What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-08-01 · 159 added, 160 removed, 323 unchanged (50% of the section changed)

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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 the Securities and Exchange Commission (“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 estimates only, based on management’s current expectations, currently available information and current strategy, plans, or forecasts, and involve certain known and unknown risks, 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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the global financial and economic situation;

the duration and impact of the COVID-19 pandemic and efforts to mitigate its spread;

the ongoing impact of the COVID-19 virus and efforts to mitigate its spread;

changes in levels of unemployment and other economic conditions in the U.S.

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Executive Overview

The Company's second-quarter results for talent solutions were impacted by elongated client hiring cycles resulting from ongoing global macro uncertainty.

Protiviti was much less impacted with its diversified suite of solutions offerings.

During the first half of 2023, service revenues were $3.36 billion, a decrease of 8.8% from the prior year.

Revenue and net income results for the third quarter exceeded management's expectations, notwithstanding the ongoing macroeconomic uncertainty that lengthens client and job candidate decision cycles.

Gross margins remained strong due to pricing discipline and the ongoing benefit from the rising mix shift to higher skill levels.

The Company’s operating cost base also benefited from targeted actions to align costs with revenues across all reportable segments.

During the first three quarters of 2023, service revenues were $4.92 billion, a decrease of 10.7% from the prior year.

Net income was $324 million and diluted net income per share was $3.04.

Global labor markets remain tight and the scarcity of talent persists.

Client hiring and project needs continue to be significant.

However, the urgency or velocity of that demand is impacted by the prolonged period of macroeconomic uncertainty, which continued in the second-quarter.

As clients become more cost-focused, hiring timeframes extend, projects are delayed and contractor workloads are shifted to internal staff.

On a segment basis, year-to-date revenues for contract talent solutions and permanent placement talent solutions were down 11.1% and 20.9% year-over-year, respectively, and Protiviti year-to-date revenues grew by 1.6% year-over-year.

The urgency and velocity of that demand is impacted by the prolonged period of macroeconomic uncertainty, which continued in the third-quarter.

Clients are budget sensitive and very selective in their hiring activities - including approval of new projects.

On a segment basis, year-to-date revenues for contract talent solutions, permanent placement talent solutions and Protiviti were down 13.1%, 21.7% and 1.0% year-over-year, respectively.

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 half of 2023 remained steady for the Company as the unemployment rate increased slightly from 3.5% for December 2022 to 3.6% at the end of the second quarter of 2023.

economic backdrop and labor trends for the first three quarters of 2023 remained steady for the Company as the unemployment rate increased slightly from 3.5% for December 2022 to 3.8% at the end of the third 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 2.1%.

Although labor markets remain strong, ongoing uncertainty related to inflation and interest rates cause clients to be more cautious, resulting in elongated hiring cycles and has a negative impact on short-term results.

The Company is confident 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 making enhancements to further improve our already effective, industry-leading artificial intelligence.

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.

Although labor markets remain strong, ongoing uncertainty related to inflation and interest rates cause clients to be more cautious, resulting in elongated hiring cycles and a negative impact on short-term results.

The Company is confident about its ability to weather the current global macroeconomic environment and its future growth prospects as the macro landscape improves.

Clients continue to hire, but are generally maintaining internal headcounts based on the anticipated difficulty in finding suitable replacements, resulting in less churn in the labor markets.

The Company continues to invest in services involving higher-skilled positions across its practice groups.

This has advantages of higher bill rates and gross margins, longer assignment lengths, and less economic sensitivity.

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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The Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth trends and productivity metrics.

Visibility into future revenues is limited not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements.

Visibility into future revenues is limited not only due to the dependence on macroeconomic and labor market conditions noted above, but also because of the relatively short duration of the Company’s client engagements.

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

During the first half 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.

During the first three quarters of 2023, the Company decreased headcount for its contract talent solutions and permanent placement talent solutions segments, while it increased its full-time 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 six months ended June 30, 2023.

There were no material changes to the Company’s critical accounting policies or estimates for the nine months ended September 30, 2023.

Recent Accounting Pronouncements

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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 conducts placement activities through 318 offices in 42 states, the District of Columbia and 18 foreign countries, while Protiviti has 65 offices in 23 states and 13 foreign countries.

The Company’s talent solutions segments conducts placement activities through 319 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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adjusted gross margin;

adjusted selling, general and administrative expense;

adjusted selling, general and administrative expenses;

combined segment income;

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

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

Service Revenues.

The Company’s revenues were $1.64 billion for the three months ended June 30, 2023, a decrease of 12.0% compared to $1.86 billion for the three months ended June 30, 2022.

The Company’s revenues were $1.56 billion for the three months ended September 30, 2023, a decrease of 14.7% compared to $1.83 billion for the three months ended September 30, 2022.

Revenues from U.S.

operations decreased 13.3% to $1.27 billion (77.6% of total revenue) for the three months ended June 30, 2023, compared to $1.47 billion (78.8% of total revenue) for the three months ended June 30, 2022.

Revenues from international operations decreased 7.0% to $368 million (22.4% of total revenue) for the three months ended June 30, 2023, compared to $396 million (21.2% of total revenue) for the three months ended June 30, 2022.

operations decreased 17.5% to $1.21 billion (77.3% of total revenue) for the three months ended September 30, 2023, compared to $1.47 billion (79.9% of total revenue) for the three months ended September 30, 2022.

Revenues from international operations decreased 3.5% to $355 million (22.7% of total revenue) for the three months ended September 30, 2023, compared to $368 million (20.1% of total revenue) for the three months ended September 30, 2022.

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

Contract talent solutions revenues were $1.00 billion for the three months ended June 30, 2023, decreasing by 14.3% compared to revenues of $1.16 billion for the three months ended June 30, 2022.

Contract talent solutions revenues were $943 million for the three months ended September 30, 2023, decreasing by 17.3% compared to revenues of $1.14 billion for the three months ended September 30, 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 decrease in contract talent solutions revenues for the three months ended June 30, 2023, was primarily due to a 21.1% decrease in the number of hours worked by the Company's engagement professionals, partially offset by a 7.7% increase in average bill rates.

On an as adjusted basis, contract talent solutions revenues decreased 14.0% for the second quarter of 2023, compared to the second quarter of 2022.

In the U.S., revenues in the second quarter of 2023 decreased 16.0% on an as reported basis, and decreased 15.9% on an as adjusted basis, compared to the second quarter of 2022.

International revenues for the second quarter of 2023 decreased 7.6% on an as reported basis, and decreased 6.2% on an as adjusted basis compared to the second quarter of 2022.

Permanent placement talent solutions revenues were $149 million for the three months ended June 30, 2023, decreasing by 25.4% compared to revenues of $200 million for the three months ended June 30, 2022.

The decrease in contract talent solutions revenues for the three months ended September 30, 2023, was primarily due to a 22.9% decrease in the number of hours worked by the Company’s engagement professionals, partially offset by a 6.9% increase in average bill rates.

On an as adjusted basis, contract talent solutions revenues decreased 16.4% for the third quarter of 2023, compared to the third quarter of 2022.

In the U.S., revenues in the third quarter of 2023 decreased 20.7% on an as reported basis, and decreased 19.2% on an as adjusted basis, compared to the third quarter of 2022.

International revenues for the third quarter of 2023 decreased 3.1% on an as reported basis, and decreased 4.9% on an as adjusted basis compared to the third quarter of 2022.

Permanent placement talent solutions revenues were $140 million for the three months ended September 30, 2023, decreasing by 23.3% compared to revenues of $182 million for the three months ended September 30, 2022.

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

The decrease in permanent placement talent revenues for the three months ended June 30, 2023, was due to a 25.9% decrease in the number of placements, partially offset by a 0.4% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues decreased 25.0% for the second quarter of 2023, compared to the second quarter of 2022.

In the U.S., revenues for the second quarter of 2023 decreased 26.2% on an as reported basis, and decreased 26.1% on an as adjusted basis, compared to the second quarter of 2022.

International revenues for the second quarter of 2023 decreased 23.4% on an as reported basis and decreased 21.9% on an as adjusted basis, compared to the second quarter of 2022.

The decrease in permanent placement talent revenues for the three months ended September 30, 2023, was due to a 26.8% decrease in the number of placements, partially offset by a 3.5% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues decreased 22.5% for the third quarter of 2023, compared to the third quarter of 2022.

In the U.S., revenues for the third quarter of 2023 decreased 26.9% on an as reported basis, and decreased 25.5% on an as adjusted basis, compared to the third quarter of 2022.

International revenues for the third quarter of 2023 decreased 13.0% on an as reported basis and decreased 14.2% on an as adjusted basis, compared to the third 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 $491 million for the three months ended June 30, 2023, decreasing by 1.2% compared to revenues of $497 million for the three months ended June 30, 2022.

Protiviti revenues were $481 million for the three months ended September 30, 2023, decreasing by 6.0% compared to revenues of $511 million for the three months ended September 30, 2022.

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

The decrease in Protiviti revenues for the three months ended June 30, 2023, was due to a 3.4% decrease in billable hours, partially offset by a 2.2% increase in average hourly bill rates.

On an as adjusted basis, Protiviti revenues decreased 1.0% for the second quarter of 2023, compared to the second quarter of 2022.

In the U.S., revenues in the second quarter of 2023 decreased 2.4% on an as reported basis, and decreased 2.3% on an as adjusted basis, compared to the second quarter of 2022.

International revenues for the second quarter of 2023 increased 3.3% on an as reported basis and increased 4.2% on an as adjusted basis, compared to the second 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 June 30, 2023, is presented in the following table:

The decrease in Protiviti revenues for the three months ended September 30, 2023, was due to a 10.2% decrease in billable hours, partially offset by a 4.2% increase in average hourly bill rates.

On an as adjusted basis, Protiviti revenues decreased 4.9% for the third quarter of 2023, compared to the third quarter of 2022.

In the U.S., revenues in the third quarter of 2023 decreased 7.4% on an as reported basis, and decreased 5.6% on an as adjusted basis, compared to the third quarter of 2022.

International revenues for the third quarter of 2023 increased 0.3% on an as reported basis and decreased 1.5% on an as adjusted basis, compared to the third 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 September 30, 2023, is presented in the following table:

Global United States International

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Gross Margin .

The Company’s gross margin dollars were $660 million for the three months ended June 30, 2023, down 19.1% from $816 million for the three months ended June 30, 2022.

The Company’s gross margin dollars were $641 million for the three months ended September 30, 2023, down 18.6% from $788 million for the three months ended September 30, 2022.

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

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

Gross margin dollars for contract talent solutions were $399 million for the three months ended June 30, 2023, down 14.2% from $465 million for the three months ended June 30, 2022.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.9% in both the second quarter of 2023 and the second quarter of 2022.

Gross margin dollars for contract talent solutions were $375 million for the three months ended September 30, 2023, decreasing by 16.6% from $450 million for the three months ended September 30, 2022.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in the third quarter of 2023, up from 39.4% in the third quarter of 2022.

The increase in gross margin percentage was primarily due to lower fringe costs and higher pay-bill spreads.

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

Gross margin dollars for permanent placement talent solutions were $149 million for the three months ended June 30, 2023, down

25.4% from $200 million for the three months ended June 30, 2022.

Gross margin dollars for permanent placement talent solutions were $140 million for the three months ended September 30, 2023, down 23.3% from $182 million for the three months ended September 30, 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.

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

Gross margin dollars for Protiviti were $112 million for the three months ended June 30, 2023, down 25.5% from $151 million for the three months ended June 30, 2022.

As a percentage of revenues, reported gross margin dollars for Protiviti were 22.9% in the second quarter of 2023, down from 30.4% in the second quarter of 2022.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 24.0% in the second quarter of 2023, down from 28.1% in the second quarter of 2022.

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

Gross margin dollars for Protiviti were $126 million for the three months ended September 30, 2023, down 19.2% from $156 million for the three months ended September 30, 2022.

As a percentage of revenues, reported gross margin dollars for Protiviti were 26.2% in the third quarter of 2023, down from 30.5% in the third quarter of 2022.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 25.6% in the third quarter of 2023, down from 30.0% in the third quarter of 2022.

The year-over-year decrease in adjusted gross margin percentage was primarily due to increases in the pay rates for its professional staff, which were only partially offset by higher bill rates.

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

Three Months Ended June 30, Relationships

Three Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 640,939 $ 787,609 $ 638,094 $ 784,909 41.0 % 43.0 % 40.8 % 42.8 %

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30, 2023

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the three months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 375,158 39.8 % $ 139,681 99.8 % $ 123,255 25.6 % $ 638,094 40.8 %

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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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 $542 million for the three months ended June 30, 2023, up 6.4% from $509 million for the three months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses were 33.1% in the second quarter of 2023, up from 27.3% in the second quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses were 31.6% in the second quarter of 2023, up from 30.3% in the second quarter of 2022.

The Company’s selling, general and administrative expenses were $497 million for the three months ended September 30, 2023, decreasing by 9.5% from $549 million for the three months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses were 31.8% in the third quarter of 2023, up from 29.9% in the third quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses were 32.5% in the third quarter of 2023, up from 30.6% in the third 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 $338 million for the three months ended June 30, 2023, increasing by 18.9% from $284 million for the three months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 33.8% in the second quarter of 2023, up from 24.4% in the second quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 31.8% in the second quarter of 2023, up from 28.4% in the second 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 $130 million for the three months ended June 30, 2023, decreasing by 16.7% from $156 million for the three months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 87.0% in the second quarter of 2023, up from 77.9% in the second quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement was 85.3% in the second quarter of 2023, up from 81.4% in the second 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 the Company’s Protiviti division were $74 million for the three months ended June 30, 2023, increasing by 7.1% from $69 million for the three months ended June 30, 2022.

As a percentage of revenues, selling, general and administrative expenses for Protiviti services were 15.1% in the second quarter of 2023, up from 14.0% in the second quarter of 2022, due primarily to operating expenditures returning to more normal pre-pandemic levels.

Selling, general and administrative expenses for contract talent solutions were $307 million for the three months ended September 30, 2023, decreasing by 3.8% from $319 million for the three months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 32.5% in the third quarter of 2023, up from 27.9% in the third quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 33.6% in the third quarter of 2023, up from 28.9% in the third 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 $119 million for the three months ended September 30, 2023, decreasing by 19.5% from $148 million for the three months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 85.3% in the third quarter of 2023, up from 81.3% in the third quarter of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement was 86.2% in the third quarter of 2023, up from 82.2% in the third 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 $71 million for the three months ended September 30, 2023, decreasing by 13.4% from $82 million for the three months ended September 30, 2022.

As a percentage of revenues, selling, general and administrative expenses for Protiviti services were 14.7% in the third quarter of 2023, down from 16.0% in the third quarter of 2022, due primarily to lower variable overhead costs.

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

(in thousands):

Three Months Ended June 30, Relationships

Three Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 496,732 $ 548,579 $ 508,162 $ 561,214 31.8 % 29.9 % 32.5 % 30.6 %

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 June 30, 2023 and 2022 (in thousands):

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 316,683 33.6 % $ 120,626 86.2 % $ 70,853 14.7 % $ 508,162 32.5 %

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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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 (income) loss from investments held in employee deferred compensation trusts was income of $28 million and a loss of $66 million for the three months ended June 30, 2023 and 2022, respectively.

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

The Company’s loss from investments held in employee deferred compensation trusts was $14 million and $15 million for the three months ended September 30, 2023 and 2022, respectively.

The loss from trust investments was due to negative market returns during the third quarter of 2023.

Income Before Income Taxes and Segment Income.

The Company’s total income before income taxes was $151 million, or 9.2% of revenues, for the three months ended June 30, 2023, down from $241 million or 12.9% of revenues, for the three months ended June 30, 2022.

Combined segment income was $147 million, or 8.9% of revenues, for the three months ended June 30, 2023, down from $241 million, or 12.9% of revenues, for the three months ended June 30, 2022.

The Company’s total income before income taxes was $136 million, or 8.7% of revenues, for the three months ended September 30, 2023, down from $226 million or 12.3% of revenues, for the three months ended September 30, 2022.

Combined segment income was $130 million, or 8.3% of revenues, for the three months ended September 30, 2023, down from $224 million, or 12.2% of revenues, for the three months ended September 30, 2022.

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

Three Months Ended June 30,

Three Months Ended September 30,

2023 % of Revenue 2022 % of Revenue

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Total $ 129,932 8.3 % $ 223,695 12.2 %

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended June 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 September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30,

2023 % of Revenue 2022 % of Revenue

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Provision for income taxes .

The provision for income taxes was 29.7% and 27.0% for the three months ended June 30, 2023 and 2022, respectively.

The higher tax rate for 2023 can be attributed to an increased impact of nondeductible expenses, fewer tax credits as well as lower stock compensation deductions.

Six Months Ended June 30, 2023 and 2022

The provision for income taxes was 29.9% and 26.3% for the three months ended September 30, 2023 and 2022, respectively.

The higher tax rate for 2023 can be attributed to an increased impact of nondeductible expenses and fewer tax credits.

Nine Months Ended September 30, 2023 and 2022

Service Revenues.

The Company’s revenues were $3.36 billion for the six months ended June 30, 2023, a decrease of 8.8% compared to $3.68 billion for the six months ended June 30, 2022.

The Company’s revenues were $4.92 billion for the nine months ended September 30, 2023, a decrease of 10.7% compared to $5.51 billion for the nine months ended September 30, 2022.

Revenues from U.S.

operations decreased 9.3% to $2.61 billion (77.9% of total revenue) for the six months ended June 30, 2023, compared to $2.88 billion (78.4% of total revenue) for the six months ended June 30, 2022.

Revenues from international operations decreased 6.6% to $743 million (22.1% of total revenue) for the six months ended June 30, 2023, compared to $795 million (21.6% of total revenue) for the six months ended June 30, 2022.

operations decreased 12.1% to $3.82 billion (77.7% of total revenue) for the nine months ended September 30, 2023, compared to $4.35 billion (78.9% of total revenue) for the nine months ended September 30, 2022.

Revenues from international operations decreased 5.6% to $1.10 billion (22.3% of total revenue) for the nine months ended September 30, 2023, compared to $1.16 billion (21.1% of total revenue) for the nine months ended September 30, 2022.

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

Contract talent solutions revenues were $2.07 billion for the six months ended June 30, 2023, decreasing by 11.1% compared to revenues of $2.32 billion for the six months ended June 30, 2022.

Contract talent solutions revenues were $3.01 billion for the nine months ended September 30, 2023, decreasing by 13.1% compared to revenues of $3.46 billion for the nine months ended September 30, 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 decrease in contract talent solutions revenues for the six months ended June 30, 2023, was primarily due to a 19.6% decrease in the number of hours worked by the Company's engagement professionals, partially offset by a 9.3% increase in average bill rates.

On an as adjusted basis, contract talent solutions revenues in the first half of 2023 decreased 11.0% compared to the first half of 2022.

In the U.S., revenues in the first half of 2023 decreased 12.3% on an as reported basis, and decreased 12.9% on as adjusted basis, compared to the first half of 2022.

International revenues for the first half of 2023 decreased 6.1% on an as reported basis, and decreased 3.7% on an as adjusted basis, compared to the first half of 2022.

Permanent placement talent solutions revenues were $306 million for the six months ended June 30, 2023, decreasing by 20.9% compared to revenues of $387 million for the six months ended June 30, 2022.

The decrease in contract talent solutions revenues for the nine months ended September 30, 2023, was primarily due to a 20.7% decrease in the number of hours worked by the Company’s engagement professionals, partially offset by an 8.5% increase in average bill rates.

On an as adjusted basis, contract talent solutions revenues in the first three quarters of 2023 decreased 12.7% compared to the first three quarters of 2022.

In the U.S., revenues in the first three quarters of 2023 decreased 15.1% on an as reported basis, and decreased 15.0% on as adjusted basis, compared to the first three quarters of 2022.

International revenues for the first three quarters of 2023 decreased 5.1% on an as reported basis, and decreased 4.0% on an as adjusted basis, compared to the first three quarters of 2022.

Permanent placement talent solutions revenues were $446 million for the nine months ended September 30, 2023, decreasing by 21.7% compared to revenues of $569 million for the nine months ended September 30, 2022.

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

The decrease in permanent placement staffing revenues for the six months ended June 30, 2023, was due to a 22.3% decrease in the number of placements, partially offset by a 1.4% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues decreased 20.6% for the first half of 2023, compared to the first half of 2022.

In the U.S., revenues for the first half of 2023 decreased 21.7% on an as reported basis and decreased 22.2% on an as adjusted basis, compared to the first half of 2022.

International revenues for the first half of 2023 decreased 18.8% on an as reported basis, and decreased 16.3% on an as adjusted basis, compared to the first half of 2022.

The decrease in permanent placement staffing revenues for the nine months ended September 30, 2023, was due to a 23.7% decrease in the number of placements, partially offset by a 2.0% increase in average fees earned per placement.

On an as adjusted basis, permanent placement talent solutions revenues decreased 21.2% for the first three quarters of 2023, compared to the first three quarters of 2022.

In the U.S., revenues for the first three quarters of 2023 decreased 23.4% on an as reported basis and decreased 23.3% on an as adjusted basis, compared to the first three quarters of 2022.

International revenues for the first three quarters of 2023 decreased 17.0% on an as reported basis, and decreased 15.6% on an as adjusted basis, compared to the first three quarters of 2022.

Protiviti revenues were $985 million for the six months ended June 30, 2023, increasing by 1.6% compared to revenues of $969 million for the six months ended June 30, 2022.

Protiviti revenues were $1.47 billion for the nine months ended September 30, 2023, decreasing by 1.0% compared to revenues of $1.48 billion for the nine months ended September 30, 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 six months ended June 30, 2023, was due to a 3.2% increase in average hourly bill rates, partially offset by a 1.6% decrease in billable hours.

On an as adjusted basis, Protiviti revenues increased 1.6% for the first half of 2023, compared to the first half of 2022.

In the U.S., revenues in the first half of 2023 increased 2.4% on an as reported basis and increased 1.7% on an as adjusted basis, compared to the first half of 2022.

International revenues in the first half of 2023 decreased 1.2% on an as reported basis, and increased 1.3% on an as adjusted basis, compared to the first half 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 six months ended June 30, 2023, is presented in the following table:

The decrease in Protiviti revenues for the nine months ended September 30, 2023, was due to a 4.5% decrease in billable hours, partially offset by a 3.5% increase in average hourly bill rates.

On an as adjusted basis, Protiviti revenues decreased 0.6% for the first three quarters of 2023, compared to the first three quarters of 2022.

In the U.S., revenues in the first three quarters of 2023 decreased 1.1% on an as reported basis and decreased 0.9% on an as adjusted basis, compared to the first three quarters of 2022.

International revenues in the first three quarters of 2023 decreased 0.7% on an as reported basis, and increased 0.5% on an as adjusted basis, compared to the first three quarters 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 nine months ended September 30, 2023, is presented in the following table:

Global United States International

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Gross Margin .

The Company’s gross margin dollars were $1.35 billion for the six months ended June 30, 2023, down 15.0% from $1.59 billion for the six months ended June 30, 2022.

The Company’s gross margin dollars were $1.99 billion for the nine months ended September 30, 2023, down 16.2% from $2.38 billion for the nine months ended September 30, 2022.

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

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

Gross margin dollars for contract talent solutions were $822 million for the six months ended June 30, 2023, down 11.3% from $927 million for the six months ended June 30, 2022.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in the first half of 2023, down from 39.9% in the first half of 2022.

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

Gross margin dollars for contract talent solutions were $1.20 billion for the nine months ended September 30, 2023, down 13.0% from $1.38 billion for the nine months ended September 30, 2022.

As a percentage of revenues, gross margin dollars for contract talent solutions were 39.8% in the first three quarters of both 2023 and 2022.

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

Gross margin dollars for permanent placement talent solutions were $305 million for the six months ended June 30, 2023, down 20.9% from $386 million for the six months ended June 30, 2022.

Gross margin dollars for permanent placement talent solutions were $445 million for the nine months ended September 30, 2023, down 21.7% from $568 million for the nine months ended September 30, 2022.

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

Gross margin dollars for Protiviti were $222 million for the six months ended June 30, 2023, down 19.0% from $275 million for the six months ended June 30, 2022.

As a percentage of revenues, reported gross margin dollars for Protiviti were 22.6% in the first half of 2023, down from 28.3% in the first half of 2022.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 23.6% in the first half of 2023, down from 26.8% in the first half of 2022.

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

Gross margin dollars for Protiviti were $348 million for the nine months ended September 30, 2023, down 19.1% from $431 million for the nine months ended September 30, 2022.

As a percentage of revenues, reported gross margin dollars for Protiviti were 23.8% in the first three quarters of 2023, down from 29.1% in the first three quarters of 2022.

As a percentage of revenues, adjusted gross margin dollars for Protiviti were 24.3% in the first three quarters of 2023, down from 27.9% in the first three quarters of 2022.

The year-over-year decrease in adjusted gross margin percentage was primarily due to increases in the pay rates for its professional staff, which were only partially offset by higher bill rates.

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

(in thousands):

Six Months Ended June 30, Relationships

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 1,990,840 $ 2,375,002 $ 1,998,091 $ 2,357,043 40.5 % 43.1 % 40.6 % 42.8 %

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the six months ended June 30, 2023 and 2022 (in thousands):

Six Months Ended June 30, 2023

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the nine months ended September 30, 2023 and 2022 (in thousands):

Nine Months Ended September 30, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 1,197,419 39.8 % $ 445,051 99.8 % $ 355,621 24.3 % $ 1,998,091 40.6 %

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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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 $1.09 billion for the six months ended June 30, 2023, up 6.9% from $1.02 billion for the six months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses were 32.6% in the first half of 2023, up from 27.8% in the first half of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses were 31.2% in the first half of 2023, up from 30.0% in the first half of 2022.

The Company’s reported selling, general and administrative expenses were $1.59 billion for the nine months ended September 30, 2023, up 1.2% from $1.57 billion for the nine months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses were 32.3% in the first three quarters of 2023, up from 28.5% in the first three quarters of 2022.

The Company’s adjusted selling, general and administrative expenses were $1.56 billion for the nine months ended September 30, 2023, down 6.5% from $1.67 billion for the nine months ended September 30, 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses were 31.6% in the first three quarters of 2023, up from 30.2% in the first three quarters of 2022.

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

Selling, general and administrative expenses for contract talent solutions were $679 million for the six months ended June 30, 2023, increasing by 15.3% from $589 million for the six months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 32.9% in the first half of 2023, up from 25.4% in the first half of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 30.9% in the first half of 2023, up from 28.4% in the first half of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions.

Selling, general and administrative expenses for permanent placement talent solutions were $265 million for the six months ended June 30, 2023, decreasing by 12.4% from $302 million for the six months ended June 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 86.5% in the first half of 2023, up from 78.1% in the first half of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 84.9% in the first half of 2023, up from 80.7% in the first half of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions.

Selling, general and administrative expenses for Protiviti were $150 million for the six months ended June 30, 2023, increasing by 13.6% from $132 million for the six months ended June 30, 2022.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 15.2% in the first half of 2023, up from 13.6% in the first half of 2022, due primarily to operating expenditures returning to more normal pre-pandemic levels.

Selling, general and administrative expenses for contract talent solutions, on an as-reported basis, were $986 million for the nine months ended September 30, 2023, increasing by 8.6% from $908 million for the nine months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 32.8% in the first three quarters of 2023, up from 26.2% in the first three quarters of 2022.

Selling, general and administrative expenses for contract talent solutions, on an adjusted basis, were $955 million for the nine months ended September 30, 2023, down 3.4% from $989 million for the nine months ended September 30, 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 31.8% in the first three quarters of 2023, up from 28.6% in the first three quarters of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions.

Selling, general and administrative expenses for permanent placement talent solutions were $384 million for the nine months ended September 30, 2023, decreasing by 14.7% from $450 million for the nine months ended September 30, 2022.

As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 86.1% in the first three quarters of 2023, up from 79.1% in the first three quarters of 2022.

As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions was 85.3% in the first three quarters of 2023, up from 81.1% in the first three quarters of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions.

Selling, general and administrative expenses for Protiviti were $221 million for the nine months ended September 30, 2023, increasing by 3.3% from $214 million for the nine months ended September 30, 2022.

As a percentage of revenues, selling, general and administrative expenses for Protiviti were 15.1% in the first three quarters of 2023, up from 14.4% in the first three quarters of 2022, due primarily to negative leverage as revenues decreased as a result of economic conditions.

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

(in thousands):

Six Months Ended June 30, Relationships

Nine Months Ended September 30, Relationships

As Reported As Adjusted As Reported As Adjusted

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Total $ 1,590,865 $ 1,572,167 $ 1,556,753 $ 1,665,166 32.3 % 28.5 % 31.6 % 30.2 %

The following tables provide reconciliations of the non-GAAP selling, general and administrative expenses to reported selling, general and administrative expenses for the six months ended June 30, 2023 and 2022 (in thousands):

Six Months Ended June 30, 2023

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, 2023 and 2022 (in thousands):

Nine Months Ended September 30, 2023

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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As Adjusted $ 955,482 31.8 % $ 380,439 85.3 % $ 220,832 15.1 % $ 1,556,753 31.6 %

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Contract Talent Solutions Permanent Placement Talent Solutions Protiviti Total

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The Company’s (income) loss from investments held in employee deferred compensation trusts was income of $56 million and a loss of $96 million for the six months ended June 30, 2023 and 2022, respectively.

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

The Company’s (income) loss from investments held in employee deferred compensation trusts was income of $41 million and a loss of $111 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Income Before Income Taxes and Segment Income.

The Company’s total income before income taxes was $320 million, or 9.5% of revenues, for the six months ended June 30, 2023, down from $468 million or 12.7% of revenues, for the six months ended June 30, 2022.

Combined segment income was $311 million, or 9.3% of revenues, for the six months ended June 30, 2023, down from $468 million, or 12.7% of revenues, for the six months ended June 30, 2022.

The Company’s total income before income taxes was $456 million, or 9.3% of revenues, for the nine months ended September 30, 2023, down from $694 million or 12.6% of revenues, for the nine months ended September 30, 2022.

Combined segment income was $441 million, or 9.0% of revenues, for the nine months ended September 30, 2023, down from $692 million, or 12.6% of revenues, for the nine months ended September 30, 2022.

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

Six Months Ended June 30,

Nine Months Ended September 30,

2023 % of Revenue 2022 % of Revenue

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Total $ 441,338 9.0 % $ 691,877 12.6 %

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the six months ended June 30, 2023, and 2022 (in thousands):

Six Months Ended June 30,

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, 2023, and 2022 (in thousands):

Nine Months Ended September 30,

2023 % of Revenue 2022 % of Revenue

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Provision for income taxes .

The provision for income taxes was 28.7% and 26.5% for the six months ended June 30, 2023 and 2022, respectively.

The higher tax rate for 2023 can be attributed to an increased impact of nondeductible expenses, fewer tax credits as well as lower stock compensation deductions.

The provision for income taxes was 29.1% and 26.5% for the nine months ended September 30, 2023 and 2022, respectively.

The higher tax rate for 2023 can be attributed to an increased impact of nondeductible expenses and fewer tax credits.

Liquidity and Capital Resources

The change in the Company’s liquidity during the six months ended June 30, 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 $723 million and $591 million at June 30, 2023 and 2022, respectively.

Operating activities provided cash flows of $347 million during the six months ended June 30, 2023, offset by $78 million and $210 million of net cash used in investing activities and financing activities, respectively.

Operating activities provided cash flows of $302 million during the six months ended June 30, 2022, offset by $55 million and $257 million of net cash used in investing activities and financing activities, respectively.

Fluctuations in foreign currency exchange rates had the effect of increasing reported cash and cash equivalents by $5 million during the six months ended June 30, 2023, compared to a decrease of $18 million during the six months ended June 30, 2022.

Operating activities—Net cash provided by operating activities for the six months ended June 30, 2023, was composed of net income of $228 million adjusted upward for non-cash items of $22 million and net cash provided by changes in working capital of $97 million.

Net cash provided by operating activities for the six months ended June 30, 2022, was composed of net income of $344 million adjusted upward for non-cash items of $176 million, offset by net cash used in changes in working capital of $218 million.

Investing activities—Cash used in investing activities for the six months ended June 30, 2023, was $78 million.

The change in the Company’s liquidity during the nine months ended September 30, 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 $729 million and $593 million at September 30, 2023 and 2022, respectively.

Operating activities provided cash flows of $522 million during the nine months ended September 30, 2023, offset by $91 million and $354 million of net cash used in investing activities and financing activities, 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.

Fluctuations in foreign currency exchange rates had the effect of decreasing reported cash and cash equivalents by $6 million during the nine months ended September 30, 2023, compared to a decrease of $35 million during the nine months ended September 30, 2022.

Operating activities—Net cash provided by operating activities for the nine months ended September 30, 2023, was composed of net income of $324 million adjusted upward for non-cash items of $75 million and net cash provided by changes in working capital of $123 million.

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.

Investing activities—Cash used in investing activities for the nine months ended September 30, 2023, was $91 million.

This was composed of capital expenditures of $34 million, investments in employee deferred compensation trusts of $89 million, and $1 million in payments related to an acquisition, partially offset by proceeds from employee deferred compensation trusts redemptions of $33 million.

Cash used in investing activities for the six months ended June 30, 2022, was $55 million.

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

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

Capital expenditures, including $20 million for cloud computing arrangements, for the six months ended June 30, 2023, totaled $39 million, approximately 74.0% 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, including $28 million for cloud computing arrangements, for the nine months ended September 30, 2023, totaled $63 million, approximately 68.0% 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 $80 million to $90 million, of which $50 million to $60 million relates to software initiatives and technology infrastructure, including capitalized costs related to implementation of cloud computing arrangements.

Financing activities—Cash used in financing activities for the six months ended June 30, 2023, was $210 million.

Financing activities—Cash used in financing activities for the nine months ended September 30, 2023, was $354 million.

This included repurchases of $199 million in common stock and $155 million in dividends paid to stockholders.

Cash used in financing activities for the six months ended June 30, 2022, was $257 million.

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

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

As of June 30, 2023, the Company is authorized to repurchase, from time to time, up to 12.7 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions.

During the six months ended June 30, 2023 and 2022, the Company repurchased 1.1 million shares, at a cost of $83 million, and 1.4 million shares, at a cost of $133 million, on the open market, respectively.

As of September 30, 2023, the Company is authorized to repurchase, from time to time, up to 11.5 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, 2023 and 2022, the Company repurchased 2.4 million shares, at a cost of $175 million, and 2.5 million shares, at a cost of $219 million, on the open market, respectively.

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

During the six months ended June 30, 2023 and 2022, such repurchases totaled 0.3 million shares, at a cost of $22 million, and 0.3 million shares, at a cost of $33 million, respectively.

During the nine months ended September 30, 2023 and 2022, such repurchases totaled 0.3 million shares, at a cost of $22 million, and 0.3 million shares, at a cost of $33 million, respectively.

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

The Company’s working capital at June 30, 2023, included $723 million in cash and cash equivalents and $974 million in net accounts receivable, both of which will be a significant source of ongoing liquidity and financial resilience.

The Company’s working capital at September 30, 2023, included $729 million in cash and cash equivalents and $941 million 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.

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Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing which, effective May 2023, will be calculated according to the Adjusted Term Secured Overnight Financing Rate (“SOFR”), or an alternative base rate, plus an applicable margin.

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of June 30, 2023.

There were no borrowings under the Credit Agreement as of June 30, 2023, or December 31, 2022.

On July 31, 2023, the Company announced a quarterly dividend of $0.48 per share to be paid to all shareholders of record as of August 25, 2023.

The dividend will be paid on September 15, 2023.

The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of September 30, 2023.

There were no borrowings under the Credit Agreement as of September 30, 2023, or December 31, 2022.

On October 30, 2023, the Company announced a quarterly dividend of $0.48 per share to be paid to all shareholders of record as of November 24, 2023.

The dividend will be paid on December 15, 2023.

Material Cash Requirements from Contractual Obligations

As of June 30, 2023, the Company reported current and long-term operating lease liabilities of $82 million and $136 million, respectively.

These balances consist of the minimum rental commitments for July 2023 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancellable lease contracts executed as of June 30, 2023.

As of September 30, 2023, the Company reported current and long-term operating lease liabilities of $81 million and $134 million, respectively.

These balances consist of the minimum rental commitments for October 2023 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancellable lease contracts executed as of September 30, 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 half of 2023.

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

Employee Deferred Compensation Plan.

As of June 30, 2023, the Company reported employee deferred compensation plan obligations of $531 million in its accompanying unaudited Condensed Consolidated Statements of Financial Position.

As of September 30, 2023, the Company reported employee deferred compensation plan obligations of $519 million in its accompanying unaudited Condensed Consolidated Statements of Financial Position.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis