ROBERT HALF INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (in thousands, except share amounts) March 31, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 547,729 $ 658,626 Accounts receivable, net 1,009,192 1,018,287 Employee deferred compensation trust assets 511,164 432,734 Other current assets 184,237 175,465 Total current assets 2,252,322 2,285,112 Property and equipment, net 107,687 109,687 Right-of-use assets 188,111 201,998 Other intangible assets, net 4,596 5,317 Goodwill 237,911 237,810 Noncurrent deferred income taxes 121,507 124,564 Total assets $ 2,912,134 $ 2,964,488 LIABILITIES Accounts payable and accrued expenses $ 155,633 $ 168,163 Accrued payroll and benefit costs 382,115 472,310 Employee deferred compensation plan obligations 496,081 474,111 Income taxes payable 28,368 15,535 Current operating lease liabilities 86,113 86,083 Total current liabilities 1,148,310 1,216,202 Noncurrent operating lease liabilities 135,921 151,768 Other liabilities 29,422 27,960 Total liabilities 1,313,653 1,395,930 Commitments and Contingencies (Note J) STOCKHOLDERS’ EQUITY Preferred stock, $ 0.001 par value; authorized 5,000,000 shares; none issued — — Common stock, $ 0.001 par value; authorized 260,000,000 shares; issued and outstanding 107,762,831 shares and 107,698,498 shares 108 108 Additional paid-in capital 1,308,998 1,293,565 Accumulated other comprehensive income (loss) ( 38,737 ) ( 43,623 ) Retained earnings 328,112 318,508 Total stockholders’ equity 1,598,481 1,568,558 Total liabilities and stockholders’ equity $ 2,912,134 $ 2,964,488 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 2 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) Three Months Ended March 31, 2023 2022 Service revenues $ 1,716,335 $ 1,814,834 Costs of services 1,026,603 1,042,988 Gross margin 689,732 771,846 Selling, general and administrative expenses 552,229 514,194 (Income) loss from investments held in employee deferred compensation trusts ( 27,291 ) 30,001 Amortization of intangible assets 721 417 Interest income, net ( 4,825 ) ( 166 ) Income before income taxes 168,898 227,400 Provision for income taxes 46,893 59,161 Net income $ 122,005 $ 168,239 Net income per share: Basic $ 1.15 $ 1.54 Diluted $ 1.14 $ 1.52 Shares: Basic 106,420 109,218 Diluted 107,130 110,591 Dividends declared per share $ 0.48 $ 0.43 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 3 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (in thousands) Three Months Ended March 31, 2023 2022 COMPREHENSIVE INCOME (LOSS): Net income $ 122,005 $ 168,239 Other comprehensive income (loss): Foreign currency translation adjustments, net of tax 4,852 ( 968 ) Foreign defined benefit plan adjustments, net of tax 34 16 Total other comprehensive income (loss) 4,886 ( 952 ) Total comprehensive income (loss) $ 126,891 $ 167,287 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 4 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except per share amounts) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shares Par Value Balance at December 31, 2022 107,698 $ 108 $ 1,293,565 $ ( 43,623 ) $ 318,508 $ 1,568,558 Net income — — — — 122,005 122,005 Other comprehensive income (loss) — — — 4,886 — 4,886 Dividends declared ($ 0.48 per share) — — — — ( 52,529 ) ( 52,529 ) Net issuances of restricted stock 831 1 ( 1 ) — — — Stock-based compensation — — 15,434 — — 15,434 Repurchases of common stock ( 766 ) ( 1 ) — — ( 59,872 ) ( 59,873 ) Balance at March 31, 2023 107,763 $ 108 $ 1,308,998 $ ( 38,737 ) $ 328,112 $ 1,598,481 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shares Par Value Balance at December 31, 2021 110,686 $ 111 $ 1,235,903 $ ( 22,622 ) $ 167,659 $ 1,381,051 Net income — — — — 168,239 168,239 Other comprehensive income (loss) — — — ( 952 ) — ( 952 ) Dividends declared ($ 0.43 per share) — — — — ( 48,413 ) ( 48,413 ) Net issuances of restricted stock 598 1 ( 1 ) — — — Stock-based compensation — — 15,184 — — 15,184 Repurchases of common stock ( 537 ) ( 1 ) — — ( 62,340 ) ( 62,341 ) Balance at March 31, 2022 110,747 $ 111 $ 1,251,086 $ ( 23,574 ) $ 225,145 $ 1,452,768 The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 5 ROBERT HALF INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 122,005 $ 168,239 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for credit losses 2,934 2,065 Depreciation 12,738 11,080 Amortization of cloud computing implementation costs 8,188 7,113 Amortization of intangible assets 721 417 Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts ( 25,728 ) 30,296 Stock-based compensation 15,434 15,184 Deferred income taxes 3,102 5,493 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 9,772 ( 89,597 ) Capitalized cloud computing implementation costs ( 10,457 ) ( 9,464 ) Accounts payable and accrued expenses ( 10,216 ) ( 14,072 ) Accrued payroll and benefit costs ( 91,740 ) ( 39,435 ) Employee deferred compensation plan obligations 21,970 ( 39,976 ) Income taxes payable 29,909 35,310 Other assets and liabilities, net ( 23,109 ) ( 13,491 ) Net cash flows provided by operating activities 65,523 69,162 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 9,369 ) ( 14,987 ) Investments in employee deferred compensation trusts ( 71,302 ) ( 33,913 ) Proceeds from employee deferred compensation trust redemptions 18,600 21,782 Payments for acquisition ( 700 ) — Net cash flows used in investing activities ( 62,771 ) ( 27,118 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchases of common stock ( 63,244 ) ( 62,062 ) Dividends paid ( 53,717 ) ( 47,498 ) Net cash flows used in financing activities ( 116,961 ) ( 109,560 ) Effect of exchange rate fluctuations 3,312 ( 1,155 ) Change in cash and cash equivalents ( 110,897 ) ( 68,671 ) Cash and cash equivalents at beginning of period 658,626 619,001 Cash and cash equivalents at end of period $ 547,729 $ 550,330 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Non-cash items: Repurchases of common stock awaiting settlement $ — $ 5,872 Fund exchanges within employee deferred compensation trusts $ 50,213 $ 40,509 Contingent consideration related to acquisition $ 600 $ — The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these financial statements. 6 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2023 Note A— Summary of Significant Accounting Policies Nature of Operations . Robert Half International Inc. (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. The Company operates in North America, South America, Europe, Asia and Australia. The Company is a Delaware corporation. Basis of Presentation. The unaudited Condensed 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”). The comparative year-end Condensed Consolidated Statement of Financial Position data presented was derived from audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the periods presented have been included. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended December 31, 2022, included in its Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for a full year. Certain reclassifications have been made to prior year’s Financial Statements to conform to the 2023 presentation. Principles of Consolidation. The Financial Statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates. 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. As of March 31, 2023, 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. Service Revenues. The Company derives its revenues from three segments: 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. Costs of Services. 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. The Company expenses all advertising costs as incurred. Advertising costs were $ 13.3 million and $ 14.2 million for the three months ended March 31, 2023, and 2022, respectively. (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 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) 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. 7 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 The following table presents the Company’s (income) loss from investments held in employee deferred compensation trusts (in thousands): Three Months Ended March 31, 2023 2022 Dividend income $ ( 1,563 ) $ ( 295 ) Realized and unrealized (gains) losses ( 25,728 ) 30,296 (Income) loss from investments held in employee deferred compensation trusts $ ( 27,291 ) $ 30,001 Comprehensive Income (Loss). Comprehensive income (loss) includes net income and certain other items that are recorded directly to stockholders’ equity. The Company’s only sources of other comprehensive income (loss) are foreign currency translation and foreign defined benefit plan adjustments. Fair Value of Financial Instruments. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market to measure fair value, summarized as follows: Level 1: observable inputs for identical assets or liabilities, such as quoted prices in active markets Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly Level 3: 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). 8 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 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 March 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market funds $ 121,030 $ 121,030 — — Mutual funds - bond 33,613 33,613 — — Mutual funds - stock 271,750 271,750 — — Mutual funds - blend 84,771 84,771 — — $ 511,164 $ 511,164 — — Fair Value Measurements Using Balance at December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Money market funds $ 77,730 $ 77,730 — — Mutual funds - bond 31,096 31,096 — — Mutual funds - stock 245,908 245,908 — — Mutual funds - blend 78,000 78,000 — — $ 432,734 $ 432,734 — — Certain items, such as goodwill and other intangible assets, are recognized or disclosed at fair value on a non-recurring basis. The Company determines the fair value of these items using level 3 inputs. There are inherent limitations when estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that would be realized in current market transactions. Allowance for Credit Losses. The Company is exposed to credit losses resulting from the inability of its customers to make required payments. The Company establishes an allowance for these potential credit losses based on its review of customers’ credit profiles, historical loss statistics, prepayments, recoveries, age of customer receivable balances, current business conditions and macro-economic trends. The Company considers risk characteristics of trade receivables based on asset type and geographical locations to evaluate trade receivables on a collective basis. The Company applies credit loss estimates to these pooled receivables to determine expected credit losses. The following table sets forth the activity in the allowance for credit losses from December 31, 2022 through March 31, 2023 (in thousands): Allowance for Credit Losses Balance as of December 31, 2022 $ 22,561 Charges to expense 2,934 Deductions ( 1,524 ) Other, including foreign currency translation adjustments 111 Balance as of March 31, 2023 $ 24,082 9 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 Note B— New Accounting Pronouncements Recently Adopted Accounting Pronouncements None. Recently Issued Accounting Pronouncements Not Yet Adopted None. Note C— Revenue Recognition The Company derives its revenues from three segments: 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. Service revenues, as presented on the unaudited Condensed Consolidated Statements of Operations, represent services rendered to customers less variable consideration, such as sales adjustments and allowances. 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. 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. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security, and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers. 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 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. These amounts are established based primarily on historical data and are recorded as liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. 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. Revenue is measured using cost incurred relative to total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost incurred represents work performed and thereby best depicts the transfer of control to the customer. 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. 10 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 The following table presents the Company’s revenues disaggregated by functional specialization and segment (in thousands): Three Months Ended March 31, 2023 2022 Contract talent solutions Finance and accounting $ 777,833 $ 801,690 Administrative and customer support 219,350 284,906 Technology 194,082 213,327 Elimination of intersegment revenues (a) ( 125,791 ) ( 144,200 ) Total contract talent solutions 1,065,474 1,155,723 Permanent placement talent solutions 156,737 186,782 Protiviti 494,124 472,329 Total service revenues $ 1,716,335 $ 1,814,834 (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. 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. As of March 31, 2023, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $ 151.8 million. Of this amount, $ 140.2 million is expected to be recognized within the next twelve months . As of March 31, 2022, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $ 147.7 million. Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the unaudited Condensed Consolidated Statements of Financial Position. The following table sets forth the activity in contract liabilities from December 31, 2022 through March 31, 2023 (in thousands): Contract Liabilities Balance as of December 31, 2022 $ 21,983 Payments in advance of satisfaction of performance obligations 11,361 Revenue recognized ( 12,503 ) Other, including translation adjustments 144 Balance as of March 31, 2023 $ 20,985 11 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 Note D— Other Current Assets Other current assets consisted of the following (in thousands): March 31, 2023 December 31, 2022 Prepaid expenses $ 95,260 $ 69,394 Unamortized cloud computing implementation costs 58,367 56,108 Other 30,610 49,963 Other current assets $ 184,237 $ 175,465 Note E— Property and Equipment, Net Property and equipment consisted of the following (in thousands): March 31, 2023 December 31, 2022 Computer hardware $ 160,681 $ 160,028 Computer software 222,059 219,863 Furniture and equipment 97,152 96,601 Leasehold improvements 174,398 171,893 Property and equipment, cost 654,290 648,385 Accumulated depreciation ( 546,603 ) ( 538,698 ) Property and equipment, net $ 107,687 $ 109,687 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 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 $ 22.4 million and $ 22.6 million for the three months ended March 31, 2023 and 2022, respectively. Supplemental cash flow information related to leases consisted of the following (in thousands): Three Months Ended March 31, 2023 2022 Cash paid for operating lease liabilities $ 24,005 $ 22,986 Right-of-use assets obtained in exchange for new operating lease liabilities $ 6,342 $ 20,389 Supplemental balance sheet information related to leases consisted of the following: March 31, 2023 December 31, 2022 Weighted average remaining lease term for operating leases 3.3 years 3.5 years Weighted average discount rate for operating leases 2.3 % 2.2 % 12 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 Future minimum lease payments under non-cancellable leases as of March 31, 2023, were as follows (in thousands): 2023 (excluding the three months ended March 31, 2023) $ 69,002 2024 69,475 2025 42,368 2026 27,874 2027 14,645 Thereafter 7,438 Less: Imputed interest ( 8,768 ) Present value of operating lease liabilities (a) $ 222,034 (a) Includes the current portion of $ 86.1 million for operating leases. As of March 31, 2023, the Company had additional future minimum lease obligations totaling $ 6.1 million under executed operating lease contracts that had not yet commenced. These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 7 years. Note G— Goodwill The following table sets forth the activity in goodwill from December 31, 2022 through March 31, 2023 (in thousands): Goodwill Contract talent solutions Permanent placement talent solutions Protiviti Total Balance as of December 31, 2022 $ 134,118 $ 26,098 $ 77,594 $ 237,810 Foreign currency translation adjustments 27 6 68 101 Balance as of March 31, 2023 $ 134,145 $ 26,104 $ 77,662 $ 237,911 Note H— Accrued Payroll and Benefit Costs Accrued payroll and benefit costs consisted of the following (in thousands): March 31, 2023 December 31, 2022 Payroll and benefits $ 353,039 $ 423,439 Payroll taxes 12,753 33,559 Workers’ compensation 16,323 15,312 Accrued payroll and benefit costs $ 382,115 $ 472,310 Note I— Employee Deferred Compensation Plan Obligations The Company provides various qualified defined contribution 401(k) plans covering eligible employees. The plans offer a savings feature with the Company matching employee contributions. Assets of this plan are held by an independent trustee for the sole benefit of participating employees. 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 $ 511.2 million and $ 432.7 million as of March 31, 2023 and December 31, 2022, respectively. The Company holds these assets to satisfy the Company’s liabilities under its deferred compensation plans. The liability value for the nonqualified plans was $ 496.1 million and $ 474.1 million as of March 31, 2023 and December 31, 2022, respectively. 13 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 The following table presents the Company’s compensation expense related to its qualified defined contribution plans and nonqualified plans (in thousands): Three Months Ended March 31, 2023 2022 Contribution expense $ 11,281 $ 12,202 Increase (decrease) in employee deferred compensation expense related to changes in the fair value of trust assets 27,291 ( 30,001 ) $ 38,572 $ ( 17,799 ) The Company has statutory defined contribution plans and defined benefit plans outside the United States of America, which are not material. Note J— 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. The complaint alleges that a putative class of current and former employees of the Company working in California since March 13, 2010, were denied compensation for the time they spent interviewing “for temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Private Attorneys General Act (“PAGA”). At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation. On April 6, 2018, Plaintiff Shari Dorff, 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, County of Los Angeles. In addition to certain claims individual to Plaintiff Dorff, the complaint alleges that salaried recruiters based in California have been misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company intends to continue to vigorously defend against the litigation. The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial position or cash flows, litigation is subject to certain inherent uncertainties. Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred. The Company has an unsecured revolving credit facility (the “Credit Agreement”) of $ 100.0 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 14 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 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. Note K— Stockholders’ Equity Stock Repurchase Program. 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. The number and the cost of common stock shares repurchased during the three months ended March 31, 2023 and 2022, are reflected in the following table (in thousands): Three Months Ended March 31, 2023 2022 Common stock repurchased (in shares) 484 475 Common stock repurchased $ 38,193 $ 54,913 Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable statutory withholding taxes. The number and the cost of employee stock plan repurchases made during the three months ended March 31, 2023 and 2022, are reflected in the following table (in thousands): Three Months Ended March 31, 2023 2022 Repurchases related to employee stock plans (in shares) 282 62 Repurchases related to employee stock plans $ 21,680 $ 7,428 The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Treasury stock activity for the three months ended March 31, 2023 and 2022, (consisting of purchases of shares for the treasury) is presented in the unaudited Condensed Consolidated Statements of Stockholders’ Equity. 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. 15 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 Note L— Net Income Per Share The calculation of net income per share for the three months ended March 31, 2023 and 2022, is reflected in the following table (in thousands, except per share amounts): Three Months Ended March 31, 2023 2022 Net income $ 122,005 $ 168,239 Basic: Weighted average shares 106,420 109,218 Diluted: Weighted average shares 106,420 109,218 Dilutive effect of potential common shares 710 1,373 Diluted weighted average shares 107,130 110,591 Net income per share: Basic $ 1.15 $ 1.54 Diluted $ 1.14 $ 1.52 Note M— Business Segments The Company has three reportable segments: 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 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” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The Company evaluates performance based on income before intangible assets amortization expense, net interest income, and income taxes. 16 ROBERT HALF INTERNATIONAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued) March 31, 2023 The following table provides a reconciliation of service revenues and segment income by reportable segment to consolidated results for the three months ended March 31, 2023 and 2022 (in thousands): Three Months Ended March 31, 2023 2022 Service revenues Contract talent solutions $ 1,065,474 $ 1,155,723 Permanent placement talent solutions 156,737 186,782 Protiviti 494,124 472,329 $ 1,716,335 $ 1,814,834 Segment income Contract talent solutions $ 102,146 $ 133,246 Permanent placement talent solutions 23,827 37,328 Protiviti 38,821 57,077 Combined segment income 164,794 227,651 Amortization of intangible assets 721 417 Interest income, net ( 4,825 ) ( 166 ) Income before income taxes $ 168,898 $ 227,400 Service revenues presented above are shown net of eliminations of intersegment revenues. Intersegment revenues between contract talent solutions segment and Protiviti segment were $ 125.8 million and $ 144.2 million for the three months ended March 31, 2023 and 2022, 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. Note N— Subsequent Events On May 2, 2023, the Company announced the following: Quarterly dividend per share $ 0.48 Declaration date May 2, 2023 Record date May 25, 2023 Payment date June 15, 2023 17