ROBERT HALF INC. - Quarter Report: 2024 June (Form 10-Q)

Common Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings

Total

Par Value

Balance at December 31, 2022

()

Net income

—

Other comprehensive income (loss)

—

Dividends declared ($ per share)

—

()

Net issuances of restricted stock

()

—

Stock-based compensation

—

Repurchases of common stock

()

—

()

Balance at March 31, 2023

()

Net income

—

Other comprehensive income (loss)

—

Dividends declared ($ per share)

—

()

Net issuances of restricted stock

—

Stock-based compensation

—

Repurchases of common stock

()

—

()

Balance at June 30, 2023

()

The following table presents the Company’s increase in employee deferred compensation costs and expense related to changes in the fair value of trust assets for its nonqualified employee deferred compensation plans (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Increase in employee deferred compensation costs and expense related to changes in the fair value of trust assets	$	$	$	$

Charges to expense Deductions()Other, including foreign currency translation adjustments()

Balance as of June 30, 2024

Note B—

Note C—

segments: contract talent solutions, permanent placement talent solutions, and Protiviti. Revenues are recognized when promised goods or services are delivered to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Service revenues, as presented on the unaudited Condensed Consolidated Statements of Operations, represent services rendered to customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to travel and out-of-pocket expenses, are also included in service revenues, and equivalent amounts of reimbursable expenses are included in costs of services.

Contract talent solutions revenues. Contract talent solutions revenues from contracts with customers are recognized in the amount to which the Company has a right to invoice when the services are rendered by the Company’s engagement professionals. The substantial majority of engagement professionals placed on assignment by the Company are the Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, including workers’ compensation insurance, state and federal unemployment taxes, social security, and certain fringe benefits. The Company assumes the risk of acceptability of its employees to its customers.

ROBERT HALF INC.

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

June 30, 2024

-day guarantee period. These amounts are established based primarily on historical data and are recorded as liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement talent solutions services are charged to employment candidates.

Protiviti revenues. Protiviti’s consulting services are generally provided on a time-and-material basis or fixed-fee basis. Revenues earned under time-and-material arrangements and fixed-fee arrangements are recognized using a proportional performance method. Revenue is measured using cost incurred relative to total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost incurred represents work performed and thereby best depicts the transfer of control to the customer. Protiviti’s consulting services generally contain one or more performance obligation(s) which are satisfied over a period of time. Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment for services provided to date.

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

$ $ $ Administrative and customer support Technology Elimination of intersegment revenues (a)()()()()Total contract talent solutions Permanent placement talent solutions Protiviti Total service revenues$ $ $ $

(a) Service revenues for finance and accounting, administrative and customer support, and technology include intersegment revenues, which represent revenues from services provided to the Company’s Protiviti segment in connection with the Company’s blended business solutions. Intersegment revenues for each functional specialization are aggregated and then eliminated as a single line.

Payment terms in the Company’s contracts vary by the type and location of the Company’s customer and the services offered. The term between invoicing and when payment is due is not significant.

ROBERT HALF INC.

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

June 30, 2024

was $ million. Of this amount, $ million is expected to be recognized within the next . As of June 30, 2023, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than was $ million.

Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the unaudited Condensed Consolidated Statements of Financial Position. ))

)) $

Note G—

year to years, some of which include options to extend the leases for up to years, and some of which include options to terminate the leases within year. Operating lease expense was $ million and $ million for the three and six months ended June 30, 2024, respectively, and $ million and $ million for the three and six months ended June 30, 2023, respectively. $ Right-of-use assets obtained in exchange for new operating lease liabilities$ $ million for operating leases.

As of June 30, 2024, the Company had additional future minimum lease obligations totaling $ 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 to years.

ROBERT HALF INC.

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

June 30, 2024

Note H—

$ $ $ Foreign currency translation adjustments()()()()

Balance as of June 30, 2024

$ $ $ $

The Company completed its annual assessment of the recoverability of goodwill during the three months ended June 30, 2024, and determined there were no events or circumstances that would more likely than not reduce the fair value of the Company’s reporting units below their carrying value.

Note I—

Note J—

million and $ million as of June 30, 2024 and December 31, 2023, 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 $ million and $ million as of June 30, 2024 and December 31, 2023, respectively.

Contribution expenses for the Company’s qualified and nonqualified defined contribution plans were $ million and $ million for the three and six months ended June 30, 2024, respectively, and $ million and $ million for the three and six months ended June 30, 2023, respectively.

The Company has statutory defined contribution plans and defined benefit plans outside the United States of America, which are not material.

Note K—

ROBERT HALF INC.

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

June 30, 2024

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, 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.

million, which matures May 2026. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing which 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, 2024. There were borrowings under the Credit Agreement as of June 30, 2024, or December 31, 2023.

ROBERT HALF INC.

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

June 30, 2024

Note L—

million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. Common stock repurchased$ $

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.

Repurchases related to employee stock plans$ $

Note M—

$ $ $ Basic:

Weighted average shares

Diluted:

Weighted average shares

Dilutive effect of potential common shares Diluted weighted average shares Net income per share:Basic$ $ $ $ Diluted$ $ $ $

ROBERT HALF INC.

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

June 30, 2024

Note N—

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, and executive searches. The Protiviti segment provides internal audit, risk, business, and technology consulting solutions.

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, 2023. The Company evaluates performance based on income before intangible assets amortization expense, net interest income, and income taxes.

$ $ $ Permanent placement talent solutions

Protiviti

$ $ $ $ Segment incomeContract talent solutions$ $ $ $ Permanent placement talent solutions

Protiviti

Combined segment income Amortization of intangible assets Interest income, net()()()()Income before income taxes$ $ $ $ 91,580 6.2 %$146,612 8.9 %

Provision for income taxes. The provision for income taxes was 29.3% and 29.7% for the three months ended June 30, 2024 and 2023, respectively.

In 2021, the Organization for Economic Co-operation and Development established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution (“Pillar Two”) to global taxation, focusing on global profit allocation and a 15% global minimum effective tax rate. The Company continues to monitor developments and evaluate any potential tax impacts from Pillar Two. There were no material impacts for the three months ended June 30, 2024, nor are any expected throughout the remainder of 2024.

Six Months Ended June 30, 2024 and 2023

Service Revenues. The Company’s revenues were $2.95 billion for the six months ended June 30, 2024, a decrease of 12.1% compared to $3.36 billion for the six months ended June 30, 2023. Revenues from U.S. operations decreased 12.3% to $2.29 billion (77.7% of total revenue) for the six months ended June 30, 2024, compared to $2.61 billion (77.9% of total revenue) for the six months ended June 30, 2023. Revenues from international operations decreased 11.6% to $657 million (22.3% of total revenue) for the six months ended June 30, 2024, compared to $743 million (22.1% of total revenue) for the six months ended June 30, 2023. Contributing factors for each reportable segment are discussed below in further detail.

Contract talent solutions revenues were $1.74 billion for the six months ended June 30, 2024, decreasing by 15.6% compared to revenues of $2.07 billion for the six months ended June 30, 2023. 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, 2024, was primarily due to a 16.5% decrease in the number of hours worked by the Company’s engagement professionals, partially offset by a 1.7% increase in average bill rates. On an as adjusted basis, contract talent solutions revenues in the first half of 2024 decreased 15.3% compared to the first half of 2023. In the U.S., revenues in the first half of 2024 decreased 17.4% on an as reported basis, and decreased 17.3% on as adjusted basis, compared to the first half of 2023. International revenues for the first half of 2024 decreased 9.2% on an as reported basis, and decreased 8.4% on an as adjusted basis, compared to the first half of 2023.

Permanent placement talent solutions revenues were $256 million for the six months ended June 30, 2024, decreasing by 16.4% compared to revenues of $306 million for the six months ended June 30, 2023. 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, 2024, was due to a 20.0% decrease in the number of placements, partially offset by a 3.6% increase in average fees earned per placement. On an as adjusted basis, permanent placement talent solutions revenues decreased 16.0% for the first half of 2024, compared to the first half of 2023. In the U.S., revenues for the first half of 2024 decreased 15.5% on an as reported basis, and decreased 15.3% on an as adjusted basis, compared to the first half of 2023. International revenues for the first half of 2024 decreased 18.6% on an as reported basis, and decreased 17.7% on an as adjusted basis, compared to the first half of 2023. 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 $951 million for the six months ended June 30, 2024, decreasing by 3.5% compared to revenues of $985 million for the six months ended June 30, 2023. 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 six months ended June 30, 2024, was due to a 5.4% decrease in billable hours, partially offset by a 1.9% increase in average hourly bill rates. On an as adjusted basis, Protiviti revenues decreased 3.1% for the first half of 2024, compared to the first half of 2023. In the U.S., revenues in the first half of 2024 decreased 0.8% on an as reported basis, and decreased 0.6% on an as adjusted basis, compared to the first half of 2023. International revenues in the first half of 2024 decreased 13.8% on an as reported basis, and decreased 13.1% on an as adjusted basis, compared to the first half of 2023.

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, 2024, is presented in the following table:


	Global		United States		International
Contract talent solutions
As Reported	-15.6	%	-17.4	%	-9.2	%
Billing Days Impact	0.2	%	0.1	%	0.3	%
Currency Impact	0.1	%	―		0.5	%
As Adjusted	-15.3	%	-17.3	%	-8.4	%
Permanent placement talent solutions
As Reported	-16.4	%	-15.5	%	-18.6	%
Billing Days Impact	0.2	%	0.2	%	0.1	%
Currency Impact	0.2	%	―		0.8	%
As Adjusted	-16.0	%	-15.3	%	-17.7	%
Protiviti
As Reported	-3.5	%	-0.8	%	-13.8	%
Billing Days Impact	0.3	%	0.2	%	0.2	%
Currency Impact	0.1	%	―		0.5	%
As Adjusted	-3.1	%	-0.6	%	-13.1	%

Gross Margin. The Company’s gross margin dollars were $1.14 billion for the six months ended June 30, 2024, down 15.6% from $1.35 billion for the six months ended June 30, 2023. Contributing factors for each reportable segment are discussed below in further detail.

Gross margin dollars for contract talent solutions represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses. The key drivers of gross margin are: i) pay-bill spreads, which represent the differential between wages paid to engagement professionals and amounts billed to clients; ii) fringe costs, which are primarily composed of payroll taxes and benefit costs; and iii) conversion revenues, which are earned when a contract position converts to a permanent position with the Company’s client.

Gross margin dollars for contract talent solutions were $687 million for the six months ended June 30, 2024, down 16.5% from $822 million for the six months ended June 30, 2023. As a percentage of revenues, gross margin dollars for contract talent solutions were 39.4% in the first half of 2024, down from 39.8% in the first half of 2023. The decrease in gross margin percentage was primarily due to lower conversion revenues.

Gross margin dollars for permanent placement talent solutions represent revenues less reimbursable expenses. Gross margin dollars for permanent placement talent solutions were $255 million for the six months ended June 30, 2024, down 16.4% from $305 million for the six months ended June 30, 2023. Because reimbursable expenses for permanent placement talent solutions are de minimis, the decrease in gross margin dollars is substantially explained by the decrease in revenues previously discussed.

Gross margin dollars for Protiviti represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs, and reimbursable expenses. The primary drivers of Protiviti’s gross margin are: i) the relative composition of and number of professional staff and their respective pay and bill rates; and ii) staff utilization, which is the relationship of time spent on client engagements in proportion to the total time available for the Company’s Protiviti staff. Gross margin dollars for Protiviti were $197 million for the six months ended June 30, 2024, down 11.2% from $222 million for the six months ended June 30, 2023. As a percentage of revenues, reported gross margin dollars for Protiviti were 20.8% in the first half of 2024, down from 22.6% in the first half of 2023. As a percentage of revenues, adjusted gross margin dollars for Protiviti were 22.0% in the first half of 2024, down from 23.6% in the first half of 2023. The year-over-year decrease in adjusted gross margin percentage was primarily due to the relative composition of and number of professional staff and their respective pay and bill rates

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


	Six Months Ended June 30,								Relationships
	As Reported				As Adjusted				As Reported				As Adjusted
	2024		2023		2024		2023		2024		2023		2024		2023
Gross Margin
Contract talent solutions	$	686,731	$	822,261	$	686,731	$	822,261	39.4	%	39.8	%	39.4	%	39.8	%
Permanent placement talent solutions	255,349		305,370		255,349		305,370		99.8	%	99.8	%	99.8	%	99.8	%
Protiviti	197,396		222,270		208,983		232,366		20.8	%	22.6	%	22.0	%	23.6	%
Total	$	1,139,476	$	1,349,901	$	1,151,063	$	1,359,997	38.6	%	40.2	%	39.0	%	40.5	%

The following tables provide reconciliations of the non-GAAP adjusted gross margin to reported gross margin for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30, 2024
	Contract Talent Solutions				Permanent Placement Talent Solutions				Protiviti				Total
	$		% of Revenue		$		% of Revenue		$		% of Revenue		$		% of Revenue
Gross Margin
As Reported	$	686,731	39.4	%	$	255,349	99.8	%	$	197,396	20.8	%	$	1,139,476	38.6	%
Adjustments (1)	—		—		—		—		11,587		1.2	%	11,587		0.4	%
As Adjusted	$	686,731	39.4	%	$	255,349	99.8	%	$	208,983	22.0	%	$	1,151,063	39.0	%


	Six Months Ended June 30, 2023
	Contract Talent Solutions				Permanent Placement Talent Solutions				Protiviti				Total
	$		% of Revenue		$		% of Revenue		$		% of Revenue		$		% of Revenue
Gross Margin
As Reported	$	822,261	39.8	%	$	305,370	99.8	%	$	222,270	22.6	%	$	1,349,901	40.2	%
Adjustments (1)	—		—		—		—		10,096		1.0	%	10,096		0.3	%
As Adjusted	$	822,261	39.8	%	$	305,370	99.8	%	$	232,366	23.6	%	$	1,359,997	40.5	%

(1)Changes in the Company’s deferred compensation obligations related to Protiviti operations are included in costs of services, while the related investment income is presented separately. The non-GAAP financial adjustments shown in the table above are to reclassify investment income from investments held in employee deferred compensation trusts to the same line item that includes the corresponding change in obligation. These adjustments have no impact on income before income taxes.

Selling, General and Administrative Expenses. The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs. The Company’s reported selling, general and administrative expenses were $1.02 billion for the six months ended June 30, 2024, down 6.6% from $1.09 billion for the six months ended June 30, 2023. As a percentage of revenues, reported selling, general and administrative expenses were 34.7% in the first half of 2024, up from 32.6% in the first half of 2023. The Company’s adjusted selling, general and administrative expenses were $975 million for the six months ended June 30, 2024, down 7.0% from $1.05 billion for the six months ended June 30, 2023. As a percentage of revenues, adjusted selling, general and administrative expenses were 33.1% in the first half of 2024, up from 31.2% in the first half of 2023. Contributing factors for each reportable segment are discussed below in further detail.

Selling, general and administrative expenses for contract talent solutions, on an as-reported basis, were $640 million for the six months ended June 30, 2024, decreasing by 5.7% from $679 million for the six months ended June 30, 2023. As a percentage of revenues, reported selling, general and administrative expenses for contract talent solutions were 36.8% in the first half of 2024, up from 32.9% in the first half of 2023. Selling, general and administrative expenses for contract talent solutions, on an adjusted basis, were $598 million for the six months ended June 30, 2024, down 6.3% from $639 million for the six months ended June 30, 2023. As a percentage of revenues, adjusted selling, general and administrative expenses for contract talent solutions were 34.4% in the first half of 2024, up from 30.9% in the first half of 2023, 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 $233 million for the six months ended June 30, 2024, decreasing by 12.0% from $265 million for the six months ended June 30, 2023. As a percentage of revenues, reported selling, general and administrative expenses for permanent placement talent solutions were 91.0% in the first half of 2024, up from 86.5% in the first half of 2023. As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement talent solutions were 88.9% in the first half of 2024, up from 84.9% in the first half of 2023, due primarily to negative leverage as revenues decreased as a result of economic conditions.

Selling, general and administrative expenses for Protiviti were $149 million for the six months ended June 30, 2024, decreasing by 0.6% from $150 million for the six months ended June 30, 2023. As a percentage of revenues, selling, general and administrative expenses for Protiviti were 15.7% in the first half of 2024, up from 15.2% in the first half of 2023, 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
	As Reported				As Adjusted				As Reported				As Adjusted
	2024		2023		2024		2023		2024		2023		2024		2023
Selling, General and Administrative Expenses
Contract talent solutions	$	640,474	$	679,464	$	598,467	$	638,799	36.8	%	32.9	%	34.4	%	30.9	%
Permanent placement talent solutions	232,861		264,690		227,346		259,813		91.0	%	86.5	%	88.9	%	84.9	%
Protiviti	149,092		149,979		149,092		149,979		15.7	%	15.2	%	15.7	%	15.2	%
Total	$	1,022,427	$	1,094,133	$	974,905	$	1,048,591	34.7	%	32.6	%	33.1	%	31.2	%

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, 2024 and 2023 (in thousands):


	Six Months Ended June 30, 2024
	Contract Talent Solutions				Permanent Placement Talent Solutions				Protiviti				Total
	$		% of Revenue		$		% of Revenue		$		% of Revenue		$		% of Revenue
Selling, General and Administrative Expenses
As Reported	$	640,474	36.8	%	$	232,861	91.0	%	$	149,092	15.7	%	$	1,022,427	34.7	%
Adjustments (1)	(42,007)		(2.4	%)	(5,515)		(2.1	%)	—		—		(47,522)		(1.6	%)
As Adjusted	$	598,467	34.4	%	$	227,346	88.9	%	$	149,092	15.7	%	$	974,905	33.1	%


	Six Months Ended June 30, 2023
	Contract Talent Solutions				Permanent Placement Talent Solutions				Protiviti				Total
	$		% of Revenue		$		% of Revenue		$		% of Revenue		$		% of Revenue
Selling, General and Administrative Expenses
As Reported	$	679,464	32.9	%	$	264,690	86.5	%	$	149,979	15.2	%	$	1,094,133	32.6	%
Adjustments (1)	(40,665)		(2.0	%)	(4,877)		(1.6	%)	—		—		(45,542)		(1.4	%)
As Adjusted	$	638,799	30.9	%	$	259,813	84.9	%	$	149,979	15.2	%	$	1,048,591	31.2	%

(1)Changes in the Company’s employee deferred compensation plan obligations related to talent solutions operations are included in selling, general and administrative expenses, while the related investment income is presented separately. The non-GAAP financial adjustments shown in the table above are to reclassify investment income from investments held in employee deferred compensation trusts to the same line item that includes the corresponding change in obligation. These adjustments have no impact on income before income taxes.

Income from Investments Held in Employee Deferred Compensation Trusts. Under the Company’s employee deferred compensation plans, employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trusts consistent with these directions. As realized and unrealized investment gains and losses occur, the Company’s employee deferred compensation plan obligations change and adjustments are recorded in selling, general and administrative expenses, or in the case of Protiviti, costs of services. The value of the related investment trust assets also changes by the equal and offsetting amount, leaving no net costs to the Company. The Company’s income 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 from investments held in employee deferred compensation trusts was $59 million and $56 million for the six months ended June 30, 2024 and 2023, respectively. The income from trust investments was due to positive market returns during the first half of 2024.

Income Before Income Taxes and Segment Income. The Company’s total income before income taxes was $187 million, or 6.3% of revenues, for the six months ended June 30, 2024, down from $320 million, or 9.5% of revenues, for the six months ended June 30, 2023. Combined segment income was $176 million, or 6.0% of revenues, for the six months ended June 30, 2024, down from $311 million, or 9.3% of revenues, for the six months ended June 30, 2023.

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


	Six Months Ended June 30,
	2024		% of Revenue		2023		% of Revenue
Combined Segment Income
Contract talent solutions	$	88,264	5.1	%	$	183,462	8.9	%
Permanent placement talent solutions	28,003		10.9	%	45,557		14.9	%
Protiviti	59,891		6.3	%	82,387		8.4	%
Total	$	176,158	6.0	%	$	311,406	9.3	%

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, 2024, and 2023 (in thousands):


	Six Months Ended June 30,
	2024		% of Revenue		2023		% of Revenue
Income before income taxes	$	187,149	6.3	%	$	320,109	9.5	%
Interest income, net	(11,599)		(0.3	%)	(10,145)		(0.2)	%
Amortization of intangible assets	608		0.0	%	1,442		0.0	%
Combined segment income	$	176,158	6.0	%	$	311,406	9.3	%

Provision for income taxes. The provision for income taxes was 29.5% and 28.7% for the six months ended June 30, 2024 and 2023, respectively. The higher tax rate for 2024 can primarily be attributed to the impact of nondeductible expenses.

Liquidity and Capital Resources

The change in the Company’s liquidity during the six months ended June 30, 2024 and 2023, 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 $547 million and $723 million at June 30, 2024 and 2023, respectively. Operating activities provided cash flows of $126 million during the six months ended June 30, 2024, partially offset by $38 million and $258 million of net cash used in investing activities and financing activities, 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. Fluctuations in foreign currency exchange rates had the effect of decreasing reported cash and cash equivalents by $15 million during the six months ended June 30, 2024, compared to an increase of $5 million during the six months ended June 30, 2023.

Operating activities—Net cash used in operating activities for the six months ended June 30, 2024, was composed of net income of $132 million adjusted upward for non-cash items of $19 million, offset by net cash used in changes in working capital of $25 million. 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.

Investing activities—Cash used in investing activities for the six months ended June 30, 2024, was $38 million. This was composed of capital expenditures of $24 million and investments in employee deferred compensation trusts of $43 million, partially offset by proceeds from employee deferred compensation trusts redemptions of $29 million. Cash used in investing activities for the six months ended June 30, 2023, was $78 million. This was composed of capital expenditures of $19 million, investments in employee deferred compensation trusts of $82 million, and $1 million in payments related to an acquisition, partially offset by proceeds from employee deferred compensation trusts redemptions of $24 million.

Capital expenditures, including $16 million for cloud computing arrangements, for the six months ended June 30, 2024, totaled $40 million, approximately 64% 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. Capital expenditures included amounts spent on tenant improvements and furniture and equipment in the Company’s leased offices. The Company currently expects that 2024 capital expenditures will range from $80 million to $100 million, of which $40 million to $50 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, 2024, was $258 million. This included repurchases of $146 million in common stock and $112 million in dividends paid to stockholders. Cash used in financing activities for the six months ended June 30, 2023, was $210 million. This included repurchases of $105 million in common stock and $105 million in dividends paid to stockholders.

As of June 30, 2024, the Company is authorized to repurchase, from time to time, up to 9.1 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, 2024 and 2023, the Company repurchased 1.7 million shares, at a cost of $121 million, and 1.1 million shares, at a cost of $83 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, 2024 and 2023, such repurchases totaled 0.3 million shares, at a cost of $21 million, and 0.3 million shares, at a cost of $22 million, respectively. Repurchases of shares have been funded with cash generated from operations.

The Company’s working capital at June 30, 2024, included $547 million in cash and cash equivalents and $893 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.

There is limited visibility into future cash flows as the Company’s revenues and net income are largely dependent on macroeconomic conditions. The Company’s variable direct costs related to its contract talent solutions business will largely fluctuate in relation to its revenues.

The Company has an unsecured revolving credit facility (the “Credit Agreement”) of $100.0 million, which matures in May 2026. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing and 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, 2024. There were no borrowings under the Credit Agreement as of June 30, 2024, or December 31, 2023.

On July 30, 2024, the Company announced a quarterly dividend of $0.53 per share to be paid to all shareholders of record as of August 23, 2024. The dividend will be paid on September 13, 2024.

Material Cash Requirements from Contractual Obligations

Leases. As of June 30, 2024, the Company reported current and long-term operating lease liabilities of $71 million and $168 million, respectively. These balances consist of the minimum rental commitments for July 2024 and thereafter, discounted to reflect the Company’s cost of borrowing, under noncancellable lease contracts executed as of June 30, 2024.

The majority of these leases are for real estate. In the event the Company vacates a location prior to the end of the lease term, the Company may be obliged to continue making lease payments. For further information, see Note G—“Leases” to the Company’s Condensed Consolidated Financial Statements included under Part I—Item 1 of this report.

Purchase Obligations. Purchase obligations are discussed in more detail in Item 7—“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, 2023. There have been no material changes to the Company’s contractual purchase obligations during the first half of 2024.

Employee Deferred Compensation Plan. As of June 30, 2024, the Company reported employee deferred compensation plan obligations of $628 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. The timing of these payments may change based upon factors including termination of the Company’s employment arrangement with a participant. These obligations are funded through contributions to investment trusts, whose assets as of June 30, 2024, were substantially equal to the obligations. Assets of these plans are held by an independent trustee for the sole benefit of participating employees and consist of money market funds and mutual funds. For further information, see Note J—“Employee Deferred Compensation Plan Obligations” to the Company’s Condensed Consolidated Financial Statements included under Part I—Item 1 of this report.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Because a portion of the Company’s net revenues are derived from its operations outside the U.S. and are denominated in local currencies, the Company is exposed to the impact of foreign currency fluctuations. The Company’s exposure to foreign currency exchange rates relates primarily to the Company’s foreign subsidiaries. Exchange rates impact the U.S. dollar value of the Company’s reported revenues, expenses, earnings, assets and liabilities.

For the six months ended June 30, 2024, approximately 22.3% of the Company’s revenues were generated outside of the U.S. These operations transact business in their functional currency, which is the same as their local currency. As a result, fluctuations in the value of foreign currencies against the U.S. dollar, particularly the Australian dollar and Brazilian real, British pound, Canadian dollar and Euro, have an impact on the Company’s reported results. Under GAAP, revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the monthly average exchange rates prevailing during the period. Consequently, as the value of the U.S. dollar changes relative to the currencies of the Company’s international markets, the Company’s reported results vary.

During the first six months of 2024, the U.S. dollar fluctuated, and generally strengthened, against the primary currencies in which the Company conducts business, compared to one year ago. Foreign currency exchange rates had the effect of decreasing reported service revenues by $4.2 million, or 0.1%, in the first half of 2024 compared to the same period one year ago. The general strengthening of the U.S. dollar also affected the reported level of expenses incurred in the Company’s international operations. Because substantially all the Company’s international operations generated revenues and incurred expenses within the same country and currency, the effect of lower reported revenues is largely offset by the decrease in reported operating expenses. Reported net income was $0.1 million, or 0.1%, lower in the first half of 2024 compared to the same period one year ago due to the effect of currency exchange rates. If currency exchange rates were to remain at June 30, 2024 levels throughout the remainder of 2024, the currency impact on the Company’s full-year reported revenues and operating expenses would be consistent with the first half of 2024 results. Should current trends continue, the impact to reported net income would be immaterial.

Fluctuations in foreign currency exchange rates impact the U.S. dollar amount of the Company’s stockholders’ equity. The assets and liabilities of the Company’s international subsidiaries are translated into U.S. dollars at the exchange rates in effect at period end. The resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. Although currency fluctuations impact the Company’s reported results and shareholders’ equity, such fluctuations generally do not affect cash flow or result in actual economic gains or losses. The Company generally has few cross-border transfers of funds, consisting of dividends from the Company’s foreign subsidiaries, and transfers to and from the U.S. related to intercompany working capital requirements.

ITEM 4. Controls and Procedures

Management, including the Company’s President and Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In accordance with this review, no material changes to controls and procedures were made in the three months ended June 30, 2024.

PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

There have been no material developments with regard to any of the other legal proceedings previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, and its quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2024.

ITEM 1A. Risk Factors

There have not been any material changes with regard to the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans (c)
April 1, 2024 to April 30, 2024	103,041	(a)	$	70.68	100,000	9,925,706
May 1, 2024 to May 31, 2024	550,000		$	68.22	550,000	9,375,706
June 1, 2024 to June 30, 2024	250,480	(b)	$	64.19	250,000	9,125,706
Total April 1, 2024 to June 30, 2024	903,521				900,000

(a)Includes 3,041 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes.

(b)Includes 480 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes.

(c)Commencing in October 1997, the Company’s Board of Directors has, at various times, authorized the repurchase, from time to time, of the Company’s common stock on the open market or in privately negotiated transactions depending on market conditions. Since plan inception, a total of 138,000,000 shares have been authorized for repurchase, of which 128,874,294 shares have been repurchased as of June 30, 2024.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosure

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits


3.1			Restated Certificate of Incorporation of Robert Half Inc., incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated July 17, 2023.

3.2			Amended and Restated By-Laws of Robert Half Inc., incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 10-Q dated May 2, 2024.

31.1			Rule 13a-14(a) Certification of Chief Executive Officer.

31.2			Rule 13a-14(a) Certification of Chief Financial Officer.

32.1			Section 1350 Certification of Chief Executive Officer.

32.2			Section 1350 Certification of Chief Financial Officer.

101.1			Part I, Item 1 of this Form 10-Q formatted in Inline XBRL.

104			Cover page of this Form 10-Q formatted in Inline XBRL and contained in Exhibit 101.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ROBERT HALF INC. (Registrant)

			/s/Michael C. Buckley
			Michael C. Buckley Executive Vice President and Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

Date: July 31, 2024

ROBERT HALF INC. - Quarter Report: 2024 June (Form 10-Q)

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