 723,706 568,983 99.8 % 99.8 % 99.8 % 99.8 %

566,314 528,329 552,465 537,176 28.6 % 28.5 % 27.9 % 29.0 %

Total $ 3,094,049 $ 2,696,028 $ 3,080,200 $ 2,704,875 42.7 % 41.7 % 42.6 % 41.9 %

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

Year Ended December 31, 2022

Contract talent solutions Permanent placement talent solutions Protiviti Total

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

As Reported $ 1,804,029 39.8 % $ 723,706 99.8 % $ 566,314 28.6 % $ 3,094,049 42.7 %

Adjustments (1) — — — — (13,849) (0.7 %) (13,849) (0.1 %)

As Adjusted $ 1,804,029 39.8 % $ 723,706 99.8 % $ 552,465 27.9 % $ 3,080,200 42.6 %

Year Ended December 31, 2021

Contract talent solutions Permanent placement talent solutions Protiviti Total

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

As Reported $ 1,598,716 39.6 % $ 568,983 99.8 % $ 528,329 28.5 % $ 2,696,028 41.7 %

Adjustments (1) — — — — 8,847 0.5 % 8,847 0.2 %

As Adjusted $ 1,598,716 39.6 % $ 568,983 99.8 % $ 537,176 29.0 % $ 2,704,875 41.9 %

(1) Changes in the Company’s deferred compensation obligations related to Protiviti operations are included in 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) loss 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 on income before income taxes.

Selling, General and Administrative Expenses .

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As a percentage of revenues, reported selling, general and administrative expenses were 29.3% in 2022, down from 30.2% in 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses were 29.4% in 2021, down from 31.4% in 2020.

As a percentage of revenues, adjusted selling, general and administrative expenses were 30.3% in 2022, up from 29.4% in 2021.

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

Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $1.25 billion for the year ended December 31, 2021, increasing by 10.5% from $1.13 billion for the year ended December 31, 2020.

As a percentage of revenues, reported selling, general and administrative expenses for temporary and consultant staffing were 31.0% in 2021, down from 32.6% in 2020.

As a percentage of revenues, adjusted selling, general and administrative expenses for temporary and consultant staffing were 29.8% in 2021, down from 30.9% in 2020, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for the Company’s permanent placement staffing division were $468 million for the year ended December 31, 2021, increasing by 35.0% from $347 million for the year ended December 31, 2020.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement staffing services were 82.1% in 2021, down from 93.7% in 2020.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement staffing was 81.2% in 2021, down from 92.0% in 2020, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $232 million for the year ended December 31, 2021, increasing by 24.3% from $186 million for the year ended December 31, 2020.

As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 12.5% in 2021, down from 14.8% in 2020, due primarily to positive operating leverage resulting from increased revenue.

A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the years ended December 31, 2021 and 2020 is presented in the following table (in thousands):

Selling, general and administrative expenses for contract talent solutions were $1.25 billion for the year ended December 31, 2022, flat compared to the year ended December 31, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 27.5% in 2022, down from 31.0% in 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 28.9% in 2022, down from 29.8% in 2021, due primarily to positive leverage from an increase in revenues.

Selling, general and administrative expenses for permanent placement talent solutions were $587 million for the year ended December 31, 2022, increasing by 25.5% from $468 million for the year ended December 31, 2021.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions services were 81.0% in 2022, down from 82.1% in 2021.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 82.2% in 2022, up from 81.2% in 2021, due primarily to higher staff compensation costs.

Selling, general and administrative expenses for Protiviti were $282 million for the year ended December 31, 2022, increasing by 21.6% from $232 million for the year ended December 31, 2021.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 14.2% in 2022, up from 12.5% in 2021, due primarily to operating expenditures returning to more normal levels following lower levels of expenditures experienced during the COVID-19 pandemic.

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

Year Ended December 31, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

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

SERVICE REVENUES:

Accountemps $ 1,870,563 $ — $ 1,870,563 $ 1,558,024 $ — $ 1,558,024 29.0 % 30.5 % 29.0 % 30.5 %

OfficeTeam 1,058,906 — 1,058,906 764,947 — 764,947 16.4 % 15.0 % 16.4 % 15.0 %

Robert Half Technology 795,319 — 795,319 695,418 — 695,418 12.3 % 13.6 % 12.3 % 13.6 %

Robert Half Management Resources 894,334 — 894,334 698,942 — 698,942 13.8 % 13.7 % 13.8 % 13.7 %

Elimination of intersegment revenues (580,379) — (580,379) (239,996) — (239,996) (9.0 %) (4.7 %) (9.0 %) (4.7 %)

Temporary and consultant staffing 4,038,743 — 4,038,743 3,477,335 — 3,477,335 62.5 % 68.1 % 62.5 % 68.1 %

Permanent placement staffing 569,921 — 569,921 370,109 — 370,109 8.8 % 7.2 % 8.8 % 7.2 %

Protiviti 1,852,780 — 1,852,780 1,261,556 — 1,261,556 28.7 % 24.7 % 28.7 % 24.7 %

Total $ 6,461,444 $ — $ 6,461,444 $ 5,109,000 $ — $ 5,109,000 100.0 % 100.0 % 100.0 % 100.0 %

GROSS MARGIN:

Temporary and consultant staffing $ 1,598,716 $ — $ 1,598,716 $ 1,312,797 $ — $ 1,312,797 39.6 % 37.8 % 39.6 % 37.8 %

Permanent placement staffing 568,983 — 568,983 369,401 — 369,401 99.8 % 99.8 % 99.8 % 99.8 %

Protiviti 528,329 8,847 537,176 330,413 11,682 342,095 28.5 % 26.2 % 29.0 % 27.1 %

Total $ 2,696,028 $ 8,847 $ 2,704,875 $ 2,012,611 $ 11,682 $ 2,024,293 41.7 % 39.4 % 41.9 % 39.6 %

Selling, General and

ADMINISTRATIVE EXPENSE:

Temporary and consultant staffing $ 1,251,565 $ (46,721) $ 1,204,844 $ 1,132,915 $ (57,397) $ 1,075,518 31.0 % 32.6 % 29.8 % 30.9 %

Permanent placement staffing 468,028 (5,510) 462,518 346,711 (6,109) 340,602 82.1 % 93.7 % 81.2 % 92.0 %

Protiviti 231,689 — 231,689 186,415 — 186,415 12.5 % 14.8 % 12.5 % 14.8 %

Total $ 1,951,282 $ (52,231) $ 1,899,051 $ 1,666,041 $ (63,506) $ 1,602,535 30.2 % 32.6 % 29.4 % 31.4 %

OPERATING/SEGMENT INCOME:

Temporary and consultant staffing $ 347,151 $ 46,721 $ 393,872 $ 179,882 $ 57,397 $ 237,279 8.6 % 5.2 % 9.8 % 6.8 %

Permanent placement staffing 100,955 5,510 106,465 22,690 6,109 28,799 17.7 % 6.1 % 18.7 % 7.8 %

Protiviti 296,640 8,847 305,487 143,998 11,682 155,680 16.0 % 11.4 % 16.5 % 12.3 %

Total $ 744,746 $ 61,078 $ 805,824 $ 346,570 $ 75,188 $ 421,758 11.5 % 6.8 % 12.5 % 8.3 %

Income from investments held in

employee deferred compensation trusts

Administrative Expenses

Contract talent solutions

$ 1,248,378 $ 1,251,565 $ 1,311,748 $ 1,204,844 27.5 % 31.0 % 28.9 % 29.8 %

Amortization of intangible assets 2,241 — 2,241 1,219 — 1,219 0.1 % 0.0 % 0.1 % 0.0 %

Interest income, net (197) — (197) (1,343) — (1,343) 0.0 % 0.0 % 0.0 % 0.0 %

Income before income taxes $ 803,780 $ — $ 803,780 $ 421,882 $ — $ 421,882 12.4 % 8.3 % 12.4 % 8.3 %

(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 is presented separately.

The non-GAAP financial measures shown in the table above are adjusted to reclassify investment income 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 from Investments Held in Employee Deferred Compensation Trusts .

Permanent placement talent solutions

587,164 468,028 596,084 462,518 81.0 % 82.1 % 82.2 % 81.2 %

281,754 231,689 281,754 231,689 14.2 % 12.5 % 14.2 % 12.5 %

Total $ 2,117,296 $ 1,951,282 $ 2,189,586 $ 1,899,051 29.3 % 30.2 % 30.3 % 29.4 %

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

Year Ended December 31, 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 $ 1,248,378 27.5 % $ 587,164 81.0 % $ 281,754 14.2 % $ 2,117,296 29.3 %

Adjustments (1) 63,370 1.4 % 8,920 1.2 % — — 72,290 1.0 %

As Adjusted $ 1,311,748 28.9 % $ 596,084 82.2 % $ 281,754 14.2 % $ 2,189,586 30.3 %

Year Ended December 31, 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 $ 1,251,565 31.0 % $ 468,028 82.1 % $ 231,689 12.5 % $ 1,951,282 30.2 %

Adjustments (1) (46,721) (1.2 %) (5,510) (0.9 %) — — (52,231) (0.8 %)

As Adjusted $ 1,204,844 29.8 % $ 462,518 81.2 % $ 231,689 12.5 % $ 1,899,051 29.4 %

(1) Changes in the Company’s deferred compensation obligations related to talent solutions operations are included in selling, general and administrative expenses, while the related investment (income) loss is presented separately.

These adjustments have no impact on 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 the Company’s risk consulting and internal audit services division, 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 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 from investments held in employee deferred compensation trusts was $61 million for the year ended December 31, 2021, down from $75 million for the year ended December 31, 2020.

The decrease in income from trust investments was due to lower market returns in 2021, when compared to 2020.

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 Consolidated Statements of Operations.

The Company’s (income) loss from investments held in employee deferred compensation trusts was a loss of $86 million for the year ended December 31, 2022, down from income of $61 million for the year ended December 31, 2021.

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

Income Before Income Taxes and Segment Income.

1 unchanged sentence

Combined segment income was $891 million, or 12.3% of revenues, for the year ended December 31, 2022, up from $806 million, or 12.5% of revenues, for the year ended December 31, 2021.

The Company's non-GAAP combined segment income is summarized as follows (in thousands):

Year Ended December 31,

2022 % of Revenue 2021 % of Revenue

Combined Segment Income

Contract talent solutions $ 492,281 10.9 % $ 393,872 9.8 %

Permanent placement talent solutions $ 127,622 17.6 % $ 106,465 18.7 %

Protiviti $ 270,711 13.7 % $ 305,487 16.5 %

Total $ 890,614 12.3 % $ 805,824 12.5 %

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

Year Ended December 31,

2022 % of Revenue 2021 % of Revenue

Income before income taxes $ 896,955 12.4 % $ 803,780 12.4 %

2 unchanged sentences

Combined segment income $ 890,614 12.3 % $ 805,824 12.5 %

For the Company’s temporary and consultant staffing division, segment income was $394 million, or 9.8% of applicable revenues, for the year ended December 31, 2021, up from $237 million, or 6.8% of applicable revenues, for the year ended December 31, 2020.

For the Company’s permanent placement staffing division, segment income was $106 million, or 18.7% of applicable revenues, for the year ended December 31, 2021, up from segment income of $29 million, or 7.8% of applicable revenues, for the year ended December 31, 2020.

For the Company’s risk consulting and internal audit services division, segment income was $305 million, or 16.5% of applicable revenues, for the year ended December 31, 2021, compared to segment income of $156 million, or 12.3% of applicable revenues, for the year ended December 31, 2020.

Provision for income taxes .

The provision for income taxes was 26.6% and 25.5% for the years ended December 31, 2022 and 2021, respectively.

The lower tax rate for 2021 can be attributed to better coverage of non-deductible expenses due to higher income in 2021, as well as higher stock compensation deductions due to the rise in the Company's stock price.

The higher tax rate for 2022 can be primarily attributed to higher non-deductible expenses in 2022, as well as lower stock compensation deductions due to the Company's stock price.

Years ended December 31, 2021 and 2020

4 unchanged sentences

Operating activities provided $684 million during the year ended December 31, 2022, offset by $117 million and $509 million of net cash used in investing activities and financing activities, respectively.

Operating and investing activities provided $597 million and $9 million, respectively, during the year ended December 31, 2020, offset by $315 million of net cash used in financing activities.

Operating activities provided $603 million during the year ended December 31, 2021, offset by $88 million and $459 million of net cash used in investing and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the year ended December 31, 2022, was $684 million.

1 unchanged sentence

Net cash provided by operating activities for the year ended December 31, 2021, was $603 million.

This was composed of net income of $306 million, adjusted upward for non-cash items of $59 million, and net cash provided by changes in working capital of $232 million.

This was composed of net income of $599 million, adjusted upward for non-cash items of $89 million, offset by net cash used in changes in working capital of $85 million.

Investing activities—Cash used in investing activities for the year ended December 31, 2022, was $117 million.

This was composed of capital expenditures of $37 million and investments in employee deferred compensation trusts of $85 million, offset by proceeds from employee deferred compensation trust redemptions of $34 million.

Cash provided by investing activities for the year ended December 31, 2020 was $9 million.

This was composed of proceeds from employee deferred compensation trust redemptions of $123 million, largely offset by capital expenditures of $33 million, investments in employee deferred compensation trusts of $65 million, and $16 million cash paid for an acquisition.

This was composed of capital expenditures of $61 million, investments in employee deferred compensation trusts of $67 million and $19 million cash paid for an acquisition, partially offset by proceeds from employee deferred compensation trust redemptions of $30 million.

Cash used in investing activities for the year ended December 31, 2021, was $88 million.

This was composed of capital expenditures of $37 million and investments in employee deferred compensation trusts of $85 million, partially offset by proceeds from employee deferred compensation trust redemptions of $34 million.

Capital expenditures, including $40 million related to cloud computing implementations, in 2022, totaled $101 million, approximately 80.0% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

1 unchanged sentence

Capital expenditures included amounts spent on tenant improvements and furniture and equipment in the Company’s leased offices.

We currently expect that 2022 capitalized expenditures will range from $95 million to $105 million, of which $75 million to $80 million relates to software initiatives and technology infrastructure, including capitalized costs relating to the implementation of cloud computing arrangements.

The Company currently expects 2023 capitalized expenditures will range from $100 million to $120 million, of which $65 million to $75 million relates to software initiatives and technology infrastructure, including capitalized costs relating to the implementation of cloud computing arrangements.

Financing activities—Cash used in financing activities for the year ended December 31, 2022, was $509 million.

3 unchanged sentences

As of December 31, 2022, the Company is authorized to repurchase, from time to time, up to 3.8 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the year ended December 31, 2021 and 2020, the Company repurchased 2.8 million shares, at a cost of $260 million, and 2.5 million shares, at a cost of $138 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 year ended December 31, 2021 and 2020, such repurchases totaled 0.3 million shares, at a cost of $30 million, and 0.4 million shares, at a cost of $17 million, respectively.

On February 9, 2023, the Company authorized the repurchase, from time to time, of up to an additional 10.0 million shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the years ended December 31, 2022 and 2021, the Company repurchased 3.3 million shares, at a cost of $280 million, and 2.8 million shares, at a cost of $260 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 applicable statutory withholding taxes.

During the years ended December 31, 2022 and 2021, such repurchases totaled 0.4 million shares, at a cost of $38 million, and 0.3 million shares, at a cost of $30 million, respectively.

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

The Company’s working capital as of December 31, 2021 included $619 million in cash and cash equivalents and $985 million in accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company’s working capital as of December 31, 2022, included $659 million in cash and cash equivalents and $1.02 billion in net 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.

There is limited visibility into future cash flows as the Company’s revenues are dependent on macroeconomic conditions.

The Company’s variable direct costs related to its temporary and consultant staffing business will largely fluctuate in relation to its revenues.

In May 2021, the Company entered into an amendment to extend the maturity of its $100 million unsecured revolving credit facility (the “Credit Agreement”) to May 2024.

There is limited visibility into future cash flows as the Company’s revenues and net income are dependent on macroeconomic conditions.

The Company’s variable direct costs related to its contract talent solutions business will largely fluctuate in relation to its revenues.

The Company has an unsecured revolving credit facility (the “Credit Agreement”) of $100 million, which matures in May 2024.

Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR, or an alternative base rate, plus an applicable margin.

5 unchanged sentences

As of December 31, 2022, the Company reported current and long-term operating lease liabilities of $86.1 million and $151.8 million, respectively.

These balances consist of the minimum rental commitments for 2022 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancelable lease contracts executed as of December 31, 2021.

These balances consist of the minimum rental commitments for 2023 and thereafter, discounted to reflect the Company’s cost of borrowing, under non-cancelable lease contracts executed as of December 31, 2022.

The majority of these leases are for real estate.

2 unchanged sentences

Purchase Obligations.

As of December 31, 2021, the Company incurred contractual purchase obligations of $127.9 million primarily related to software subscriptions, services, telecom service and software maintenance agreements.

As of December 31, 2022, the Company incurred contractual purchase obligations of $251.3 million primarily related to software subscriptions, services, telecom services and software maintenance agreements.

Of this amount, $113.5 million is expected to be paid within the next twelve months.

5 unchanged sentences

Assets of these plans are held by an independent trustee for the sole benefit of participating employees and consist of money market funds and mutual funds.

For further information, see Note I—“Employee Deferred Compensation Plan Obligations” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report.

For further information, see Note I— “ Employee Deferred Compensation Plans ” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis