What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-10 compared with 2022-02-14 · 144 added, 157 removed, 662 unchanged (31% of the section changed)

18 unchanged sentences

Income taxes payable 15,535 15,631

Notes payable — 239

Current operating lease liabilities 86,083 83,787

3 unchanged sentences

Total liabilities 1,395,930 1,571,308

Commitments and Contingencies (Note L)

Commitments and Contingencies (Note K)

STOCKHOLDERS’ EQUITY

3 unchanged sentences

authorized 260,000,000 shares;

outstanding 110,685,989 and 113,127,501 shares

issued and outstanding 107,698,498 and 110,685,989 shares

Additional paid-in capital 1,293,565 1,235,903

14 unchanged sentences

Selling, general and administrative expenses 2,117,296 1,951,282 1,666,041

Income from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I) ( 61,078 ) ( 75,188 ) ( 54,917 )

(Income) loss from investments held in employee deferred compensation trusts 86,139 ( 61,078 ) ( 75,188 )

Amortization of intangible assets 1,667 2,241 1,219

20 unchanged sentences

Foreign currency translation adjustments, net of tax ( 25,274 ) ( 18,702 ) 18,973

Foreign defined benefit plans, net of tax 812 ( 3,719 ) ( 2,324 )

Foreign defined benefit plan adjustments, net of tax 4,273 812 ( 3,719 )

Total other comprehensive income (loss) ( 21,001 ) ( 17,890 ) 15,254

9 unchanged sentences

Net income — — — — 306,276 306,276

Adoption of accounting pronouncement — — — — ( 558 ) ( 558 )

Other comprehensive income (loss) — — — 15,254 — 15,254

6 unchanged sentences

Net income — — — — 598,626 598,626

Adoption of accounting pronouncement — — — — ( 558 ) ( 558 )

Other comprehensive income (loss) — — — ( 17,890 ) — ( 17,890 )

27 unchanged sentences

Amortization of intangible assets 1,667 2,241 1,219

Realized and unrealized gains from investments held in employee deferred compensation trusts ( 37,359 ) ( 66,866 ) ( 44,492 )

Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts 98,776 ( 37,359 ) ( 66,866 )

Stock-based compensation 57,663 55,932 52,486

31 unchanged sentences

Fund exchanges within employee deferred compensation trusts $ 103,003 $ 116,815 $ 208,055

Contingent consideration related to acquisition $ 1,300 $ — $ —

The accompanying Notes to Consolidated Financial Statements

4 unchanged sentences

Robert Half International Inc.

(the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps ® , Robert Half ® Finance & Accounting , OfficeTeam ® , Robert Half ® Technology , Robert Half ® Management Resources , Robert Half ® Legal , The Creative Group ® , and Protiviti ® .

The Company, through its Accountemps , Robert Half Finance & Accounting , and Robert Half Management Resources divisions, is a specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance.

OfficeTeam specializes in highly skilled temporary administrative support professionals.

Robert Half Technology provides project and full-time technology professionals.

Robert Half Legal provides temporary, project, and full-time staffing of lawyers, paralegals and legal support personnel.

The Creative Group provides interactive, design, marketing, advertising and public relations professionals.

Protiviti is a global consulting firm that helps companies solve problems in finance, technology, operations, data, analytics, governance, risk and internal audit.

Revenues are predominantly derived from specialized staffing services.

(the “Company”) is a specialized talent solutions and business consulting firm that connects opportunities at great companies with highly skilled job seekers.

Robert Half ® offers contract talent solutions and permanent placement talent solutions for finance and accounting, technology, marketing and creative, legal, administrative, and customer support roles.

Robert Half is also the parent company of Protiviti ® , a global consulting firm that provides internal audit, risk, business, and technology consulting solutions.

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 operates in North America, South America, Europe, Asia, and Australia.

2 unchanged sentences

The Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current presentation.

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the 2022 presentation.

Principles of Consolidation.

3 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, accrued medical expenses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.

We continue to monitor the global economic uncertainty as a result of cornavirus (“COVID-19”) and its variants to assess the impact on the Company’s results of operations, financial condition and liquidity.

As of December 31, 2022, such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, accrued medical expenses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.

Actual results and outcomes may differ from management’s estimates and assumptions.

1 unchanged sentence

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.

See Note C for further discussion of the revenue recognition accounting policy.

See Note C— “ Revenue Recognition ” for further discussion of the revenue recognition accounting policy.

Costs of Services.

Direct costs of temporary and consultant staffing consist of professional staff payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses.

Direct costs of permanent placement staffing services consist of reimbursable expenses.

Risk consulting and internal audit direct costs of services include professional staff payroll, payroll taxes and benefit costs, as well as reimbursable expenses.

Direct costs of contract talent solutions consist of payroll, payroll taxes, and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses.

Direct costs of permanent placement talent solutions consist of reimbursable expenses.

Protiviti direct costs of services include professional staff payroll, payroll taxes and benefit costs, as well as reimbursable expenses.

Advertising Costs.

1 unchanged sentence

Advertising costs were $ 55.6 million, $ 49.3 million and $ 37.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Income from Investments Held in Employee Deferred Compensation Trusts .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Income) Loss from Investments Held in Employee Deferred Compensation Trusts .

Under the Company’s employee deferred compensation plans, employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trusts consistent with these directions.

As realized and unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly.

Changes in the Company’s deferred compensation obligations remain in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, costs of services.

As realized and unrealized investment gains and losses occur, the Company’s 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 an equal and offsetting amount, leaving no net cost to the Company.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s income from investments held in employee deferred compensation trusts (in thousands):

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 following table presents the Company’s (income) loss from investments held in employee deferred compensation trusts (in thousands):

Year Ended December 31,

1 unchanged sentence

Dividend income $ ( 12,637 ) $ ( 23,719 ) $ ( 8,322 )

Realized and unrealized gains 37,359 66,866 44,492

Income from investments held in employee deferred compensation trusts $ 61,078 $ 75,188 $ 54,917

Realized and unrealized (gains) losses 98,776 ( 37,359 ) ( 66,866 )

(Income) loss from investments held in employee deferred compensation trusts $ 86,139 $ ( 61,078 ) $ ( 75,188 )

Comprehensive Income (Loss).

9 unchanged sentences

inputs other than the quoted prices in active markets that are observable either directly or indirectly

unobservable inputs in which there is little or no market data, which requires management’s best

estimates and assumptions that market participants would use in pricing the asset or liability

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value because of their short-term nature.

unobservable inputs in which there is little or no market data, which requires management’s best estimates and assumptions that market participants would use in pricing the asset or liability

The carrying value of cash and cash equivalents, net accounts receivable, and accounts payable and accrued expenses approximates fair value because of their short-term nature.

The Company holds mutual funds and money market funds to satisfy its obligations under its employee deferred compensation plans which are carried at fair value based on quoted market prices in active markets for identical assets (level 1).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the composition of the underlying assets which comprise the Company’s deferred

compensation trust assets (in thousands):

The following table sets forth the composition of the underlying assets which comprise the Company’s deferred compensation trust assets (in thousands):

Fair Value Measurements Using

Balance at December 31, 2021

Quoted Prices

Balance at December 31, 2022 Quoted Prices

in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

6 unchanged sentences

Fair Value Measurements Using

Balance at December 31, 2020

Quoted Prices

Balance at December 31, 2021 Quoted Prices

in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

14 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the activity in the allowance for credit losses from January 1, 2020, through December 31, 2021 (in thousands):

The following table sets forth the activity in the allowance for credit losses from December 31, 2020, through December 31, 2022 (in thousands):

Allowance for Credit Losses

Balance as of January 1, 2020

Balance as of December 31, 2020

Charges to expense 9,464

41 unchanged sentences

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.

5 unchanged sentences

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

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

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

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

4 unchanged sentences

Workers’ compensation expense includes the insurance premiums for claims in excess of $ 0.5 million, claims administration fees charged by the Company’s workers’ compensation administrator, premiums paid to state-operated insurance funds, and an estimate for the Company’s liability for incurred but not reported (“IBNR”) claims and for the ongoing development of existing claims.

The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period includes estimates.

The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period include estimates.

The Company has established reserves for workers’ compensation claims using loss development rates which are estimated using periodic third party actuarial valuations based upon historical loss statistics, which include the Company’s historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends.

5 unchanged sentences

Medical expenses are presented as a component of selling, general and administrative expenses, or in the case of risk consulting and internal audit services, costs of services in the Consolidated Statements of Operations.

The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period includes estimates.

The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period include estimates.

The Company has established reserves for medical claims using rates which are estimated using periodic third-party actuarial valuations based upon historical loss statistics which include the Company’s historical claims data, and an estimate of future claim trends.

3 unchanged sentences

The reporting currency of the Company and its subsidiaries is the U.S.

The functional currency of the Company’s foreign subsidiaries is their local currency.

The results of operations of the Company’s foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period.

The financial position of the Company’s foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Stockholders’ Equity.

The functional currency of the Company’s international subsidiaries is their local currency.

The results of operations of the Company’s international subsidiaries are translated at the monthly average exchange rates prevailing during the period.

The financial position of the Company’s international subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Stockholders’ Equity.

Gains and losses resulting from foreign currency transactions are included as a component of selling, general and administrative expenses in the Consolidated Statements of Operations and have not been material for all periods presented.

9 unchanged sentences

Recently Adopted Accounting Pronouncements

Reference Rate Reform.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

The application of this guidance did not have a material impact on the Company's financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Government Assistance.

3 unchanged sentences

The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions.

This guidance is effective for annual periods beginning after December 15, 2021.

The Company believes the adoption of this guidance will not have a material impact on its financial statements.

The Company adopted this ASU in January 2022.

The adoption of this guidance did not have a material impact on its financial statements.

Business Combinations.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers, as if it had originated the contracts.

After the amendments are adopted, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements.

The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted this ASU during the fourth quarter of 2022.

The adoption of this guidance did not have a material impact on its financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note C—Revenue Recognition

The Company derives its revenues from three segments:

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

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

1 unchanged sentence

Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues, and equivalent amounts of reimbursable expenses are included in costs of services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Temporary and consultant staffing revenues.

Temporary and consultant staffing revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s engagement professionals.

Contract talent solutions revenues.

Contract talent solutions revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice when the services are rendered by the Company’s engagement professionals.

The substantial majority of engagement professionals placed on assignment by the Company are the Company’s legal employees while they are working on assignments.

1 unchanged sentence

The Company assumes the risk of acceptability of its employees to its customers.

The Company records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses.

The Company records contract talent solutions revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses.

The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and establish their price and duties, and (iii) bears the risk for services that are not fully paid for by customers.

Fees paid to time management or vendor management service providers selected by clients are recorded as a reduction of revenues, as the Company is not the primary obligor with respect to those services.

Permanent placement staffing revenues.

Permanent placement staffing revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment.

Permanent placement talent solutions revenues.

Permanent placement talent solutions revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment.

The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90 -day guarantee period.

1 unchanged sentence

Fees to clients are generally calculated as a percentage of the new employee’s annual compensation.

No fees for permanent placement services are charged to employment candidates.

Risk consulting and internal audit services revenues.

Risk consulting and internal audit services are generally provided on a time-and-material basis or fixed-fee basis.

No fees for permanent placement talent solutions services are charged to employment candidates.

Protiviti revenues.

Protiviti's consulting services are generally provided on a time-and-material basis or fixed-fee basis.

Revenues earned under time-and-material arrangements and fixed-fee arrangements are recognized using a proportional performance method.

1 unchanged sentence

Cost incurred represents work performed and thereby best depicts the transfer of control to the customer.

Risk consulting and internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time.

Protiviti’s consulting services generally contain one or more performance obligation(s) which are satisfied over a period of time.

Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment for services provided to date.

The Company periodically evaluates the need to provide for any losses on these projects, and losses are recognized when it is probable that a loss will be incurred.

The following table presents the Company’s revenues disaggregated by line of business (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s revenues disaggregated by functional specialization and segments (in thousands):

Year Ended December 31,

2022 2021 2020

Accountemps $ 1,870,563 $ 1,558,024 $ 1,985,221

OfficeTeam 1,058,906 764,947 1,040,755

Robert Half Technology 795,319 695,418 765,831

Robert Half Management Resources 894,334 698,942 792,757

Contract talent solutions

Finance and accounting $ 3,185,183 $ 2,764,897 $ 2,256,966

Administration and customer support 1,042,634 1,058,906 764,947

Technology 857,261 795,319 695,418

Elimination of intersegment revenues (a) ( 552,231 ) ( 580,379 ) ( 239,996 )

Temporary and consultant staffing 4,038,743 3,477,335 4,412,125

Permanent placement staffing 569,921 370,109 533,432

Risk consulting and internal audit services 1,852,780 1,261,556 1,128,875

Service revenues $ 6,461,444 $ 5,109,000 $ 6,074,432

(a) Service revenues for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources include intersegment revenues, which represent revenues from services provided to the Company’s risk consulting and internal audit services segment in connection with the Company’s blended business solutions.

Intersegment revenues for each line of business are aggregated and then eliminated as a single line.

Total contract talent solutions 4,532,847 4,038,743 3,477,335

Permanent placement talent solutions 725,155 569,921 370,109

Protiviti 1,980,140 1,852,780 1,261,556

Total service revenues $ 7,238,142 $ 6,461,444 $ 5,109,000

(a) Service revenues for finance and accounting, administrative and customer support, and technology include intersegment revenues, which represent revenues from services provided to the Company’s Protiviti segment in connection with the Company’s blended business solutions.

Intersegment revenues for each functional specialization are aggregated and then eliminated as a single line.

Payment terms in the Company's contracts vary by the type and location of the Company’s customer and the services offered.

The term between invoicing and when payment is due is not significant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement.

13 unchanged sentences

Balance as of December 31, 2022 $ 21,983

Payments in advance of satisfaction of performance obligations 27,341

Revenue recognized ( 20,372 )

Other, including translation adjustments 380

Balance as of December 31, 2021 $ 25,601

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note D—Other Current Assets

13 unchanged sentences

Property and equipment, net $ 109,687 $ 93,403

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note F—Leases

The Company has operating leases for corporate and field offices, and certain equipment.

The Company’s leases have remaining lease terms of 1 year to 8 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

The Company’s leases have remaining lease terms of less than 1 year to 9 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year.

Operating lease expense was $ 89.3 million, $ 86.6 million and $ 81.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

3 unchanged sentences

Cash paid for operating lease liabilities $ 93,302 $ 91,253 $ 84,569

Right-of-use assets obtained in exchange for operating lease liabilities from new leases $ 20,038 $ 37,786 $ 32,170

Right-of-use assets obtained in exchange for operating lease liabilities from lease

modifications or reassessments

$ 31,433 $ 64,221 $ 32,122

Right-of-use assets obtained in exchange for new operating lease liabilities $ 63,622 $ 51,471 $ 102,007

Supplemental balance sheet information related to leases consisted of the following:

3 unchanged sentences

Weighted average discount rate for operating leases 2.2 % 2.3 % 2.6 %

Future minimum lease payments under non-cancellable leases as of December 31, 2021, were as follows (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum lease payments under non-cancelable leases as of December 31, 2022, were as follows (in thousands):

2023 $ 90,452

5 unchanged sentences

These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 6 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note G—Goodwill

The following table sets forth the activity in goodwill from December 31, 2020, through December 31, 2022 (in thousands):

Temporary and consultant staffing Permanent placement staffing Risk consulting and internal audit services Total

Contract talent solutions Permanent placement talent solutions Protiviti Total

Balance as of December 31, 2020

$ 134,511 $ 26,180 $ 62,364 $ 223,055

Acquisitions (a) — — 12,199 12,199

Foreign currency translation adjustments 73 9 ( 282 ) ( 200 )

1 unchanged sentence

$ 134,584 $ 26,189 $ 62,082 $ 222,855

Acquisition (a) — — 15,892 15,892

Foreign currency translation adjustments ( 466 ) ( 91 ) ( 380 ) ( 937 )

1 unchanged sentence

$ 134,118 $ 26,098 $ 77,594 $ 237,810

(a) In December 2020 the Company, through its wholly owned subsidiary Protiviti, acquired Identropy, Inc., an independent security consulting firm specializing in advisory, implementation and managed services for identity, access management and access governance solutions.

As part of the acquisition, the Company recorded goodwill of $ 12.2 million within its risk consulting and internal audit services segment.

(a) In December 2022, the Company, through its wholly owned subsidiary Protiviti, acquired R2integrated (“R2i”), a digital experience agency specializing in digital solutions that integrate and accelerate customer experiences to drive impact for brands.

In connection with the acquisition, the Company recorded goodwill of $ 15.9 million within its Protiviti segment.

Note H—Accrued Payroll and Benefit Costs

4 unchanged sentences

Accrued payroll and benefit costs $ 472,310 $ 540,183

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $ 51.1 million and $ 102.2 million of applicable payroll taxes as of December 31, 2021 and December 31, 2020, respectively.

The remaining deferred payroll balance of $ 51.1 million is expected to be paid during the next 12 months and is included in payroll and benefits.

Note I—Employee Deferred Compensation Plan Obligations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note I—Employee Deferred Compensation Plans

The Company provides various qualified defined contribution 401(k) plans covering eligible employees.

1 unchanged sentence

Assets of this plan are held by an independent trustee for the sole benefit of participating employees.

Nonqualified plans are provided for employees not eligible for the qualified plans.

These plans include provisions for salary deferrals and Company matching and discretionary contributions.

Nonqualified plans are provided for employees on a discretionary basis, including those not eligible for the qualified plans.

These plans include provisions for salary deferrals and discretionary contributions.

The asset value of the nonqualified plans was $ 432.7 million and $ 495.0 million as of December 31, 2022, and December 31, 2021, respectively.

1 unchanged sentence

The liability value for the nonqualified plans was $ 474.1 million and $ 535.3 million as of December 31, 2022, and December 31, 2021, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s compensation expense related to its qualified defined contribution plans and nonqualified plans (in thousands):

2 unchanged sentences

Contribution expense $ 50,406 $ 47,119 $ 42,092

Increase in employee deferred compensation expense related to changes in the fair value of trust assets 61,078 75,188 54,917

Increase (decrease) in employee deferred compensation expense related to changes in the fair value of trust assets ( 86,139 ) 61,078 75,188

$ ( 35,733 ) $ 108,197 $ 117,280

The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material.

Note J—Notes Payable

The Company had a promissory note payable which had a balance of $ 0.2 million at December 31, 2020, and was paid in full as of December 31, 2021.

The Company has an uncommitted letter of credit facility (the “facility”) of up to $ 35.0 million, which is available to cover the issuance of debt support standby letters of credit.

The Company had used $ 18.0 million and $ 17.0 million in debt support standby letters of credit as of December 31, 2021 and 2020, respectively.

Of the debt support standby letters of credit outstanding, as of December 31, 2021 and 2020, $ 18.0 million and $ 16.8 million, respectively, satisfied workers’ compensation insurer’s collateral requirements.

There is a service fee of 1.2 % on the used portion of the facility.

The facility is subject to certain financial covenants and expires on August 31, 2022.

The Company was in compliance with these covenants as of December 31, 2021.

The Company intends to renew this facility prior to its August 31, 2022, expiration.

In March 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.

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 December 31, 2021.

There were no borrowings under the Credit Agreement as of December 31, 2021 or December 31, 2020.

Note K—Income Taxes

Note J—Income Taxes

The provision for income taxes for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands):

7 unchanged sentences

$ 239,036 $ 205,154 $ 115,606

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income before the provision for income taxes for the years ended December 31, 2022, 2021 and 2020, consisted of the following (in thousands):

4 unchanged sentences

$ 896,955 $ 803,780 $ 421,882

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:

10 unchanged sentences

Effective tax rate 26.6 % 25.5 % 27.4 %

The deferred portion of the tax (benefit) provision consisted of the following (in thousands):

The deferred portion of the tax provision (benefit) consisted of the following (in thousands):

Year Ended December 31,

1 unchanged sentence

Accrued expenses, deducted for tax when paid $ 41,953 $ ( 32,741 ) $ ( 33,997 )

Capitalized costs for books, deducted for tax 462 1,904 3,246

Internal-use software and capitalized costs ( 7,930 ) 462 1,904

Depreciation 4,608 ( 2,286 ) 6,732

Unrealized gains from investments held in employee deferred compensation trusts 8,167 14,882 11,674

Unrealized gains (losses) from investments held in employee deferred compensation trusts ( 26,009 ) 8,167 14,882

Other, net 1,695 5,000 ( 1,260 )

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As of December 31, 2022, the Company’s consolidated financial statements provide for any related U.S.

tax liability on earnings of foreign subsidiaries that may be repatriated.

tax liability on earnings of international subsidiaries that may be repatriated.

The following table reconciles the total amounts of gross unrecognized tax benefits from January 1, 2020 to December 31, 2022 (in thousands):

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Gross increases—tax positions in current year 1,533 3,370 1,678

Settlements — — ( 4 )

Lapse of statute of limitations ( 2,058 ) ( 1,894 ) ( 1,467 )

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The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.

The total amount of interest and penalties accrued as of December 31, 2021, is $ 0.4 million, including a $ 0.1 million decrease recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2022, is $ 0.6 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2021, was $ 0.4 million, including a $ 0.1 million decrease recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2020, was $ 0.5 million, including less than a $ 0.1 million increase recorded in income tax expense during the year.

The total amount of interest and penalties accrued as of December 31, 2019, was $ 0.5 million, including a $ 0.2 million increase recorded in income tax expense during the year.

The Company does not believe it is reasonably possible that the settlement of tax uncertainties will occur within the next twelve months.

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Generally, for foreign countries, the Company remains subject to examination for 2015 and subsequent years.

Note L—Commitments and Contingencies

Note K—Commitments and Contingencies

On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which was subsequently amended on October 23, 2015.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note M—Stockholders' Equity

The Company has an uncommitted letter of credit facility (the “facility”) of up to $ 35.0 million, which is available to cover the issuance of debt support standby letters of credit.

The Company had used $ 14.1 million and $ 18.0 million in debt support standby letters of credit as of December 31, 2022 and 2021, respectively.

Of the debt support standby letters of credit outstanding, as of December 31, 2022 and 2021, $ 14.1 million and $ 18.0 million, respectively, satisfied workers’ compensation insurer’s collateral requirements.

There is a service fee of 1.2 % on the used portion of the facility.

The facility is subject to certain financial covenants and expires on August 31, 2023.

The Company was in compliance with these covenants as of December 31, 2022.

The Company intends to renew this facility prior to its August 31, 2023, expiration.

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

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of December 31, 2022.

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

Note L—Stockholders' Equity

Stock Repurchase Program.

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Repurchases of shares and issuances of dividends are applied first to the extent of retained earnings and any remaining amounts are applied to additional paid-in capital.

Note N—Stock Plans

Note M—Stock Plans

Under various stock plans, officers, employees, and outside directors have received or may receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock.

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Restricted stock grants contain forfeitable rights to dividends.

Dividends for these grants are accrued on the dividend payment dates but are not paid until the shares vest, and dividends accrued for shares that ultimately do not vest are forfeited.

Dividends for these grants are accrued on the dividend payment dates but are not paid until the shares vest, and dividends accrued for shares that ultimately do

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

not vest are forfeited.

Recipients of stock units do not pay any cash consideration for the units, do not have the right to vote and do not receive dividends with respect to such units.

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The historical volatility was based on the most recent 2.78 -year period for the Company and the components of the peer group.

The stock price movements have been modeled such that the dividends are

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0 % dividend yield for each stock.

The stock price movements have been modeled such that the dividends are incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0 % dividend yield for each stock.

The use of a 0 % dividend yield is mathematically equivalent to including the dividends in the calculation of TSR.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note O—Net Income Per Share

Note N—Net Income Per Share

The calculation of net income per share for the three years ended December 31, 2022, 2021 and 2020, are reflected in the following table (in thousands, except per share amounts):

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Potential common shares include the dilutive effect of unvested performance-based restricted stock, restricted stock which contains forfeitable rights to dividends, and stock units.

Note P—Business Segments

Note O—Business Segments

The Company has three reportable segments:

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

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

Operating segments are defined as components of the Company for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance.

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

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

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

The accounting policies of the segments are set forth in Note A.

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

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

The accounting policies of the segments are set forth in Note A— “ Summary of Significant Accounting Policies ” .

The Company evaluates performance based on income before net interest income, intangible assets amortization expense and income taxes.

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Service revenues

Temporary and consultant staffing $ 4,038,743 $ 3,477,335 $ 4,412,125

Permanent placement staffing 569,921 370,109 533,432

Risk consulting and internal audit services 1,852,780 1,261,556 1,128,875

Contract talent solutions $ 4,532,847 $ 4,038,743 $ 3,477,335

Permanent placement talent solutions 725,155 569,921 370,109

Protiviti 1,980,140 1,852,780 1,261,556

$ 7,238,142 $ 6,461,444 $ 5,109,000

Segment income

Temporary and consultant staffing $ 393,872 $ 237,279 $ 410,153

Permanent placement staffing 106,465 28,799 83,885

Risk consulting and internal audit services 305,487 155,680 127,713

Contract talent solutions $ 492,281 $ 393,872 $ 237,279

Permanent placement talent solutions 127,622 106,465 28,799

Protiviti 270,711 305,487 155,680

Combined segment income 890,614 805,824 421,758

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Service revenues presented above are shown net of eliminations of intersegment revenues.

Intersegment revenues between temporary and consultant staffing segment and risk consulting and internal audit services segment were $ 580.4 million, $ 240.0 million and $ 172.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Revenue and direct costs related to the intersegment activity are reflected in the risk consulting and internal audit segment, including the costs of candidate payroll, fringe benefits and incremental recruiter compensation.

Intersegment revenues between contract talent solutions segment and Protiviti segment were $ 552.2 million, $ 580.4 million and $ 240.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Revenue and direct costs related to the intersegment activity are reflected in the Protiviti segment, including the costs of candidate payroll, fringe benefits and incremental recruiter compensation.

Assets by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is such information used by management for purposes of assessing performance or allocating resources.

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$ 7,238,142 $ 6,461,444 $ 5,109,000

2021 2020 2019

Property and equipment, net

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$ 109,687 $ 93,403

(a) There were no customers that accounted for more than 10% of the Company’s total service revenues in any year presented.

(b) No individual country represented more than 10% of revenues in any year presented.

(a) No customer accounted for more than 10% of the Company’s total service revenues in any year presented.

(b) No country represented more than 10% of revenues in any year presented.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note Q—Subsequent Events

Note P—Subsequent Events

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.

The authorization is in addition to the approximately 3.8 million shares remaining under the existing repurchase program.

There is no guarantee as to whether, when, or how many shares the Company will repurchase, and the Company may discontinue the repurchase program at any time.

On February 9, 2023, the Company announced the following:

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Notes A and K to the consolidated financial statements, the Company’s operations are subject to U.S.

As described in Notes A and J to the consolidated financial statements, the Company’s operations are subject to U.S.

federal, state and local, and foreign income taxes.

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These procedures included testing the effectiveness of controls relating to income taxes, including management’s controls over the application of current enacted tax laws and published tax guidance and their impact to the current year provision, the establishment of deferred tax assets and liabilities, and the evaluation of the realizability of deferred tax assets.

These procedures also included, among others, (i) testing the provision for income taxes and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and

measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance.

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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-K

Item 8. Financial Statements and Supplementary Data