SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

 FORM 10-Q

______________________

 (Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      to                     .

Commission File Number 1-10427

ROBERT HALF INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Delaware		94-1648752
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2884 Sand Hill Road
Suite 200
Menlo Park,	California	94025
(Address of principal executive offices)		(zip-code)

Registrant’s telephone number, including area code: (650) 234-6000

Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	RHI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of September 30, 2022:

108,498,536 shares of $0.001 par value Common Stock

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ROBERT HALF INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(in thousands, except share amounts)

	September 30, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	593,348	$	619,001
Accounts receivable, net	1,101,305		984,691
Employee deferred compensation trust assets	404,019		494,991
Other current assets	151,178		169,864
Total current assets	2,249,850		2,268,547
Property and equipment, net	106,286		93,403
Right-of-use assets	198,483		228,793
Other intangible assets, net	2,084		3,334
Goodwill	221,426		222,855
Noncurrent deferred income taxes	132,456		135,427
Total assets	$	2,910,585	$	2,952,359
LIABILITIES
Accounts payable and accrued expenses	$	153,247	$	183,796
Accrued payroll and benefit costs	553,606		540,183
Employee deferred compensation plan obligations	435,021		535,276
Income taxes payable	11,303		15,631
Current operating lease liabilities	81,072		83,787
Total current liabilities	1,234,249		1,358,673
Noncurrent operating lease liabilities	150,938		181,291
Other liabilities	34,481		31,344
Total liabilities	1,419,668		1,571,308
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 108,498,147 shares and 110,685,989 shares	108		111
Additional paid-in capital	1,279,576		1,235,903
Accumulated other comprehensive income (loss)	(71,759)		(22,622)
Retained earnings	282,992		167,659
Total stockholders’ equity	1,490,917		1,381,051
Total liabilities and stockholders’ equity	$	2,910,585	$	2,952,359

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Service revenues	$	1,833,455	$	1,712,566	$	5,511,116	$	4,691,527
Costs of services	1,045,846		987,239		3,136,114		2,739,618
Gross margin	787,609		725,327		2,375,002		1,951,909
Selling, general and administrative expenses	548,579		495,576		1,572,167		1,406,731
(Income) loss from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I)	15,335		1,759		110,958		(38,039)
Amortization of intangible assets	417		572		1,250		1,724
Interest income, net	(2,346)		(238)		(3,230)		(145)
Income before income taxes	225,624		227,658		693,857		581,638
Provision for income taxes	59,418		56,787		183,591		150,956
Net income	$	166,206	$	170,871	$	510,266	$	430,682
Net income per share:
Basic	$	1.54	$	1.55	$	4.70	$	3.89
Diluted	$	1.53	$	1.53	$	4.65	$	3.85
Shares:
Basic	107,855		110,176		108,630		110,816
Diluted	108,618		111,490		109,630		111,954
Dividends declared per share	$	0.43	$	0.38	$	1.29	$	1.14

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
COMPREHENSIVE INCOME (LOSS):
Net income	$	166,206	$	170,871	$	510,266	$	430,682
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	(24,167)		(10,046)		(49,183)		(14,485)
Foreign defined benefit plan adjustments, net of tax	15		38		46		117
Total other comprehensive income (loss)	(24,152)		(10,008)		(49,137)		(14,368)
Total comprehensive income (loss)	$	142,054	$	160,863	$	461,129	$	416,314

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, 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
Net income	—	—		—		—		175,821		175,821
Other comprehensive income (loss)	—	—		—		(24,033)		—		(24,033)
Dividends declared ($0.43 per share)	—	—		—		—		(47,325)		(47,325)
Net issuances of restricted stock	4	—		—		—		—		—
Stock-based compensation	—	—		14,409		—		—		14,409
Repurchases of common stock	(1,144)	(1)		—		—		(103,971)		(103,972)
Balance at June 30, 2022	109,607	$	110	$	1,265,495	$	(47,607)	$	249,670	$	1,467,668
Net income	—	—		—		—		166,206		166,206
Other comprehensive income (loss)	—	—		—		(24,152)		—		(24,152)
Dividends declared ($0.43 per share)	—	—		—		—		(46,944)		(46,944)
Net issuances of restricted stock	—	—		—		—		—		—
Stock-based compensation	—	—		14,081		—		—		14,081
Repurchases of common stock	(1,109)	(2)		—		—		(85,940)		(85,942)
Balance at September 30, 2022	108,498	$	108	$	1,279,576	$	(71,759)	$	282,992	$	1,490,917

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 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, 2020	113,128	$	113	$	1,179,972	$	(4,732)	$	29,936	$	1,205,289
Net income	—	—		—		—		110,598		110,598
Other comprehensive income (loss)	—	—		—		(8,797)		—		(8,797)
Dividends declared ($0.38 per share)	—	—		—		—		(43,300)		(43,300)
Net issuances of restricted stock	602	1		(1)		—		—		—
Stock-based compensation	—	—		14,182		—		—		14,182
Repurchases of common stock	(1,048)	(1)		—		—		(80,272)		(80,273)
Balance at March 31, 2021	112,682	$	113	$	1,194,153	$	(13,529)	$	16,962	$	1,197,699
Net income	—	—		—		—		149,213		149,213
Other comprehensive income (loss)	—	—		—		4,437		—		4,437
Dividends declared ($0.38 per share)	—	—		—		—		(42,720)		(42,720)
Net issuances of restricted stock	5	—		—		—		—		—
Stock-based compensation	—	—		13,903		—		—		13,903
Repurchases of common stock	(717)	(1)		—		—		(63,281)		(63,282)
Balance at June 30, 2021	111,970	$	112	$	1,208,056	$	(9,092)	$	60,174	$	1,259,250
Net income	—	—		—		—		170,871		170,871
Other comprehensive income (loss)	—	—		—		(10,008)		—		(10,008)
Dividends declared ($0.38 per share)	—	—		—		—		(42,463)		(42,463)
Net issuances of restricted stock	1	—		—		—		—		—
Stock-based compensation	—	—		14,061		—		—		14,061
Repurchases of common stock	(742)	(1)		—		—		(75,667)		(75,668)
Balance at September 30, 2021	111,229	$	111	$	1,222,117	$	(19,100)	$	112,915	$	1,316,043

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

6

ROBERT HALF INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	510,266	$	430,682
Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for credit losses	5,883		7,262
Depreciation	34,769		40,536
Amortization of cloud computing implementation costs	21,203		20,776
Amortization of intangible assets	1,250		1,724
Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts	114,534		(30,625)
Stock-based compensation	43,674		42,146
Deferred income taxes	2,954		(32,777)
Changes in operating assets and liabilities:
Accounts receivable	(158,254)		(308,823)
Capitalized cloud computing implementation costs	(29,697)		(23,735)
Accounts payable and accrued expenses	(18,081)		32,140
Accrued payroll and benefit costs	33,486		166,239
Employee deferred compensation plan obligations	(100,255)		56,929
Income taxes payable	8,950		41,435
Other assets and liabilities, net	10,794		14,356
Net cash flows provided by operating activities	481,476		458,265
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(48,637)		(24,797)
Investments in employee deferred compensation trusts	(52,203)		(55,940)
Proceeds from employee deferred compensation trust redemptions	28,640		30,939
Net cash flows used in investing activities	(72,200)		(49,798)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable	—		(177)
Repurchases of common stock	(257,848)		(212,088)
Dividends paid	(142,596)		(128,337)
Net cash flows used in financing activities	(400,444)		(340,602)
Effect of exchange rate fluctuations	(34,485)		(8,572)
Change in cash and cash equivalents	(25,653)		59,293
Cash and cash equivalents at beginning of period	619,001		574,426
Cash and cash equivalents at end of period	$	593,348	$	633,719
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash items:
Repurchases of common stock awaiting settlement	$	—	$	10,239
Fund exchanges within employee deferred compensation trusts	$	82,410	$	81,955

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

7

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2022

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 completed a multiyear process to unify its family of Robert Half endorsed divisional brands to a single brand, Robert Half. This simplifies the Company’s go-to-market brand structure for clients and candidates, provides leverage for greater brand awareness, and allows future flexibility to expand the Company’s existing functional specializations. In connection with this process, the Company’s current financial statement disclosures reflect new names for its reportable segments, including contract talent solutions (formerly temporary and consultant staffing), permanent placement talent solutions (formerly permanent placement staffing) and Protiviti (formerly risk consulting and internal audit services). What was previously referred to as staffing operations is now referred to as talent solutions.

The presentation of contract talent solutions includes functional specializations rather than the previously branded divisions. The functional specializations are: finance and accounting, which combines the former Accountemps® and Robert Half® Management Resources divisions; administrative and customer support, which consists of the former OfficeTeam®; and technology, which includes the former Robert Half® Technology.

The Company operates in North America, South America, Europe, Asia and Australia. 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, 2021, 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 Condensed Consolidated Financial Statements to conform to the 2022 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 September 30, 2022, such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, accrued medical expenses, income and other taxes, 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.

8

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

Costs of Services. Direct costs of contract talent solutions consist of professional staff payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement 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 $13.5 million and $42.2 million for the three and nine months ended September 30, 2022, respectively, and $13.9 million and $34.1 million for the three and nine months ended September 30, 2021, 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.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Dividend income	$	(966)	$	(4,565)	$	(3,576)	$	(7,414)
Realized and unrealized (gains) losses	16,301		6,324		114,534		(30,625)
(Income) loss from investments held in employee deferred compensation trusts	$	15,335	$	1,759	$	110,958	$	(38,039)

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).

9

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

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 September 30, 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	$	78,932	$	78,932	—	—
Mutual funds - bond	28,043		28,043		—	—
Mutual funds - stock	224,076		224,076		—	—
Mutual funds - blend	72,968		72,968		—	—
	$	404,019	$	404,019	—	—
			Fair Value Measurements Using
	Balance at December 31, 2021		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	$	66,700	$	66,700	—	—
Mutual funds - bond	30,750		30,750		—	—
Mutual funds - stock	303,277		303,277		—	—
Mutual funds - blend	94,264		94,264		—	—
	$	494,991	$	494,991	—	—

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 macroeconomic 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, 2021 through September 30, 2022 (in thousands):

	Allowance for Credit Losses
Balance as of December 31, 2021	$	21,530
Charges to expense	5,883
Deductions	(3,442)
Other, including foreign currency translation adjustments	(1,655)
Balance as of September 30, 2022	$	22,316

10

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

Note B—New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Government Assistance. In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements. This standard is effective for annual periods beginning after December 15, 2021. The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or (2) retrospectively to those transactions. The Company adopted this ASU in January 2022. The adoption of this guidance did not have a material impact on its financial statements.

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 in 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 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 revenues 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 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.

11

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

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.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Contract talent solutions
Finance and accounting	$	805,229	$	732,365	$	2,417,829	$	1,996,692
Administrative and customer support	250,531		279,370		809,578		763,035
Technology	216,735		215,500		648,252		581,905
Elimination of intersegment revenues (a)	(132,745)		(172,534)		(414,493)		(419,375)
Total contract talent solutions	1,139,750		1,054,701		3,461,166		2,922,257
Permanent placement talent solutions	182,329		156,444		569,207		411,788
Protiviti	511,376		501,421		1,480,743		1,357,482
Total service revenues	$	1,833,455	$	1,712,566	$	5,511,116	$	4,691,527

(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 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 standalone selling values of the services and products in the arrangement. As of September 30, 2022, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $164.8 million. Of this amount, $150.1 million is expected to be recognized within the next twelve months. As of September 30, 2021, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $135.4 million.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

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, 2021 through September 30, 2022 (in thousands):

	Contract Liabilities
Balance as of December 31, 2021	$	25,601
Payments in advance of satisfaction of performance obligations	49,239
Revenue recognized	(56,590)
Other, including translation adjustments	(2,103)
Balance as of September 30, 2022	$	16,147

Note D—Other Current Assets

Other current assets consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Prepaid expenses	$	60,429	$	69,526
Unamortized cloud computing implementation costs	53,152		44,692
Other	37,597		55,646
Other current assets	$	151,178	$	169,864

Note E—Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Computer hardware	$	157,036	$	157,408
Computer software	216,039		246,013
Furniture and equipment	94,882		93,144
Leasehold improvements	163,589		165,153
Property and equipment, cost	631,546		661,718
Accumulated depreciation	(525,260)		(568,315)
Property and equipment, net	$	106,286	$	93,403

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

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 8 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Operating lease expenses were $22.0 million and $67.1 million for the three and nine months ended September 30, 2022, respectively, and $21.6 million and $64.8 million for the three and nine months ended September 30, 2021, respectively.

Supplemental cash flow information related to leases consisted of the following (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash paid for operating lease liabilities	$	69,696	$	68,509
Right-of-use assets obtained in exchange for new operating lease liabilities	$	41,916	$	32,888

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

	September 30, 2022		December 31, 2021
Weighted average remaining lease term for operating leases	3.5 years		3.9 years
Weighted average discount rate for operating leases	2.3	%	2.3	%

Future minimum lease payments under non-cancellable leases as of September 30, 2022, were as follows (in thousands):

2022 (excluding the nine months ended September 30, 2022)	$	23,095
2023	80,684
2024	60,924
2025	37,370
2026	24,008
Thereafter	15,481
Less: Imputed interest	(9,552)
Present value of operating lease liabilities (a)	$	232,010

(a) Includes the current portion of $81.1 million for operating leases.

As of September 30, 2022, the Company had additional future minimum lease obligations totaling $5.7 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 6 years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

Note G—Goodwill

The following table sets forth the activity in goodwill from December 31, 2021 through September 30, 2022 (in thousands):

	Goodwill
	Contract talent solutions		Permanent placement talent solutions		Protiviti		Total
Balance as of December 31, 2021	$	134,584	$	26,189	$	62,082	$	222,855
Foreign currency translation adjustments	(821)		(160)		(448)		(1,429)
Balance as of September 30, 2022	$	133,763	$	26,029	$	61,634	$	221,426

Note H—Accrued Payroll and Benefit Costs

Accrued payroll and benefit costs consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Payroll and benefits	$	470,556	$	449,246
Payroll taxes	64,833		74,117
Workers’ compensation	18,217		16,820
Accrued payroll and benefit costs	$	553,606	$	540,183

The Company, under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, deferred paying $51.1 million of applicable payroll taxes as of both September 30, 2022 and December 31, 2021, which is expected to be paid during the next 12 months and is included in payroll taxes.

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 $404.0 million and $495.0 million as of September 30, 2022 and December 31, 2021, 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 $435.0 million and $535.3 million as of September 30, 2022 and December 31, 2021, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Contribution expense	$	10,326	$	11,467	$	35,321	$	34,939
Increase (decrease) in employee deferred compensation expense related to changes in the fair value of trust assets	(15,335)		(1,759)		(110,958)		38,039
	$	(5,009)	$	9,708	$	(75,637)	$	72,978

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 Attorney General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of Gentry’s claims, except the PAGA claim, to individual arbitration. 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.

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ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

In May 2021, the Company entered into an amendment to extend the maturity of its $100.0 million unsecured revolving credit facility (the “Credit Agreement”) to May 2024. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate or an alternative base rate, plus an applicable margin. The Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of September 30, 2022. There were no borrowings under the Credit Agreement as of September 30, 2022, or December 31, 2021.

Note K—Stockholders’ Equity

Stock Repurchase Program. As of September 30, 2022, the Company is authorized to repurchase, from time to time, up to 4.7 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. The number and the cost of common stock shares repurchased during the nine months ended September 30, 2022 and 2021, are reflected in the following table (in thousands):

	Nine Months Ended September 30,
	2022		2021
Common stock repurchased (in shares)	2,493		2,254
Common stock repurchased	$	219,341	$	199,569

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 nine months ended September 30, 2022 and 2021, are reflected in the following table (in thousands):

	Nine Months Ended September 30,
	2022		2021
Repurchases related to employee stock plans (in shares)	297		253
Repurchases related to employee stock plans	$	32,914	$	19,654

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 nine months ended September 30, 2022 and 2021, (consisting of purchase 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.

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ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

Note L—Net Income Per Share

The calculation of net income per share for the three and nine months ended September 30, 2022 and 2021, is reflected in the following table (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	166,206	$	170,871	$	510,266	$	430,682
Basic:
Weighted average shares	107,855		110,176		108,630		110,816
Diluted:
Weighted average shares	107,855		110,176		108,630		110,816
Dilutive effect of potential common shares	763		1,314		1,000		1,138
Diluted weighted average shares	108,618		111,490		109,630		111,954
Net income per share:
Basic	$	1.54	$	1.55	$	4.70	$	3.89
Diluted	$	1.53	$	1.53	$	4.65	$	3.85

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, 2021. The Company evaluates performance based on income before net interest income, intangible assets amortization expense, and income taxes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

September 30, 2022

The following table provides a reconciliation of service revenues and segment income by reportable segment to consolidated results for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Service revenues
Contract talent solutions	$	1,139,750	$	1,054,701	$	3,461,166	$	2,922,257
Permanent placement talent solutions	182,329		156,444		569,207		411,788
Protiviti	511,376		501,421		1,480,743		1,357,482
	$	1,833,455	$	1,712,566	$	5,511,116	$	4,691,527
Segment income
Contract talent solutions	$	120,048	$	110,010	$	386,861	$	279,697
Permanent placement talent solutions	32,178		31,030		106,257		79,264
Protiviti	71,469		86,952		198,759		224,256
Combined segment income	223,695		227,992		691,877		583,217
Amortization of intangible assets	417		572		1,250		1,724
Interest income, net	(2,346)		(238)		(3,230)		(145)
Income before income taxes	$	225,624	$	227,658	$	693,857	$	581,638

Service revenues presented above are shown net of eliminations of intersegment revenues. Intersegment revenues between the contract talent solutions segment and Protiviti segment were $132.7 million and $414.5 million for the three and nine months ended September 30, 2022, respectively, and $172.5 million and $419.4 million nine months ended September 30, 2021, 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 October 27, 2022, the Company announced the following: