What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-10-28 · 138 added, 303 removed, 177 unchanged (71% of the section changed)

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(the “Company”).

These statements may be identified by words such as “estimate,” “forecast,” “project,” “plan,” “intend,” “believe,” “expect,” “anticipate,” or variations or negatives thereof or by similar or comparable words or phrases.

Forward-looking statements are not guarantees or promises that goals or targets will be met.

These statements may be identified by words such as “estimate,” “forecast,” "target," “project,” “plan,” “intend,” “believe,” “expect,” “anticipate,” or variations or negatives thereof or by similar or comparable words or phrases.

In addition, historical, current, and forward-looking information about the Company’s ESG and compliance programs, including targets or goals, may not be considered material for SEC reporting purposes and may be based on standards for measuring progress that are still developing, on internal controls, diligence, or processes that are evolving, and on assumptions that are subject to change in the future.

Forward-looking statements are estimates only, based on management’s current expectations, currently available information and current strategy, plans, or forecasts, and involve certain known and unknown risks and, uncertainties, and assumptions that are difficult to predict and often beyond our control and are inherently uncertain.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements.

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Executive Overview

The Company recently completed a multiyear process to unify its family of Robert Half endorsed divisional brands to a single brand, Robert Half .

This simplifies the Company’s go-to-market brand structure for clients and candidates and 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 reported another quarter of year-over-year growth, over and above very strong growth reported in the prior year.

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

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

dollar strengthened against the Euro and British pound.

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

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

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

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

Remote and hybrid working models are expected to remain.

This structural shift in how companies source talent plays to the Company’s numerous strengths, including its global brand, office network, candidate database and AI-driven technologies.

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

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

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

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

The Company's first-quarter results were largely in line with expectations.

Contract talent solutions and permanent placement talent solutions performed well against a backdrop of client hiring caution and tight labor markets.

Protiviti led the way with its 22nd consecutive quarter of year-over-year revenue growth.

During the first quarter of 2023, service revenues were $1.72 billion, a decrease of 5.4% from the prior year.

Net income was $122 million and diluted net income per share was $1.14.

Global labor markets are tight and clients continue to hire, albeit at a more measured pace which lengthened the sales cycle.

On segment basis, year-over-year revenues for contract talent solutions and permanent placement talent solutions were down 7.8% and 16.1%, respectively, and Protiviti grew year-over-year revenues by 4.6%.

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 and labor trends for the first quarter of 2023 remained steady for the Company as the unemployment rate was 3.5% for both December 2022 and at the end of the first quarter of 2023.

Although recent metrics are modestly off their peaks, talent shortages persist.

In the U.S., unemployment stands near a 50-year low and remains even lower for those with a college degree, where the rate is 2.0%.

The Company is optimistic about its ability to navigate the uncertain global macroeconomic environment and is well positioned to benefit as the macro landscape improves.

Clients continue to hire, but are being more selective and have added steps to their hiring process which impacts decision time frames and lengthens 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.

The Company continues to invest in the tools needed to secure top talent for its clients by combining the power of its proven, artificial intelligence-based technologies with the unique expertise of its specialized professionals.

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, when compared to the prior year.

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

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

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

During the first quarter of 2023, the Company decreased headcount for its contract talent solutions and permanent placement talent solutions segments, while it increased headcount for its Protiviti segment, when compared to prior year-end levels.

Critical Accounting Policies and Estimates

The Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments and are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

There were no material changes to the Company’s critical accounting policies or estimates for the three months ended March 31, 2023.

Recent Accounting Pronouncements

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

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 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.

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

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

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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 expenses;

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 functional specializations and segments on both a reported basis and also on an as adjusted basis for global, U.S.

and international operations.

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

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 functional specializations and segments.

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.

adjusted selling, general and administrative expense;

combined segment income;

and as adjusted revenue growth rates.

The following measures:

adjusted gross margin;

adjusted selling, general and administrative expenses;

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

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 and amortization of intangible assets.

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

The Company provides combined segment income because it is how management evaluates 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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“Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on the Company’s results of operations and financial condition.

Three Months Ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

Service Revenues.

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

The Company’s revenues were $1.72 billion for the three months ended March 31, 2023, a decrease of 5.4% compared to $1.81 billion for the three months ended March 31, 2022.

Revenues from U.S.

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

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

operations decreased 5.2% to $1.34 billion (78.2% of total revenue) for the three months ended March 31, 2023, compared to $1.42 billion (78.0% of total revenue) for the three months ended March 31, 2022.

Revenues from international operations decreased 6.2% to $375 million (21.8% of total revenue) for the three months ended March 31, 2023, compared to $400 million (22.0% of total revenue) for the three months ended March 31, 2022.

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

Contract talent solutions revenues were $1.14 billion for the three months ended September 30, 2022, increasing by 8.1% compared to revenues of $1.05 billion for the three months ended September 30, 2021.

Contract talent solutions revenues were $1.07 billion for the three months ended March 31, 2023, decreasing by 7.8% compared to revenues of $1.16 billion for the three months ended March 31, 2022.

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

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

In the U.S., revenues in the third quarter of 2022 increased 11.3% on both an as reported basis and on an as adjusted basis, compared to the third quarter of 2021.

For the Company’s international

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

Permanent placement talent solutions revenues were $182 million for the three months ended September 30, 2022, increasing by 16.5% compared to revenues of $156 million for the three months ended September 30, 2021.

The decrease in contract talent solutions revenues for the three months ended March 31, 2023, was primarily due to a 18.1% decrease in the number of hours worked by the Company's engagement professionals, partially offset by an 11.0% increase in average bill rates.

On an as adjusted basis, contract talent solutions revenues in the first quarter of 2023 decreased 8.0% compared to the first quarter of 2022.

In the U.S., revenues in the first quarter of 2023 decreased 8.6% on an as reported basis and decreased 9.9% on as adjusted basis, compared to the first quarter of 2022.

For the Company’s international operations, revenues for the first quarter of 2023 decreased 4.7% on an as reported basis and decreased 1.2% on an as adjusted basis, compared to the first quarter of 2022.

Permanent placement talent solutions revenues were $157 million for the three months ended March 31, 2023, decreasing by 16.1% compared to revenues of $187 million for the three months ended March 31, 2022.

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

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

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

For the Company’s international operations, revenues for the third quarter of 2022 increased 2.9% on an as reported basis and 15.4% on an as adjusted basis, compared to the third quarter of 2021.

The decrease in permanent placement staffing revenues for the three months ended March 31, 2023, was due to an 18.5% decrease in the number of placements, which was offset by a 2.4% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues decreased 15.8% for the first quarter of 2023, compared to the first quarter of 2022.

In the U.S., revenues for the first quarter of 2023 decreased 16.9% on an as reported basis and decreased 18.1% on an as adjusted basis, compared to the first quarter of 2022.

For the Company’s international operations, revenues for the first quarter of 2023 decreased 14.0% on an as reported basis, and decreased 10.5% on an as adjusted basis, compared to the first quarter of 2022.

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

Protiviti revenues were $511 million for the three months ended September 30, 2022, increasing by 2.0% compared to revenues of $501 million for the three months ended September 30, 2021.

Protiviti revenues were $494 million for the three months ended March 31, 2023, increasing by 4.6% compared to revenues of $472 million for the three months ended March 31, 2022.

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

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

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

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

For the Company’s international operations, revenues for the third quarter of 2022 decreased 6.3% on an as reported basis and increased 7.3% on an as adjusted basis, compared to the third quarter of 2021.

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

The increase in Protiviti revenues for the three months ended March 31, 2023, was due to a 4.5% increase in average hourly bill rates and a 0.1% increase in billable hours.

On an as adjusted basis, Protiviti revenues increased 4.4% for the first quarter of 2023, compared to the first quarter of 2022.

In the U.S., revenues in the first quarter of 2023 increased 7.5% on an as reported basis and increased 5.9% an as adjusted basis, compared to the first quarter of 2022.

For the Company’s international operations, revenues in the first quarter of 2023 decreased 5.7% on an as reported basis, and decreased 1.5% on an as adjusted basis, compared to the first quarter of 2022.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the three months ended March 31, 2023, is presented in the following table:

Global United States International

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Gross Margin .

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

The Company’s gross margin dollars were $690 million for the three months ended March 31, 2023, down 10.6% from $772 million for the three months ended March 31, 2022.

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

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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 contract talent solutions position converts to a permanent position with the Company’s client.

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

three months ended September 30, 2021.

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

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

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 $424 million for the three months ended March 31, 2023, down 8.3% from $462 million for the three months ended March 31, 2022.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in the first quarter of 2023, down from 40.0% in the first quarter of 2022.

The decrease in gross margin percentage was primarily due to lower conversion revenues.

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

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

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

Gross margin dollars for permanent placement talent solutions were $156 million for the three months ended March 31, 2023, down 16.1% from $186 million for the three months ended March 31, 2022.

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

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

The primary drivers of Protiviti's gross margin are:

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

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

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

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

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

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

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

Three Months Ended September 30, Relationships

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

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

Gross margin dollars for Protiviti were $110 million for the three months ended March 31, 2023, down 11.2% from $124 million for the three months ended March 31, 2022.

As a percentage of revenues, reported gross margin dollars for Protiviti were 22.2% in the first quarter of 2023, down from 26.2% in the first quarter of 2022.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 23.2% in the first quarter of 2023, down from 25.3% in the first quarter of 2022.

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

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

(in thousands):

Three Months Ended March 31, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 689,732 $ 771,846 $ 694,504 $ 768,000 40.2 % 42.5 % 40.5 % 42.3 %

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

Three Months Ended September 30, 2022

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 423,625 39.8 % $ 156,395 99.8 % $ 114,484 23.2 % $ 694,504 40.5 %

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 461,861 40.0 % $ 186,449 99.8 % $ 119,690 25.3 % $ 768,000 42.3 %

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

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

These adjustments have no impact to income before income taxes.

(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 .

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

The Company’s selling, general and administrative expenses were $549 million for the three months ended September 30, 2022, up 10.7% from $496 million for the three months ended September 30, 2021.

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

As a percentage of revenues, adjusted selling, general and administrative expenses were 30.6% in the third quarter of 2022, up from 29.0% in the third quarter of 2021.

The Company’s selling, general and administrative expenses were $552 million for the three months ended March 31, 2023, up 7.4% from $514 million for the three months ended March 31, 2022.

As a percentage of revenues, reported selling, general and administrative expenses were 32.2% in the first quarter of 2023, up from 28.3% in the first quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses were 30.9% in the first quarter of 2023, up from 29.8% in the first quarter of 2022.

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

Selling, general and administrative expenses for contract talent solutions were $319 million for the three months ended September 30, 2022, increasing by 2.7% from $310 million for the three months ended September 30, 2021.

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

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

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

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

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

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

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

Selling, general and administrative expenses for contract talent solutions were $342 million for the three months ended March 31, 2023, increasing by 11.9% from $305 million for the three months ended March 31, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 32.1% in the first quarter of 2023, up from 26.4% in the first quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 30.2% in the first quarter of 2023, up from 28.4% in the first quarter of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions during the quarter.

Selling, general and administrative expenses for permanent placement talent solutions were $135 million for the three months ended March 31, 2023, decreasing by 7.8% from $146 million for the three months ended March 31, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 86.0% in the first quarter of 2023, up from 78.3% in the first quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 84.6% in the first quarter of 2023, up from 79.8% in the first quarter of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions during the quarter.

Selling, general and administrative expenses for Protiviti were $75 million for the three months ended March 31, 2023, increasing by 20.8% from $63 million for the three months ended March 31, 2022.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 15.3% in the first quarter of 2023, up from 13.3% in the first quarter of 2022, due primarily to operating expenditures returning to more normal pre-pandemic levels.

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

(in thousands):

Three Months Ended September 30, Relationships

Three Months Ended March 31, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 552,229 $ 514,194 $ 529,710 $ 540,349 32.2 % 28.3 % 30.9 % 29.8 %

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

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 321,479 30.2 % $ 132,568 84.6 % $ 75,663 15.3 % $ 529,710 30.9 %

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 328,615 28.4 % $ 149,121 79.8 % $ 62,613 13.3 % $ 540,349 29.8 %

These adjustments have no impact to income before income taxes.

(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.

These adjustments have no impact on income before income taxes.

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

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The Company’s (income) loss from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments and is presented separately on the unaudited Condensed Consolidated Statements of Operations.

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

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

The Company’s (income) loss from investments held in employee deferred compensation trusts was income of $27 million and a loss of $30 million for the three months ended March 31, 2023 and 2022, respectively.

The income from trust investments was due to positive market returns during the first quarter of 2023.

Income Before Income Taxes and Segment Income.

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

Combined segment income was $224 million, or 12.2% of revenues, for the three months ended September 30, 2022, down from $228 million, or 13.3% of revenues, for the three months ended September 30, 2021.

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

Three Months Ended September 30,

The Company’s total income before income taxes was $169 million, or 9.8% of revenues, for the three months ended March 31, 2023, down from $227 million or 12.5% of revenues, for the three months ended March 31, 2022.

Combined segment income was $165 million, or 9.6% of revenues, for the three months ended March 31, 2023, down from $228 million, or 12.5% of revenues, for the three months ended March 31, 2022.

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

Three Months Ended March 31,

2023 % of Revenue 2022 % of Revenue

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

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

Amortization of intangible assets 417 0.0 % 572 0.0 %

Combined Segment Income

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

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

Protiviti segment income was $72 million, or 14.0% of applicable revenues, for the three months ended September 30, 2022, down from $87 million, or 17.3% of applicable revenues, for the three months ended September 30, 2021.

Provision for income taxes .

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

Nine Months Ended September 30, 2022 and 2021

Service Revenues.

The Company’s revenues were $5.51 billion for the nine months ended September 30, 2022, increasing by 17.5% compared to $4.69 billion for the nine months ended September 30, 2021.

Revenues from U.S.

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

Revenues from international operations increased 9.3% to $1.16 billion (21.1% of total revenue) for the nine months ended September 30, 2022, compared to $1.06 billion (22.7% of total revenue) for the nine months ended September 30, 2021.

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

Contract talent solutions revenues were $3.46 billion for the nine months ended September 30, 2022, increasing by 18.4% compared to revenues of $2.92 billion for the nine months ended September 30, 2021.

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

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

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

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

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

Permanent placement talent solutions revenues were $569 million for the nine months ended September 30, 2022, increasing by 38.2% compared to revenues of $412 million for the nine months ended September 30, 2021.

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

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

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

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

For the Company’s international operations, revenues for the first three quarters of 2022 increased 23.6% on an as reported basis, and increased 33.5% on an as adjusted basis, compared to the first three quarters of 2021.

Protiviti revenues were $1.48 billion for the nine months ended September 30, 2022, increasing by 9.1% compared to revenues of $1.36 billion for the nine months ended September 30, 2021.

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

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

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

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

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

For the Company’s international operations, revenues in the first three quarters of 2022 increased 8.3% on an as reported basis, and increased 19.2% on an as adjusted basis, compared to the first three quarters of 2021.

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

Global United States International

Contract talent solutions $ 102,146 9.6 % $ 133,246 11.5 %

As Reported 18.4 % 21.8 % 7.0 %

Billing Days Impact 0.1 % 0.0 % 0.1 %

Currency Impact 1.9 % ― 8.9 %

As Adjusted 20.4 % 21.8 % 16.0 %

Permanent placement talent solutions 23,827 15.2 % 37,328 20.0 %

As Reported 38.2 % 44.8 % 23.6 %

Billing Days Impact 0.1 % 0.0 % 0.1 %

Currency Impact 3.0 % ― 9.8 %

As Adjusted 41.3 % 44.8 % 33.5 %

As Reported 9.1 % 9.3 % 8.3 %

Billing Days Impact 0.0 % 0.0 % 0.2 %

Currency Impact 2.2 % ― 10.7 %

As Adjusted 11.3 % 9.3 % 19.2 %

Gross Margin .

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

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

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

The key drivers of gross margin are:

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

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

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

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

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

This year-over-year improvement in gross margin percentage was primarily due to higher conversion revenues.

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

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

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

The primary drivers of Protiviti's gross margin are:

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

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

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

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

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

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

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

(in thousands):

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Contract talent solutions

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

Permanent placement talent solutions

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

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

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

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

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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

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

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

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

Nine Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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

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

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

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

These adjustments have no impact to income before income taxes.

Selling, General and Administrative Expenses .

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

The Company’s selling, general and administrative expenses were $1.57 billion for the nine months ended September 30, 2022, up 11.8% from $1.41 billion for the nine months ended September 30, 2021.

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

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

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

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

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

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

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

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

As a percentage of revenues,

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

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

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

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

(in thousands):

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

2022 2021 2022 2021 2022 2021 2022 2021

Selling, General and

Administrative Expenses

Contract talent solutions

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

Permanent placement talent solutions

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

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

Protiviti 38,821 7.9 % 57,077 12.1 %

Total $ 164,794 9.6 % $ 227,651 12.5 %

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

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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

Selling, General and

Administrative Expenses

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

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

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

Nine Months Ended September 30, 2021

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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

Selling, General and

Administrative Expenses

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

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

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

These adjustments have no impact to income before income taxes.

(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 and adjustments are recorded in selling, general and administrative expenses, or in the case of Protiviti, costs of services.

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

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

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

Income Before Income Taxes and Segment Income.

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

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

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

Nine Months Ended September 30,

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended March 31, 2023, and 2022 (in thousands):

Three Months Ended March 31,

2023 % of Revenue 2022 % of Revenue

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Combined segment income $ 164,794 9.6 % $ 227,651 12.5 %

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

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

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

Provision for income taxes .

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

The provision for income taxes was 27.8% and 26.0% for the three months ended March 31, 2023 and 2022, respectively.

The higher tax rate for 2023 can be primarily attributed to lower tax credits as well as lower stock compensation deductions due to the Company's stock price.

Liquidity and Capital Resources

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

Cash and cash equivalents were $593 million and $634 million at September 30, 2022 and 2021, respectively.

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

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

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

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

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

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

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

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

The change in the Company’s liquidity during the three months ended March 31, 2023 and 2022, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, investment in employee deferred compensation trusts, net of redemptions from employee deferred compensation trusts, repurchases of common stock, and payment of dividends.

Cash and cash equivalents were $548 million and $550 million at March 31, 2023 and 2022, respectively.

Operating activities provided cash flows of $66 million during the three months ended March 31, 2023, offset by $63 million and $117 million of net cash used in investing activities and financing activities, respectively.

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

Fluctuations in foreign currency exchange rates had the effect of increasing reported cash and cash equivalents by $3 million during the three months ended March 31, 2023, compared to a decrease of $1 million during the three months ended March 31, 2022.

Operating activities—Net cash provided by operating activities for the three months ended March 31, 2023, was composed of net income of $122 million adjusted upward for non-cash items of $17 million, offset by net cash used in changes in working capital of $73 million.

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

Investing activities—Cash used in investing activities for the three months ended March 31, 2023, was $63 million.

This was composed of capital expenditures of $9 million, investments in employee deferred compensation trusts of $71 million, and $1 million in payments related to an acquisition, partially offset by proceeds from employee deferred compensation trusts redemptions of $18 million.

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

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

Capital expenditures, including $30 million for cloud computing arrangements, for the nine months ended September 30, 2022, totaled $78 million, approximately 80.3% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

Capital expenditures, including $10 million for cloud computing arrangements, for the three months ended March 31, 2023, totaled $20 million, approximately 73.0% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s sustainability and future growth opportunities.

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

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The Company currently expects that 2023 capital expenditures will range from $90 million to $110 million, of which $50 million to $70 million relates to software initiatives and technology infrastructure, including capitalized costs related to implementation of cloud computing arrangements.

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

Financing activities—Cash used in financing activities for the three months ended March 31, 2023, was $117 million.

This included repurchases of $63 million in common stock and $54 million in dividends paid to stockholders.

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

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

This included repurchases of $62 million in common stock and $48 million in dividends paid to stockholders.

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

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

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

During the nine months ended September 30, 2022 and 2021, such repurchases totaled 0.3 million shares, at a cost of $33 million, and 0.3 million shares, at a cost of $20 million, respectively.

As of March 31, 2023, the Company is authorized to repurchase, from time to time, up to 13.3 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the three months ended March 31, 2023 and 2022, the Company repurchased 0.5 million shares, at a cost of $38 million, and 0.5 million shares, at a cost of $55 million, on the open market, respectively.

Additional stock repurchases were made in

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

During the three months ended March 31, 2023 and 2022, such repurchases totaled 0.3 million shares, at a cost of $22 million, and 0.1 million shares, at a cost of $7 million, respectively.

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

The Company’s working capital at September 30, 2022, included $593 million in cash and cash equivalents and $1.10 billion in accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company’s working capital at March 31, 2023, included $548 million in cash and cash equivalents and $1.01 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.

There is limited visibility into future cash flows as the Company’s revenues and net income are largely 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.

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.

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.

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

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

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

The dividend will be paid on December 15, 2022.

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of March 31, 2023.

There were no borrowings under the Credit Agreement as of March 31, 2023 or December 31, 2022.

On May 2, 2023, the Company announced a quarterly dividend of $0.48 per share to be paid to all shareholders of record as of May 25, 2023.

The dividend will be paid on June 15, 2023.

Material Cash Requirements from Contractual Obligations

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

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

As of March 31, 2023, the Company reported current and long-term operating lease liabilities of $86 million and $136 million, respectively.

These balances consist of the minimum rental commitments for April 2023 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancellable lease contracts executed as of March 31, 2023.

The majority of these leases are for real estate.

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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

There have been no material changes to the Company’s contractual purchase obligations during the first quarter of 2023.

Employee Deferred Compensation Plan.

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

As of March 31, 2023, the Company reported deferred compensation plan obligations of $496 million in its accompanying unaudited Condensed Consolidated Statements of Financial Position.

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

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis